NISM Series VI · Unit 5 of 12 · about 5% of the paper
Functions of DP: transmission and nomination: NISM Series VI notes and practice questions
What happens to securities on the death of a holder: nomination, transmission, and the documents needed.
What to know in Unit 5
- Nomination.
- Transmission.
- Joint holders.
- Documents.
Key terms, examples and exam traps
Nomination
Nomination lets an account holder name a person who will receive the securities if the holder dies.
Example. A holder names her son as nominee when opening the account.
Exam trap. This statement is false: A nominee becomes owner of the securities while the holder is alive.
Number of nominees
SEBI allows an investor to nominate up to ten persons for a demat account, with the percentage share of each specified.
Example. An investor splits holdings among three nominees in stated proportions.
Exam trap. This statement is false: Only one nominee is permitted for a demat account.
Transmission
Transmission is the transfer of securities to a person by operation of law, such as on the death of a holder, and not by sale or gift.
Example. Securities of a deceased holder pass to the nominee or legal heir.
Exam trap. This statement is false: Transmission is a transfer for consideration.
Joint holders
On the death of one joint holder, the surviving joint holder is recognised as the holder of the securities.
Example. The second holder continues to hold the securities after the first holder's death.
Exam trap. This statement is false: The securities of a joint account are frozen permanently on a holder's death.
Documents for transmission
A transmission request needs a claim form, an attested death certificate and identity and KYC details of the claimant, with extra documents when there is no nominee.
Example. The nominee submits the death certificate with her claim.
Exam trap. This statement is false: No documents are required for transmission.
Nominee and legal heir
A nominee receives the securities as a trustee for the legal heirs when the law provides so, while a legal heir has a right under succession law.
Example. A nominee must account to the legal heirs where succession rules say so.
Exam trap. This statement is false: A nominee always owns the securities outright against other legal heirs.
Nomination for minors
A nominee may be a minor, with a guardian appointed to act for her.
Example. A holder nominates her grandchild and names the child's guardian.
Exam trap. This statement is false: A minor cannot be a nominee under any circumstance.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which term is described here? Nomination lets an account holder name a person who will receive the securities if the holder dies.
- Nomination
- Demat request form
- Market intermediaries
- Inter-depository transfer
Q2. Which term is described here? SEBI allows an investor to nominate up to ten persons for a demat account, with the percentage share of each specified.
- Stock split
- Number of nominees
- Rights of the pledgor
- KYC and PAN
Q3. Which statement best describes “Nominee and legal heir”?
- Non-cash benefits such as bonus shares and split shares are credited to the demat account of the BO, using fresh ISINs where needed.
- A nominee receives the securities as a trustee for the legal heirs when the law provides so, while a legal heir has a right under succession law.
- Equity trades on exchanges settle on a T+1 rolling basis, meaning one working day after the trade day.
- A clearing corporation guarantees and settles trades made on an exchange, managing the obligations of members.
Q4. Which statement best describes “Nomination for minors”?
- The clearing corporation settles exchange trades, and clearing members hold accounts with it to settle obligations on behalf of brokers and clients.
- If the pledgor defaults, the pledgee can invoke the pledge, and securities are moved to the pledgee's account.
- A corporate action is an event by an issuer, such as a dividend, bonus, split, rights issue or merger, that affects securities and holders.
- A nominee may be a minor, with a guardian appointed to act for her.
Q5. Which term is described here? On the death of one joint holder, the surviving joint holder is recognised as the holder of the securities.
- Pledge closure
- Margin pledge
- Joint holders
- SGL account
Q6. Which statement about “Nomination for minors” is correct?
- Investors can trade on an exchange without any intermediary.
- A minor cannot be a nominee under any circumstance.
- The pledgor invokes a pledge when she wants her shares back.
- A nominee may be a minor, with a guardian appointed to act for her.
Frequently asked questions
How much of NISM Series VI comes from Unit 5?
Unit 5 (Functions of DP: transmission and nomination) usually carries about 5% of the questions. The whole exam has 100 questions and the pass mark is 60%.
What should I study in NISM Series VI Unit 5?
Nomination. Transmission. Joint holders. Documents.
Are these NISM Series VI practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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