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How does pledging and on-pledging of securities work?

What is a pledge? 

A pledge is a limited real right of security in a movable asset. It is created by an agreement between the debtor who is the owner of the asset and the creditor to who the debtor owes a debt to, and the purpose of the pledge is to secure the debt owed by the debtor to the creditor.

All EasyCredit loans are secured loans. This means that when you take out a loan with us, you are required to pledge the holdings in your EasyEquities ZAR account and/or your TFSA, depending on what you select, to EasyEquities as security for your loan. 

Therefore, if you fail to make any payment required under your loan with us, for example, your monthly interest payments or the capital payment at the end of your loan term, EasyEquities can sell the holdings in your selected account/s, which you pledged to it as security for your loan, to cover these failed payments. 

What is an on-pledge? 

In order for EasyEquities to provide you with the loan, EasyEquities obtain a loan from a third party funder/s.

On-pledging is the process whereby the qualifying securities in the account/s that you selected to pledge to EasyEquities in terms of the EasyCredit loan agreement are on-pledged by EasyEquities to its third-party funder/s. In order for the on-pledge to be valid, EasyEquities must obtain your consent.

Therefore, in taking out an EasyCredit loan, you consent for EasyEquities to on-pledge the qualifying securities in your EasyEquities ZAR account and/or your TFSA, depending on what you selected, to its third-party funder/s. 

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In respect of FSRs, EasyEquities acts as principal to a contract for difference issued to the investor, where the investor will have a contractual claim against EasyEquities to the economic benefits and risks associated with share ownership (price movements and dividends) without having ownership rights in the underlying share. Fractional share rights (FSRs) which are issued through a contract for difference, are an over the counter derivative. Unlike whole shares, FSRs do not carry any voting rights. As the investor makes further investments in FSRs and ultimately ends up with a whole share, the contract for difference is closed out and ownership whole share is delivered to the investor.

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