Unit ko samjho · NISM Series XVI
Code of Conduct and Investor Protection Measures
7 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 broker urges a hedger to repeatedly close and reopen unchanged commodity exposure solely to generate extra brokerage, with no identified client purpose. Which conduct concern is most directly raised?
- A metals hedger tells its broker the timing and size of an upcoming order. An unrelated market participant asks the broker for those details to trade ahead of it. No client permission or lawful disclosure requirement applies. What should the broker do?
- A broker discloses that it has a proprietary commodity position. It then deliberately delays a client’s valid order to favour that position, contrary to the client’s interest. Does the disclosure alone make this acceptable?
- A new commodity trader signs a risk-disclosure document. Which statement about that document is appropriate?
- A client finds an unexplained commodity brokerage debit and has the contract note and account statement. Under the approach stated on SEBI’s SCORES portal, what should the client generally do first?
- A client receives an unexpected commodity trade alert. Which response best supports verification of what occurred?
- A broker assigns an employee to explain commodity option exercise and delivery obligations. The employee has not been trained in those products and routinely confuses options on futures with options on goods. Which action best addresses the competence concern?
Zaroori ideas
Practice bank se · 1
A broker urges a hedger to repeatedly close and reopen unchanged commodity exposure solely to generate extra brokerage, with no identified client purpose. Which conduct concern is most directly raised?
Client-facing conduct rules distinguish a legitimate trading service from inducing unnecessary activity purely to earn charges. The stated sole objective is additional brokerage, not a client risk-management or other identified purpose. Regulation 37(e) addresses encouraging transactions solely to generate brokerage or commission. The concern is the inducement, not simply that a futures hedge is rolled. Remember: Evaluate the client purpose of a recommended transaction, not merely its ability to generate fees.
Hint Common mistake: Treating frequent trading as automatically suitable because it is operationally possible.
XVI-072Practice bank se · 2
A metals hedger tells its broker the timing and size of an upcoming order. An unrelated market participant asks the broker for those details to trade ahead of it. No client permission or lawful disclosure requirement applies. What should the broker do?
Client order information is not made freely disclosable merely because execution may later occur on an exchange. The request concerns non-public client information and the facts exclude permission or a legal disclosure obligation. The broker should protect the information rather than help another participant exploit it. Anonymous public market data is different from disclosing a named client’s intended order. Remember: Distinguish public market information from confidential client instructions.
Hint Common mistake: Assuming a financial-market setting makes every customer communication public.
XVI-073Practice bank se · 3
A broker discloses that it has a proprietary commodity position. It then deliberately delays a client’s valid order to favour that position, contrary to the client’s interest. Does the disclosure alone make this acceptable?
Disclosure is one part of conflict management, not an unlimited waiver of other conduct duties. The facts describe deliberate client disadvantage to favour the broker’s own exposure. The inspected regulations require appropriate handling of conflicts and do not permit personal advantage merely because a conflict was disclosed. The issue is the unfair conduct, not an unsupported blanket claim that all proprietary activity is prohibited. Remember: A disclosed conflict still requires proper handling.
Hint Common mistake: Treating a disclosure form as consent to any later disadvantage.
XVI-074Practice bank se · 4
A new commodity trader signs a risk-disclosure document. Which statement about that document is appropriate?
Risk disclosure informs the client about risks rather than eliminating the risks or legitimising unrelated activity. SEBI’s investor guidance asks clients to obtain and read the risk-disclosure document. Signing it does not alter a futures payoff, remove physical-settlement duties or turn an unregistered service into a regulated one. Remember: Read risk disclosure as information to understand, not an insurance certificate.
Hint Common mistake: Equating completion of paperwork with removal of economic and settlement risk.
XVI-075Practice bank se · 5
A client finds an unexplained commodity brokerage debit and has the contract note and account statement. Under the approach stated on SEBI’s SCORES portal, what should the client generally do first?
The official grievance approach starts with the regulated entity concerned and uses records that allow the issue to be examined. The SCORES portal tells investors to first approach the entity against which they have a grievance. The client should describe the disputed debit and retain relevant statements and contract notes. If unresolved, the appropriate escalation can then be pursued. SCORES is not described here as an automatic payment-reversal mechanism. Remember: Use a documented complaint and the proper escalation channel.
Hint Common mistake: Expecting a grievance portal to reverse a transaction automatically without examining the underlying issue.
XVI-148Practice bank se · 6
A client receives an unexpected commodity trade alert. Which response best supports verification of what occurred?
An execution dispute requires reconciliation of reliable records, not a decision based only on the trade’s profit or loss. The alert and contract note should be checked against the correct client code and actual order instructions. The broker’s official process and exchange verification facilities, where applicable, help establish what was executed. A favourable result does not resolve an unauthorised-order concern, and sharing credentials can introduce additional risk. Remember: Check execution records against instructions and identity, then document any discrepancy.
Hint Common mistake: Using profit as proof of authorisation or replacing official reconciliation with informal promises.
XVI-149Practice bank se · 7
A broker assigns an employee to explain commodity option exercise and delivery obligations. The employee has not been trained in those products and routinely confuses options on futures with options on goods. Which action best addresses the competence concern?
Competence must match the responsibilities performed and the product-specific risks explained to clients. The scenario identifies repeated errors in a material product distinction. The inspected broker regulations include suitable training and competence of employees for their responsibilities. General order-entry experience does not prove knowledge of commodity exercise and delivery. Training and effective supervision address the weakness more directly than concealing or improvising information. Remember: Match staff competence to the product and responsibility, especially where settlement can create new obligations.
Hint Common mistake: Assuming all derivatives have identical exercise, and delivery mechanics.
XVI-150Margin is the money a participant must keep in place to carry a leveraged position.
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