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

A company issues rights shares to existing shareholders. A client who is eligible does not wish to subscribe and wants to benefit from the entitlement. Which of the following is the correct position regarding the rights entitlement (RE) in the depository system?

The rights entitlement is credited to the client's demat account under a separate ISIN, and the client can renounce it by selling on the exchange or transferring off-market during the specified renunciation period. If not used or sold, it lapses after the issue closes.

  1. AThe RE is credited to the demat account as a separate ISIN and can be renounced by selling it on the market or off-market transfer within the rights issue periodCorrect
  2. BThe RE lapses immediately and cannot be dealt with in any manner
  3. CThe RE can be sold only after the shares are allotted
  4. DThe RE is credited to the physical register of the issuer only and not to the demat account

Explanation

Under current rights issue process, rights entitlements are credited to eligible shareholders' demat accounts under a separate ISIN. Holders may apply, or renounce by selling on the exchange or by off-market transfer before the renunciation period ends. Unused entitlements lapse only after the issue closes.

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