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

Sagar Infra Ltd lists sponsored depository receipts on an IFSC exchange. Later, a DR holder asks to cancel receipts and take delivery of the underlying shares. Which statement best describes the effect of this cancellation?

On cancellation the receipts are extinguished and the custodian releases the matching underlying shares to the holder, subject to applicable law. No fresh shares are issued, and the issuer is not forced to delist because one holder converted.

  1. AThe receipts are extinguished and the corresponding underlying shares are released by the custodian to the holder, subject to applicable lawCorrect
  2. BThe receipts remain outstanding and the issuer must issue fresh shares to the holder
  3. CThe holder receives cash equal to the face value of the shares from the exchange
  4. DThe issuer is compelled to delist from the IFSC exchange at once

Explanation

Conversion of DRs into underlying shares means the receipts are cancelled and the matching shares held by the custodian are released, subject to applicable laws such as foreign investment limits. No new shares are issued, no face-value cash is paid, and delisting does not follow automatically.

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