Unit ko samjho · NISM Series VIII
Sales Practices and Investor Protection
5 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
- What is the primary purpose of the mandatory Risk Disclosure Document (RDD) provided to a derivatives client?
- What is a core purpose of an exchange Investor Protection Fund (IPF) in the context of a trading member declared a defaulter?
- Under the stock-broker framework, a contract note for executed trades is generally required to be issued to the client within:
- A securities intermediary concludes that a client's transaction is suspicious under its AML procedures. Which statement best reflects the reporting framework?
- A new client has little derivatives experience, limited ability to absorb losses and says she believes option selling provides 'guaranteed monthly income'. Why is understanding the client's risk profile important before facilitating derivative activity?
Zaroori ideas
Practice bank se · 1
What is the primary purpose of the mandatory Risk Disclosure Document (RDD) provided to a derivatives client?
The RDD is an investor-protection disclosure. It is intended to communicate significant risks and features of trading so that the client understands that derivatives can generate losses and other obligations. It does not guarantee returns and does not replace KYC. Remember: RDD informs. It does not insure the client against market losses.
Hint Common mistake: Treating disclosure as a guarantee of suitability or profitability.
VIII-096Practice bank se · 2
What is a core purpose of an exchange Investor Protection Fund (IPF) in the context of a trading member declared a defaulter?
An exchange IPF is not a general loss-insurance scheme. One of its important functions is to provide compensation for eligible admitted investor claims arising from a defaulting/expelled member when the member's available assets are insufficient, subject to the applicable rules, verification and compensation limits. Remember: IPF protection is rule-based compensation in specified member-default situations, not insurance against bad trades.
Hint Common mistake: Assuming any trading loss can be claimed from the IPF.
VIII-097Practice bank se · 3
Under the stock-broker framework, a contract note for executed trades is generally required to be issued to the client within:
The contract note is a key trade-confirmation document and is generally required to be issued within 24 hours of execution in the prescribed manner. It records essential trade details and charges. Remember: Contract notes provide prompt documentary confirmation of executed transactions.
Hint Common mistake: Confusing periodic account statements with the much quicker contract-note timeline.
VIII-098Practice bank se · 4
A securities intermediary concludes that a client's transaction is suspicious under its AML procedures. Which statement best reflects the reporting framework?
SEBI's AML/CFT framework requires intermediaries to identify and report suspicious transactions through the prescribed process to the Financial Intelligence Unit-India (FIU-IND), with the Principal Officer/designated structure responsible for reporting. The client must not be tipped off that an STR or related information is being filed. Remember: AML controls combine monitoring, reporting and confidentiality. 'do not tip off' is a core principle.
Hint Common mistake: Assuming only large cash deposits can create an STR obligation.
VIII-149Practice bank se · 5
A new client has little derivatives experience, limited ability to absorb losses and says she believes option selling provides 'guaranteed monthly income'. Why is understanding the client's risk profile important before facilitating derivative activity?
Derivatives can involve leverage, calls and potentially large losses. Understanding a client's knowledge, objectives and financial ability to bear risk helps the intermediary communicate risks and meet investor-protection responsibilities. Risk profiling cannot guarantee performance and does not replace KYC or mandated disclosures. Remember: Investor protection starts with understanding whether the client appreciates and can bear the risks involved.
Hint Common mistake: Treating margin availability as proof that a client understands derivatives or can tolerate losses.
VIII-150Margin is the money a participant must keep in place to carry a leveraged position.
Aage padho