Functions of DP: dematerialisation: NISM Series VI notes and practice questions

Q1. Which statement best describes “Rematerialisation”?

1. The DP must disclose its tariff and cannot charge beyond what it has disclosed; it levies charges such as annual maintenance and debit transaction fees.
2. Securities may be delivered at the usual pay-in time or earlier, called early pay-in, and the DP processes instructions before the deadline.
3. Rematerialisation converts demat holdings back into physical certificates at the investor's request.
4. An issuer is the company or body that issues securities and may offer them in demat form through the depository.

Q2. Which term is described here? The names and order on the certificates must match the demat account, and unmatched requests are rejected or need further steps.

1. Basic services demat account
2. Name matching
3. Early pay-in
4. Market intermediaries

Q3. Which statement best describes “Physical transfer restriction”?

1. In a hypothecation, the securities remain in the borrower's account but are blocked in favour of the lender, who gets a charge without possession.
2. SEBI does not permit the transfer of listed securities in physical form, other than for transmission and transposition, so securities must be dematerialised before transfer.
3. 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.
4. Transposition is a change in the order of names of joint holders, and it is done by the issuer or registrar.

Q4. Which statement best describes “Demat request form”?

1. Demat accounts may be opened by individuals, joint holders, HUFs, companies, trusts, NRIs and minors through a guardian.
2. SEBI regulates the securities market, protects investors and promotes market development.
3. The investor fills a demat request form (DRF) and submits it with the certificates to the DP.
4. Securities may be delivered at the usual pay-in time or earlier, called early pay-in, and the DP processes instructions before the deadline.

Q5. Which statement best describes “Transposition”?

1. Application Supported by Blocked Amount (ASBA) blocks the application money in the investor's bank account until allotment, instead of debiting it.
2. Equity trades on exchanges settle on a T+1 rolling basis, meaning one working day after the trade day.
3. Transposition is a change in the order of names of joint holders, and it is done by the issuer or registrar.
4. A depository holds securities of investors just as a bank holds their money, and transfers move by book entry.

Q6. Which statement best describes “Dematerialisation”?

1. Entities such as banks, public financial institutions, custodians, clearing corporations, stock brokers, NBFCs and registrars can become DPs, subject to net worth norms and approval.
2. Securities held in a depository are fungible, so no distinguishing numbers or certificate marks are kept for individual securities.
3. Dematerialisation is converting physical securities into electronic form and crediting them to the investor's demat account.
4. Non-cash benefits such as bonus shares and split shares are credited to the demat account of the BO, using fresh ISINs where needed.