NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
Aarav has pledged shares to a bank. The company announces a cash dividend. Who is generally entitled to receive the dividend on pledged shares in the depository system?
The pledgor receives the dividend on pledged shares, because the shares stay in the pledgor's demat account and he remains the beneficial owner. The pledgee gets no ownership benefits until it invokes the pledge and the shares are transferred.
- AThe pledgor, as he remains the beneficial ownerCorrect
- BThe pledgee, as shares are in its custody
- CThe depository
- DThe DP of the pledgee
Explanation
Since pledged shares remain in the pledgor's account, corporate benefits such as dividends are credited to the pledgor, who stays the beneficial owner. The pledgee gets rights only on invocation. The depository and DP are intermediaries, not recipients.
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