Unit study guide · NISM Series III-A
SEBI (Depositories and Participants) Regulations 2018
4 questions in this unit
What this unit covers
- How frequently must a depository participant reconcile its records with each depository in which it participates?
- A participant combines different clients’ holdings with its own securities in one undifferentiated account. Which principle is breached?
- A participant discovers a mismatch between its client ledger and depository records. What should it do first?
- A person phones a participant claiming to represent a beneficial owner and demands a transfer. There is no verified authority or valid instruction. What should happen?
Key ideas
From the practice bank · 1
How frequently must a depository participant reconcile its records with each depository in which it participates?
Regulation 64 requires the participant to reconcile its records with each relevant depository daily. Remember: Routine reconciliation and periodic audits are separate controls.
Hint Common mistake: Substituting an annual or quarterly audit for daily record matching. Recall the specific reconciliation frequency rather than an audit frequency.
III-A-122From the practice bank · 2
A participant combines different clients’ holdings with its own securities in one undifferentiated account. Which principle is breached?
The arrangement breaches the requirement to maintain separate, segregated beneficial-owner holdings. Remember: Each beneficial owner’s securities must remain distinct from other clients and the participant.
Hint Common mistake: Assuming a combined total is enough without client-level segregation. Look at whether each client’s holdings remain separately identifiable.
III-A-123From the practice bank · 3
A participant discovers a mismatch between its client ledger and depository records. What should it do first?
The participant should investigate the cause using genuine records and make a supported correction where required. Remember: Reconciliation requires resolving differences, not merely forcing totals to agree.
Hint Common mistake: Using unexplained balancing entries to make a reconciliation look complete. A reconciliation difference needs evidence before correction.
III-A-124From the practice bank · 4
A person phones a participant claiming to represent a beneficial owner and demands a transfer. There is no verified authority or valid instruction. What should happen?
The participant must establish valid authority and the required instruction before making the transfer. Remember: A securities transfer must have a valid instruction traceable to the authorised account holder.
Hint Common mistake: Treating familiarity with account details as proof of authority. Knowledge about an account is not the same as authority over it.
III-A-125