Book-Entry

### What is a primary advantage of book-entry securities over physical certificates? - [x] Increased security and efficiency - [ ] Higher dividends - [ ] Lower value fluctuation - [ ] Shorter holding period requirements > **Explanation:** Book-entry securities eliminate the risks associated with physical certificates, such as loss, theft, and forgery, and make transactions easier and faster. ### Can book-entry systems be used for both stocks and bonds? - [x] Yes, book-entry systems can be used for stocks, bonds, and other securities. - [ ] No, they are only used for bonds. - [ ] No, they are only used for stocks. - [ ] They are used only for government-issued securities. > **Explanation:** Book-entry systems are versatile and can record ownership of various securities, including stocks, bonds, and government-issued securities. ### How is ownership verified in a book-entry system? - [x] Through computerized records maintained by central repositories or financial institutions - [ ] Using physical certificates - [ ] By the serial number on paper certificates - [ ] Through notarized documents > **Explanation:** Ownership is verified through electronic records maintained by entities like central securities depositories or financial institutions. ### Which entity often holds and transfers book-entry securities? - [x] Central Securities Depository (CSD) - [ ] Local Bank Branch - [ ] Corporate Offices - [ ] Real Estate Agents > **Explanation:** Central securities depositories (CSDs) play a crucial role in holding and transferring book-entry securities. ### What does dematerialization refer to in the context of securities? - [x] Converting physical securities into electronic form - [ ] Issuing physical certificates - [ ] Destroying outdated records - [ ] Increasing the material used in certificates > **Explanation:** Dematerialization is the process of converting physical certificates into electronic records, which is central to book-entry systems. ### Are book-entry securities more susceptible to fraud than physical certificates? - [ ] Yes, they are more susceptible to fraud. - [ ] Physical certificates are equally susceptible. - [x] No, they are generally less susceptible to fraud. - [ ] Fraud risks are the same for both. > **Explanation:** Book-entry systems are generally more secure and less susceptible to fraud than physical certificates due to the reliance on secure electronic records. ### Is it possible to receive physical certificates for book-entry securities if needed? - [ ] Always - [ ] Rarely - [x] Sometimes, depending on the issuer or regulations. - [ ] Never > **Explanation:** While book-entry is the standard, some issuers or regulations might allow for the issuance of physical certificates if needed. ### Who typically uses book-entry securities? - [ ] Only high-net-worth individuals - [x] Both individual and institutional investors - [ ] Only government agencies - [ ] Only corporate employees > **Explanation:** Both individual and institutional investors use book-entry securities for their safety, efficiency, and ease of transaction. ### What are key features of book-entry systems? - [x] Electronic records and proof of ownership - [ ] Physical document delivery - [ ] High transaction fees - [ ] Limited to corporate bonds > **Explanation:** Book-entry systems involve electronic records that serve as proof of ownership, making them efficient and secure. ### What process removes the need for physical certificates in trading securities? - [x] Dematerialization - [ ] Materialization - [ ] Authentication - [ ] Certification > **Explanation:** Dematerialization is the process of removing the need for physical certificates by converting to electronic records.