In the demat system, whose responsibility is it to credit the investor’s account with the correct number of shares?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The broker
Option (1) The depository — Incorrect. The depository keeps securities in electronic form for investors, as a bank keeps money. It does not credit shares bought through a broker.
Option (2) The broker — Correct. The broker buys the shares for the investor and delivers them to the investor’s demat account. So it is the broker’s responsibility to credit the account with the correct number of shares.
Option (3) The stock exchange — Incorrect. On the pay-out day the exchange delivers shares to the broker, and the investor’s account is not its concern.
Option (4) The depository participant — Incorrect. The depository participant maintains the investor’s demat account and acts on the investor’s instructions. Crediting the correct number of shares is the broker’s duty.
NCERT (Pre-rationalised Edition): “Dematerialisation and Depositories … Holding shares in demat form is very convenient as it is just like a bank account. Physical shares can be converted into electronic form or electronic holdings can be reconverted into physical certificates (rematerialisation). Dematerialisation enables shares to be transferred to some other account just like cash and ensures settlement of all trades through a single account in shares. These demat securities can even be pledged or hypothecated to get loans. There is no danger of loss, theft or forgery of share certificates. It is the broker’s responsibility to credit the investor’s account with the correct number of shares. …” |