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

Which statement about a pledge of securities held in a demat account is correct?

A pledge becomes effective only after the pledgee confirms the pledgor's instruction in the depository system. Until confirmation, the pledge is incomplete. Pledged securities are blocked for the pledgor, and neither the company's consent nor a missing pledgee account is the requirement.

  1. APledge can be created only if the pledgee does not have a demat account
  2. BA pledge instruction becomes effective only after the pledgee confirms it, where confirmation is required in the processCorrect
  3. CPledged securities can be freely sold by the pledgor during the pledge period
  4. DThe company's consent is mandatory for every pledge of its demat shares

Explanation

A pledge is created by the pledgor's instruction and becomes effective once the pledgee confirms it in the depository system. Pledged securities are blocked for the pledgor, the pledgee needs a demat account, and no company consent is needed for depository pledges.

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