Unit ko samjho · NISM Series I
Codes of Conduct and Investor Protection Measures
13 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- A client otherwise completes all mandatory onboarding requirements but declines to execute a Power of Attorney or a DDPI. Which statement about the broker’s response is correct?
- A salaried applicant has completed identity, address and bank-account verification for currency-derivatives activation. Which document most directly supplies the additional evidence of income or financial status?
- A client loses money because USD-INR moves against an authorised futures position. The broker executes and settles the trade correctly and is not a defaulter. What follows about compensation from the exchange’s Investor Protection Fund for this loss alone?
- An investor has complained to a SEBI-registered broker and then lodged the unresolved grievance in SCORES. What is the principal role of SCORES in this case?
- In a securities-market dispute, a neutral person first helps the parties seek an agreed settlement. That process fails, and the dispute then moves to a process in which an arbitrator determines the outcome. What are the two stages, respectively?
- A broker recommends repeated reversals of a client’s currency-futures position solely to earn more brokerage. Each commission charge is within the permitted rate. Which assessment is correct?
- A broker shares a named client’s currency positions and account details with an outside marketing firm for its own commercial benefit. There is no client authorisation or legal reporting requirement. Which client duty is directly breached?
- Only 30 of a client’s 50 ordered currency-futures contracts have traded. The broker tells the client that all 50 are executed, although the remaining 20 are still pending. What should the broker report?
- A stock broker discloses a conflict to a client, then gives its own interests preference over that client’s interests in the conflicted service. It argues that disclosure alone made this acceptable. Under regulation 38 of the Stock Brokers Regulations, 2026, which statement is correct?
- A stock broker proposes using client A’s funds to meet client B’s margin shortage and restoring them before the day ends. No authorised transaction of A supports the transfer. Which statement is consistent with the client-asset segregation duty?
- While a complaint is pending on SCORES, the complainant opts for Online Dispute Resolution for the same matter. According to the SCORES FAQ, how should the resulting SCORES status be interpreted?
- A client instructs a broker to buy a currency future at a maximum of 88.20. Without any authorised change or discretionary mandate, the broker instead submits and executes a buy at 88.35. The position later makes a profit. Which statement is correct?
- A broker assigns currency-derivatives client servicing to employees whose training does not match their responsibilities. Every client has signed the risk disclosure document. Which statement reflects the broker’s competence obligation?
Zaroori ideas
Practice bank se · 1
A client otherwise completes all mandatory onboarding requirements but declines to execute a Power of Attorney or a DDPI. Which statement about the broker’s response is correct?
This follows the rule against making PoA or DDPI compulsory or denying services solely for their refusal. SEBI’s DDPI circular states that a stock broker or broker-depository participant must not compel execution of PoA or DDPI or deny services because the client refuses. The question already states that mandatory onboarding is complete. The correct response must therefore preserve the voluntary choice rather than invent another form of consent. Remember: Separate mandatory onboarding from optional authority to act on a client’s behalf.
Hint Common mistake: Believing that a broker may force a voluntary document by offering a choice between two optional authorisations.
I-039Practice bank se · 2
A salaried applicant has completed identity, address and bank-account verification for currency-derivatives activation. Which document most directly supplies the additional evidence of income or financial status?
A recent salary slip or Form 16 directly supports the stated financial-evidence requirement. SEBI’s investor KYC material lists proof of income for clients choosing derivatives, including currency derivatives. For a salaried person, a recent salary slip or Form 16 is listed as such evidence. The other choices serve different onboarding purposes. Remember: Choose the document that proves the missing fact, not just any document used during onboarding.
Hint Common mistake: Treating a completed identity check or risk acknowledgement as a substitute for financial evidence.
I-040Practice bank se · 3
A client loses money because USD-INR moves against an authorised futures position. The broker executes and settles the trade correctly and is not a defaulter. What follows about compensation from the exchange’s Investor Protection Fund for this loss alone?
The fund is not a general reimbursement mechanism for correctly executed trades that lose money. The stated loss comes from market movement, not from an admitted default-related claim against a broker. NSE’s IPF description concerns eligible admitted claims where a defaulter’s assets are insufficient, subject to the fund’s conditions. The facts given do not make an ordinary market loss compensable under that framework. Remember: Identify the source of a loss before applying an investor-compensation mechanism.
Hint Common mistake: Confusing protection against eligible intermediary default claims with protection against market risk.
I-049Practice bank se · 4
An investor has complained to a SEBI-registered broker and then lodged the unresolved grievance in SCORES. What is the principal role of SCORES in this case?
SCORES provides an online record and tracking process for the investor grievance. The investor has already approached the intermediary and is now using the SEBI complaint system. SCORES records the grievance and supports tracking of its handling. The filing is not itself an arbitral award, the appointment of a conciliator or the admission of an Investor Protection Fund claim. Those functions require their respective processes. Remember: Identify whether the investor is lodging a complaint, seeking an agreed settlement, obtaining an award or pursuing a default claim.
Hint Common mistake: Treating every investor-protection process as though it automatically performs the others.
I-074Practice bank se · 5
In a securities-market dispute, a neutral person first helps the parties seek an agreed settlement. That process fails, and the dispute then moves to a process in which an arbitrator determines the outcome. What are the two stages, respectively?
Facilitating a mutually agreed settlement is conciliation, followed here by arbitration to determine the dispute. In the first stage, the neutral person helps the parties reach their own agreement rather than deciding the outcome. This describes conciliation. The next described stage involves an arbitrator’s decision. SEBI’s online dispute-resolution explanation distinguishes that adjudicatory role from the conciliator’s facilitating role. Remember: Identify whether the neutral party facilitates an agreement or determines the dispute.
Hint Common mistake: Assuming the neutral person plays the same role at every stage of the dispute.
I-075Practice bank se · 6
A broker recommends repeated reversals of a client’s currency-futures position solely to earn more brokerage. Each commission charge is within the permitted rate. Which assessment is correct?
The prohibition concerns inducing trades solely to generate brokerage, not just the size of the charge. The question expressly states that the sole purpose is to generate brokerage, rather than a genuine change in the client’s hedge requirement. Regulation 37(e) of the SEBI Stock Brokers Regulations, 2026 prohibits encouragement of purchases or sales solely for brokerage or commission. Neither a permitted rate, a profitable account nor valid exchange execution removes that conduct problem. Remember: A lawful fee rate does not justify inducing transactions solely to earn that fee.
Hint Common mistake: Checking only whether a fee cap was exceeded while ignoring why the broker induced the trades.
I-098Practice bank se · 7
A broker shares a named client’s currency positions and account details with an outside marketing firm for its own commercial benefit. There is no client authorisation or legal reporting requirement. Which client duty is directly breached?
The data were obtained through the broker-client relationship and are being improperly disclosed for an unrelated commercial purpose. The positions and account details are identifiable client information acquired in the course of the business relationship. The stated commercial disclosure is not a permitted regulatory report or an authorised client service in this scenario. Regulation 37(d) addresses disclosure and improper use of confidential client information. The other options concern different operational duties. Remember: Access to client information for brokerage work is not permission to reuse it for unrelated commercial purposes.
Hint Common mistake: Treating confidential trading data as the broker’s unrestricted commercial asset.
I-099Practice bank se · 8
Only 30 of a client’s 50 ordered currency-futures contracts have traded. The broker tells the client that all 50 are executed, although the remaining 20 are still pending. What should the broker report?
The client needs an accurate distinction between completed trades and the unexecuted balance. Thirty contracts are completed trades. The remaining twenty have not executed and have not been cancelled. The broker should promptly report that actual status, rather than treating acceptance of the original order as complete execution. Regulation 37(b) addresses informing the client about execution or non-execution. The client’s decision to keep, change or cancel the remainder depends on reliable information. Remember: Report what has actually traded separately from what is still pending.
Hint Common mistake: Using an order acknowledgement as though it confirmed the entire requested quantity had executed.
I-100Practice bank se · 9
A stock broker discloses a conflict to a client, then gives its own interests preference over that client’s interests in the conflicted service. It argues that disclosure alone made this acceptable. Under regulation 38 of the Stock Brokers Regulations, 2026, which statement is correct?
This answer recognises that disclosure does not replace the separate restrictions on conflicted self-advantage and priority. The facts state both disclosure and preference for the broker’s own interests. These must be evaluated separately. Regulation 38 addresses conflicts, disclosure and the prohibition on seeking personal advantage or placing the broker’s interests above the client’s. The fact of disclosure therefore does not establish that the later preferential conduct complies with those duties. Remember: Check how a conflict is handled as well as whether it is disclosed.
Hint Common mistake: Assuming a disclosed conflict automatically authorises conduct that favours the broker over the client.
I-123Practice bank se · 10
A stock broker proposes using client A’s funds to meet client B’s margin shortage and restoring them before the day ends. No authorised transaction of A supports the transfer. Which statement is consistent with the client-asset segregation duty?
This answer preserves the distinction between A’s assets and B’s obligations. The proposed use belongs to client B’s obligation, not to an authorised transaction for client A. Regulation 18(2)(c) requires client money and securities to be segregated from the broker’s own assets and other clients’ assets and used only for authorised purposes. Neither a promise of quick repayment nor an internal receivable entry changes whose funds are being used. Remember: Another client’s obligation does not make a client’s surplus funds available for use.
Hint Common mistake: Confusing temporary use or a repayment promise with lawful segregation and authority.
I-124Practice bank se · 11
While a complaint is pending on SCORES, the complainant opts for Online Dispute Resolution for the same matter. According to the SCORES FAQ, how should the resulting SCORES status be interpreted?
This answer follows the specified FAQ and does not add an unsupported merits decision. Investor FAQ 35 states that choosing ODR while the complaint is pending results in the complaint being treated as disposed on SCORES. That disposition follows the move to the other process. It does not say that the client has won a payment award or that the claim has been rejected on its merits. The selected ODR process must be distinguished from SCORES complaint tracking. Its outcome is not determined merely by the SCORES status change. Remember: Disposed on SCORES does not, by itself, mean compensation was awarded or the dispute was adjudicated.
Hint Common mistake: Treating an administrative closure label as a judgment on who won the dispute.
I-125Practice bank se · 12
A client instructs a broker to buy a currency future at a maximum of 88.20. Without any authorised change or discretionary mandate, the broker instead submits and executes a buy at 88.35. The position later makes a profit. Which statement is correct?
The execution price exceeded the authorised maximum without a permitted change. The instruction capped the purchase price at 88.20. Buying at 88.35 exceeds that maximum. No authorised modification or discretion is present, so the broker cannot substitute a higher limit under the facts given. A later profit does not retrospectively change what was authorised when the order was executed. Remember: Evaluate execution against the instruction and authority in force at the time of the trade.
Hint Common mistake: Using a later profitable outcome to justify an unauthorised departure from the order.
I-149Practice bank se · 13
A broker assigns currency-derivatives client servicing to employees whose training does not match their responsibilities. Every client has signed the risk disclosure document. Which statement reflects the broker’s competence obligation?
The obligation concerns reasonable steps to maintain competence appropriate to the work assigned. The inspected broker regulations require reasonable steps to ensure employees are trained to a level commensurate with their responsibilities. The fact that clients signed risk disclosures does not establish employee competence or satisfy that training obligation by itself. Nor must the broker wait for a loss before addressing an identified training gap. Remember: Keep client risk disclosure separate from the broker’s responsibility for staff competence.
Hint Common mistake: Treating a signed disclosure or system login as a substitute for appropriate training.
I-150Margin is the money a participant must keep in place to carry a leveraged position.
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