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Question
Explain disadvantages of physical mode of holding securities.
Solution
Securities can be held in two modes - physical mode and electronic or dematerialised mode. Physical mode means securities are held in the form of paper certificates. The following are the disadvantages of the physical mode of holding securities.
- DELAY IN ALLOTMENT OF SECURITIES
Allotment of new securities takes a longer time. - RISK
Certificates of papers can be lost, damaged, torn, stolen, misplaced during transit, etc. - RISK OF BAD DELIVERY
Delivering certificates which are torn, fake, etc. creates problems in buying and selling of securities. - EFFORTS IN DUPLICATING
Obtaining duplicate certificates (if the original certificate is lost) involves time, effort, and money. - DELAY IN TRANSFER AND TRANSMISSION OF SECURITIES
More time is involved in the transfer and transmission of securities as it involves the actual handling of physical certificates.
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Study the following case/situation and express your opinion.
Mr. Z holds 100 shares of Peculiar Co. Ltd. in Physical mode and wishes to convert the same in electronic mode :
- Mr. Z holds a Saving Bank Account with CFDH Bank Ltd. Can he deposit his shares in this account for Demat?
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- Is it the RBI which will be the custodian of shares of Mr. Z after demating?
Study the following case/situation and express your opinion.
Mr. R holds 100 shares of Peculiar Co. Ltd. in Demat mode :
- He wants to transfer one share each to his wife, daughter, and son. Can he do so?
- Does he need to submit DRF or DIS if he wants to transfer his shares?
- Can he nominate his wife in his Demat account?
Study the following case/situation and express your opinion.
Mrs. Z wishes to open a Demat account in her name :
- Can she open the account by going to the Mumbai office of NSDL?
- Is she required to pay for the opening of the account and its maintenance?
- Does she have to send the shares to the respective company for demating?
Study the following case/situation and express your opinion.
| Mr. Satish holds 100 shares of Raj Company Ltd. in physical mode and wishes to convert the same into electronic mode: |
- Mr. Satish holds a Savings Bank Account with SBI Can he deposit his shares in this account for demat?
- What type of account is needed for the same?
- Is the RBI which will be the custodian of shares of Mr. Satish after demating?
