Consider the following statements about dematerialisation:
(A) Dematerialisation enables shares to be transferred to some other account just like cash.
(B) Electronic holdings of shares are reconverted into physical certificates through dematerialisation.
(C) Demat securities can be pledged or hypothecated to get loans.
(D) It is the depository’s responsibility to credit the investor’s account with the correct number of shares.
(E) Dematerialisation ensures settlement of all trades through a single account in shares.
How many of the above statements are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Three
(A) Dematerialisation enables shares to be transferred to some other account just like cash. — Correct. Demat shares can be transferred to some other account just like cash.
(B) Electronic holdings of shares are reconverted into physical certificates through dematerialisation. — Incorrect. Reconverting electronic holdings into physical certificates is rematerialisation. Dematerialisation is the opposite step.
(C) Demat securities can be pledged or hypothecated to get loans. — Correct. Demat securities can be pledged or hypothecated to get loans.
(D) It is the depository’s responsibility to credit the investor’s account with the correct number of shares. — Incorrect. Crediting the correct number of shares is the broker’s responsibility.
(E) Dematerialisation ensures settlement of all trades through a single account in shares. — Correct. Dematerialisation ensures that all trades are settled through a single account in shares.
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. …” |