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Question
Justify the following statement.
The electronic holding of securities is safer than physical holding.
Solution
- Under the depository system, securities are held in electronic form.
- Physical certificates can be lost, damaged, torn, stolen, misplaced during transit, etc.
- Delivering certificates that are torn, fake, etc. creates problems in buying and selling of securities.
- The transfer and settlement of securities are done electronically.
- It leads to the elimination of storage and handling of certificates.
- So, all risks associated with physical holding are eliminated by the electronic holding of securities.
- Hence, the electronic holding of securities is safer than physical holding.
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