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CS Executive · Capital Market and Securities Laws · Laws Governing Depositories and Depository Participants

Sagar Depository Services Ltd wishes to appoint Kaveri Securities Pvt Ltd as its agent to deal with investors. Under the Depositories Act, 1996, what must the depository do and in what form must the arrangement be documented?

A depository must enter into an agreement with the participant, who acts as its agent, and the agreement must be in the form specified by the depository's bye-laws. No court order, stock exchange form or issuer agreement is needed for appointing a participant.

  1. AEnter into an agreement with the participant as its agent, in the form specified by the bye-lawsCorrect
  2. BObtain a court order appointing the participant, in the form prescribed by the Companies Act
  3. CIssue a general notice to investors, in a form chosen by the participant
  4. DEnter into an agreement with the issuer company, in the form specified by the stock exchange

Explanation

Section 4 requires a depository to enter into an agreement with one or more participants as its agent, and every such agreement must be in the form specified by the bye-laws. The other options name a wrong party, wrong form authority or wrong mechanism.

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