Before placing an order, an investor signs an agreement and a client registration form. Who then opens a trading account in the name of the investor?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The broker
Option (1) The depository participant — Incorrect. The depository participant opens the investor’s demat account, which holds shares in electronic form.
Option (2) The broker — Correct. The investor first approaches a registered broker or sub-broker. Once the agreement and the client registration form are signed, the broker opens a trading account in the investor’s name.
Option (3) The stock exchange — Incorrect. The stock exchange runs the main computer system on which brokers’ orders are matched. Investors deal with it only through brokers.
Option (4) The depository — Incorrect. The depository keeps securities in electronic form for investors. It works through depository participants and opens no trading accounts.
NCERT (Pre-rationalised Edition): “Steps in the Trading and Settlement Procedure … 1. If an investor wishes to buy or sell any security he has to first approach a registered broker or sub-broker and enter into an agreement with him. The investor has to sign a broker-client agreement and a client registration form before placing an order to buy or sell securities. He has also to provide certain other details and information. These include: |