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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation

In a depository pledge, after the pledge is created and confirmed, what happens to the pledged securities in the pledgor's account?

The pledged securities stay in the pledgor's account but are blocked or marked as pledged, so they cannot be freely sold or transferred. Ownership is not transferred to the pledgee. The lock continues until the pledge is closed or invoked.

  1. AThey are transferred permanently to the pledgee's account
  2. BThey are blocked or marked as pledged in the pledgor's account and cannot be freely transferredCorrect
  3. CThey are cancelled and returned to the issuer
  4. DThey remain fully free for sale by the pledgor

Explanation

On confirmation, the depository freezes the pledged quantity in the pledgor's account, so it stays with the pledgor as beneficial owner but cannot be sold or transferred. Ownership does not move to the pledgee, and the pledgor cannot freely deal with it.

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