CMFAS CM-EIP Equities & Shares question: modern share settlement and safekeeping

CMFAS CM-EIPEquities & Shares

Which statement about modern share settlement and safekeeping is CORRECT?

A Trades settle instantly at the moment of execution, with no settlement cycle of any kind
B Paper share certificates remain the standard form of holding shares today
C A central depository plays no part in transferring legal ownership of shares
D Shares are usually scripless and settle a set number of business days after trade date

Show the answer and explanation

Answer: D. Shares are usually scripless and settle a set number of business days after trade date

Modern shares are almost always held in dematerialised (electronic/scripless) form and settle on a standard cycle a set number of business days after the trade date, with a central clearing system and depository transferring ownership and reducing counterparty risk.

Common mistake

Assuming instant settlement or that paper certificates and no central depository are the norm.

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CMFAS CM-EIP Equities & Shares question: modern share settlement and safekeeping

Answer: D. Shares are usually scripless and settle a set number of business days after trade date

Common mistake

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CMFAS CM-EIP Equities & Shares question: modern share settlement and safekeeping

Answer: D. Shares are usually scripless and settle a set number of business days after trade date

Common mistake

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