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NISM Certifications · NISM-Series-VI: Depository Operations · Depository and its Business Partners

Under the Depositories Act, 1996, which of the following is the legal relationship between a depository and the investor whose securities are held in the depository system?

The depository is the registered owner of dematerialised securities in the issuer's records, while the investor remains the beneficial owner entitled to dividends, bonus and other benefits. The depository does not enjoy the benefits of ownership, and the DP merely acts as its agent.

  1. AThe depository is the registered owner and the beneficial owner of the securities
  2. BThe depository is the registered owner and the investor is the beneficial ownerCorrect
  3. CThe investor is the registered owner and the depository is the beneficial owner
  4. DThe Depository Participant is the registered owner and the investor is the beneficial owner

Explanation

When securities are dematerialised, the name of the depository appears in the issuer's register as the registered owner, while the investor retains all benefits and rights as the beneficial owner. The depository has no right to the benefits attached to the securities. The DP is only an agent of the depository and does not own the securities.

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