An investor applies for shares in a public offer and gives the details of the depository participant (DP) and the demat account. On allotment, the shares are:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → automatically credited to the demat account
Option (1) credited first to the trading account opened by the broker — Incorrect. The broker opens a trading account so that the investor can buy and sell through him. Allotted shares do not pass through it.
Option (2) held by the stock exchange until the pay-out day — Incorrect. On the pay-out day the exchange delivers shares or makes payment after a trade. An allotment in a public offer is not a trade on the exchange.
Option (3) delivered to the demat account once the broker instructs his DP — Incorrect. The broker instructs his DP only when shares are sold through a broker, to deliver them to the stock exchange. Allotted shares need no such step.
Option (4) automatically credited to the demat account — Correct. The investor gives only simple details of the DP and the demat account in the application. On allotment the shares are credited to the demat account automatically.
NCERT (Pre-rationalised Edition): “Working of the Demat System 1. A depository participant (DP), either a bank, broker, or financial services company, may be identified. |