NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
In a depository pledge of dematerialised securities, which of the following correctly describes the parties?
The pledgor is the beneficial owner and borrower who offers demat securities as collateral, while the pledgee is the lender who accepts them as security for the loan. The roles are not reversed, and neither party needs to be a depository participant.
- AThe pledgor is the lender and the pledgee is the borrower
- BThe pledgor is the beneficial owner who offers securities as collateral, and the pledgee is the lender who accepts themCorrect
- CBoth pledgor and pledgee must be depository participants
- DThe pledgor is always the issuer of the securities
Explanation
In a pledge, the borrower who owns the securities and offers them as security is the pledgor. The lender who accepts them as collateral is the pledgee. The reverse description confuses the roles, and neither party need be a DP.
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