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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

Which statement about the role of a custodian for an institutional client in the securities market is correct?

A custodian holds an institutional client's securities and funds and handles settlement, confirming trade details with the broker before settling on the client's behalf. It does not execute orders, issue mutual fund units or assign credit ratings, which are done by other market participants.

  1. AIt holds the client's securities and funds and settles trades on behalf of the client after confirming trade details with the brokerCorrect
  2. BIt executes the client's orders on the exchange as a trading member
  3. CIt issues units of mutual funds to the client
  4. DIt provides credit ratings for the client's debt securities

Explanation

Custodians safekeep securities and funds and handle post-trade settlement and confirmation for institutions such as FPIs and mutual funds. Order execution is a broker's function, units are issued by mutual funds, and ratings come from credit rating agencies.

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