NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
Under the depository system, when securities are pledged, the pledgor's securities are:
The securities stay in the pledgor's demat account but are blocked and marked as pledged in favour of the pledgee. Ownership does not transfer to the lender, and the pledgor cannot dispose of them until the pledge is closed or the pledgee invokes it.
- ATransferred permanently to the pledgee's account
- BBlocked in the pledgor's account and marked as pledged in favour of the pledgeeCorrect
- CConverted into physical certificates held by the lender
- DCancelled and re-issued by the issuer
Explanation
On creation of a pledge, the securities stay in the pledgor's account but are blocked (frozen) and marked pledged in favour of the pledgee. Ownership is not transferred, so the securities are not moved permanently or rematerialised.
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