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

Before a record date for a corporate action, an investor sells shares but the settlement will not complete until after the record date. In the depository system, who is entitled to the corporate benefit such as a dividend?

The beneficial owner shown in the depository's records on the record date is entitled to the corporate benefit. The issuer relies on the depository's beneficial owner list, not on the broker or the DP, to decide who receives the dividend or other benefit.

  1. AThe beneficial owner whose name appears in the depository records on the record dateCorrect
  2. BThe buyer in all cases, regardless of settlement
  3. CThe broker who executed the trade
  4. DThe depository participant holding the account

Explanation

The issuer obtains a list of beneficial owners from the depository as at the record date, and benefits go to those holders. Trading is arranged so that the ex-date precedes the record date to reflect settlement timing, but entitlement rests on the depository records, not on the broker or the DP.

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