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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

A company announces a rights issue and the record date is fixed. A client wants to receive the rights entitlement (RE) in her demat account. Which statement best describes how REs are credited in the depository system?

Rights entitlements are credited to the demat accounts of shareholders eligible on the record date, under a separate temporary ISIN allotted for the entitlement. Shareholders can then apply or renounce them, so no physical letters or advance application to the DP is needed.

  1. AREs are credited to the demat account of eligible shareholders as of the record date, under a separate temporary ISINCorrect
  2. BREs are sent as physical letters of allotment to all shareholders
  3. CREs are credited only to shareholders who apply in advance to the DP
  4. DREs are credited under the same ISIN as the equity shares

Explanation

In a rights issue, rights entitlements are credited to the demat accounts of eligible shareholders as on the record date under a separate ISIN created for the RE. They can be renounced or used to apply. They do not share the equity ISIN and need no prior application.

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