NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
Under the depository pledge process, which party is the 'pledgor' when a client pledges securities held in demat form to obtain a loan?
The pledgor is the beneficial owner who offers his demat securities as security for a loan. The lender who accepts them as collateral is the pledgee. The depository and its participants only record and process the pledge instruction; they are not parties to the loan.
- AThe lender who accepts the securities as collateral
- BThe beneficial owner who offers the securities as securityCorrect
- CThe depository that records the pledge
- DThe clearing corporation that settles the trade
Explanation
The pledgor is the beneficial owner who creates the pledge by offering securities as security for a loan. The lender receiving the security is the pledgee. The depository only records the pledge and the clearing corporation is not a party to it.
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