NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
In the depository pledge process, which step is needed after the pledger's DP initiates the pledge instruction for it to become effective?
The pledgee must confirm the pledge instruction after the pledger initiates it. Until the lender confirms through its DP, the pledge is not created and the securities are not marked as pledged in the depository system.
- AThe pledgee must confirm the pledge instructionCorrect
- BThe issuer company must approve the pledge
- CThe stock exchange must approve the pledge
- DSEBI must give approval for each instruction
Explanation
The pledger initiates the instruction, and the pledgee has to confirm it through its DP. Only after the confirmation is the pledge created. The issuer and exchange do not approve routine pledges.
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