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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

A DP receives a request from a client to pledge 500 units of a demat debt security. Which statement about pledge of such securities is correct?

When securities are pledged, the depository marks them as pledged in the client's account, which blocks transfer. The client remains the owner, but the securities stay frozen until the pledgee closes the pledge or invokes it to recover its dues.

  1. AThe securities are marked as pledged in the client's account and cannot be transferred until the pledge is closed or invokedCorrect
  2. BThe securities are moved permanently to the lender's account at creation
  3. CThe client may sell them freely while pledged
  4. DNo depository record is made of the pledge

Explanation

In a pledge, the depository creates a lien by freezing the pledged securities in the pledgor's account. The pledgor stays the owner but cannot transfer them until the pledgee closes or invokes the pledge. Securities do not move to the lender on creation, and the depository records the pledge.

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