Question : Assertion: Depository Participants (DPs) play a key role in the dematerialization process.
Reason: DPs facilitate the conversion of electronic securities into physical certificates.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Assertion is false, but the reason is true.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
The assertion is true. Depository Participants (DPs) are entities that interface between the depository (where securities are held in electronic form) and the investors. They facilitate the dematerialization process, wherein physical securities are converted into electronic or dematerialized form and held in a demat account.
The reason is false. DPs do not facilitate the conversion of electronic securities into physical certificates. In fact, they handle the opposite process—converting physical securities into electronic form (dematerialization) and maintaining them in a demat account. The conversion of electronic securities back into physical certificates is a rare process called rematerialization, and this is not a primary function of DPs.
Question : Assertion: Dematerialization refers to the conversion of physical securities into electronic form.
Reason: Dematerialization helps in reducing the risk of theft and forgery of securities.
Question : Assertion: Primary market transactions involve the issuance of new securities to the public.
Reason: Primary market transactions facilitate the trading of existing securities.
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