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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository

Which of the following best describes the legal position of a depository in India with respect to the securities held in a beneficial owner's demat account?

The depository appears in the issuer's records as the registered owner of dematerialised securities, while the investor is the beneficial owner entitled to all benefits such as dividends, bonus and voting rights. The depository holds only the registered title and has no beneficial interest.

  1. AThe depository is the registered owner and the beneficial owner holds the beneficial interestCorrect
  2. BThe depository is both the registered and the beneficial owner of the securities
  3. CThe beneficial owner is the registered owner and the depository holds only custody
  4. DThe depository participant is the registered owner of the securities

Explanation

Under the Depositories Act, when securities are dematerialised, the name of the depository is entered in the issuer's register as the registered owner. The investor remains the beneficial owner with all rights such as dividends and voting. The depository therefore has no beneficial interest, so the option making it beneficial owner is wrong.

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