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    Question

    In order to pledge or hypothecate securities held in a

    depository, is prior approval of Depository required?
    A Yes, prior approval is mandatory Correct Answer Incorrect Answer
    B Prior approval may or may not be taken Correct Answer Incorrect Answer
    C Prior approval is not required if approved by SEBI Correct Answer Incorrect Answer
    D Prior approval may not be required but it is mandatory to intimate depository of such pledge or hypothecation Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Section 12 of Depository Act - Pledge or hypothecation of securities held in a depository—(1) Subject to such regulations and bye-laws, as may be made in this behalf, a beneficial owner may with the previous approval of the depository create a pledge or hypothecation in respect of a security owned by him through a depository. (2) Every beneficial owner shall give intimation of such pledge or hypothecation to the depository and such depository shall thereupon make entries in its records accordingly. (3) Any entry in the records of a depository under sub-section (2) shall be evidence of a pledge or hypothecation.

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