Choose the incorrect statements from the following about the trading and settlement procedure:
(A) Before placing an order, the investor signs a broker-client agreement and a client registration form.
(B) A Unique Order Code number is assigned to each transaction by the broker.
(C) The investor opens a demat account with the stock exchange for holding and transferring securities.
(D) The contract note is legally enforceable and helps to settle disputes between the investor and the broker.
(E) The investor has to open a bank account for cash transactions in the securities market.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (B) and (C) only
(A) Before placing an order, the investor signs a broker-client agreement and a client registration form. — True. The broker-client agreement and the client registration form are signed before any buy or sell order.
(B) A Unique Order Code number is assigned to each transaction by the broker. — False. The Unique Order Code number is assigned by the stock exchange, and it is printed on the contract note.
(C) The investor opens a demat account with the stock exchange for holding and transferring securities. — False. The demat account, also called the beneficial owner account, is opened with a depository participant.
(D) The contract note is legally enforceable and helps to settle disputes between the investor and the broker. — True. The contract note is legally enforceable, so it helps settle disputes or claims.
(E) The investor has to open a bank account for cash transactions in the securities market. — True. Along with the demat account, the investor opens a bank account for cash dealings in the market.
NCERT (Pre-rationalised Edition): “Steps in the Trading and Settlement Procedure … 2. The investor has to open a ‘demat’ account or ‘beneficial owner’ (BO) account with a depository participant (DP) for holding and transferring securities in the demat form. He will also have to open a bank account for cash transactions in the securities market.” “6. After the trade has been executed, within 24 hours the broker issues a Contract Note. This note contains details of the number of shares bought or sold, the price, the date and time of deal, and the brokerage charges. This is an important document as it is legally enforceable and helps to settle disputes/claims between the investor and the broker. A Unique Order Code number is assigned to each transaction by the stock exchange and is printed on the contract note.” |