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NISM Series VI · Unit 10 of 12 · about 5% of the paper

Functions of DP: public issues: NISM Series VI notes and practice questions

How investors apply for public issues and receive shares in the demat account.

Practise this unit freeAll of NISM Series VI

What to know in Unit 10

Key terms, examples and exam traps

Public issue

A public issue is an offer of securities to the public by a company for subscription, such as an initial public offer.

Example. A company offers new shares to investors at a price band.

Exam trap. This statement is false: A public issue is the sale of existing shares on the exchange.

Initial public offer

An initial public offer (IPO) is the first public offer of shares by an unlisted company, and its securities are issued in dematerialised form.

Example. An investor applies for shares in an IPO and receives them in her account.

Exam trap. This statement is false: Allotment in an IPO is made in paper certificates only.

Demat account for applicants

An applicant in a public issue needs a demat account, and the allotment is credited to it.

Example. An investor quotes her DP ID and client ID in the application.

Exam trap. This statement is false: An investor needs no demat account to apply in a public issue.

ASBA

Application Supported by Blocked Amount (ASBA) blocks the application money in the investor's bank account until allotment, instead of debiting it.

Example. The amount remains in the investor's account, blocked, while the bid is pending.

Exam trap. This statement is false: Under ASBA the money is paid out at the time of application.

Demat credit on allotment

Securities allotted to successful applicants are credited to their demat accounts through the registrar and depository, and the unallotted amount is released.

Example. The allotted shares appear in the account before listing.

Exam trap. This statement is false: Allotted shares are posted to the investor days after listing.

Mismatch of details

If the name or details in the application differ from the demat records, allotment can fail or be delayed, so details must match.

Example. An application with the wrong client ID is rejected.

Exam trap. This statement is false: Mismatched details never affect the allotment.

6 practice questions

Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.

Q1. Which term is described here? A public issue is an offer of securities to the public by a company for subscription, such as an initial public offer.

  1. Registrar and transfer agent
  2. Public issue
  3. Pledgor and pledgee
  4. BSDA eligibility

Q2. Which term is described here? An applicant in a public issue needs a demat account, and the allotment is credited to it.

  1. Fungibility
  2. ASBA
  3. Dematerialisation
  4. Demat account for applicants

Q3. Which term is described here? If the name or details in the application differ from the demat records, allotment can fail or be delayed, so details must match.

  1. Joint holders
  2. Pay-in and pay-out
  3. Delivery instruction slip
  4. Mismatch of details

Q4. Which statement best describes “Initial public offer”?

  1. A beneficial owner (BO) account, or demat account, holds securities in electronic form and is opened with a DP.
  2. The registrar verifies the request and certificates, cancels them, confirms to the depository, and the depository credits the account.
  3. An initial public offer (IPO) is the first public offer of shares by an unlisted company, and its securities are issued in dematerialised form.
  4. Securities include shares, debentures, government securities, units of mutual funds and similar instruments that can be issued and traded.

Q5. Which statement best describes “Demat credit on allotment”?

  1. Securities allotted to successful applicants are credited to their demat accounts through the registrar and depository, and the unallotted amount is released.
  2. For a BSDA, the annual maintenance charge is nil for holdings up to ₹4 lakh and up to ₹100 plus GST for holdings above ₹4 lakh and up to ₹10 lakh.
  3. The investor fills a demat request form (DRF) and submits it with the certificates to the DP.
  4. An instruction fails if securities are insufficient, the account is frozen or details are wrong, and the DP must tell the BO or correct it.

Q6. Which statement about “Demat credit on allotment” is correct?

  1. Allotted shares are posted to the investor days after listing.
  2. Dematerialisation is converting electronic securities into paper.
  3. Bonus shares are paid by cheque.
  4. Securities allotted to successful applicants are credited to their demat accounts through the registrar and depository, and the unallotted amount is released.
See the answers in the free mock

Frequently asked questions

How much of NISM Series VI comes from Unit 10?

Unit 10 (Functions of DP: public issues) usually carries about 5% of the questions. The whole exam has 100 questions and the pass mark is 60%.

What should I study in NISM Series VI Unit 10?

IPO in demat. ASBA and UPI. Allotment and credit. Role of the DP.

Are these NISM Series VI practice questions free?

Yes. Take the full free mocks to see the correct answer and the reason for every question.

Next

← Unit 9Functions of DP: corporate actionsUnit 11 →Functions of DP: debt and government securities

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