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CS Professional · IFSCA - Regulations, Listing and Compliances · Listing and Issuance of Securities

Kaveri Textiles Ltd plans to issue depository receipts listed in GIFT IFSC against its equity shares. Rohan, its CS, lists the parties. Which party holds the underlying shares on behalf of the depository in the arrangement?

The custodian holds the underlying shares for the depository. The depository issues receipts against those shares, so the custodian provides the physical link between the receipts traded in the IFSC and the shares of the issuer in the home market.

  1. AThe custodianCorrect
  2. BThe stock exchange's clearing member
  3. CThe issuer's statutory auditor
  4. DThe merchant banker to the issue

Explanation

In a DR programme the underlying shares are held by a custodian, usually in the issuer's home market, while the depository issues the receipts. Auditors and merchant bankers do not hold the shares, and a clearing member only settles trades.

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