The disadvantages of dematerialization of securities can be summarised as follows:
Trading in securities may become uncontrolled in case of dematerialized securities.
It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors.
The role of key market players in case of dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market.
Multiple regulatory frameworks have to be confirmed to, including the Depositories Act, Regulations and the various By-Laws of various depositories.
Additionally, agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity.
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