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

A shareholder holds shares in a demat account on the record date for a cash dividend. How does the company usually ensure the dividend reaches the shareholder?

The issuer or its registrar obtains the beneficial owner list with bank details from the depository as at the record date and pays the dividend directly, usually electronically. The depository and DP only provide data and do not pay the dividend themselves.

  1. AThe depository pays the dividend from its own funds to the DP
  2. BThe issuer or its registrar obtains beneficiary details with bank account information from the depository as of the record date and pays the dividend electronicallyCorrect
  3. CThe DP must compute and pay the dividend to the clients
  4. DThe stock exchange pays the dividend through the clearing corporation's pool account

Explanation

The depository provides the issuer or registrar with the list of beneficial owners and their holdings, including bank details, as on the record date. The issuer then pays dividends directly, usually electronically. Depositories and DPs do not pay dividends from their own funds.

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