Introduction to Securities
10 questions. Each answer is explained.
Question 1 of 10Practice · Series II-A — Registrars to an Issue and Share Transfer Agents - Corporate
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Learn these topics
More units in NISM Series II-A
- Characteristics of Equity Shares10
- Characteristics of Debt Securities10
- Characteristics of Other Securities10
- Basics of Mutual Funds10
- SEBI – Role and Regulations10
- Public Offer of Securities10
- Modes of allotment of shares other than Public Offers10
- Processes related to Public Offering of Shares10
- Roles and Responsibilities in a Public Issue10
- Depository Services10
- Processes Related to Depositories10
- Investor Interface with the R&T Agent10
- Secondary Market Transactions10
- Client Servicing10
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 3 of 100 marks (3%) |
Source: March 2025 Annexure I, Unit 1: Introduction to Securities
NISM Series II-A Registrars to an Issue and Share Transfer Agents - Corporate
Exam rules read on NISM's site on 31 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 31 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 10 questions on Introduction to Securities, with answers
Q1Which claim does an ordinary equity share normally give its holder in a company?
Option A. An ownership claim — Correct answer
Option B. A fixed-interest claim
Why it is wrong: A fixed-interest claim normally belongs to a debt investor.
Option C. A collateral ownership claim
Why it is wrong: Owning a share does not give direct ownership of a specific pledged asset.
Option D. A deposit repayment claim
Why it is wrong: A company share is not a repayable deposit.
Answer: A. An ordinary equity share gives an ownership claim because its holder participates in the company as a shareholder. Remember: Equity represents ownership in a company.
Hint, shown before you answer in practice mode: Think about the difference between contributing ownership capital and lending money. Common mistake: Treating shareholders as lenders.
II-A-001easyconceptual
Q2Which payment normally represents the contractual return promised to a holder of a fixed-coupon bond?
Option A. Voting rights
Why it is wrong: Voting rights are not the contractual cash return on this bond.
Option B. Interest — Correct answer
Option C. Bonus shares
Why it is wrong: Bonus shares are an equity corporate action, not a bond coupon.
Option D. Share premium
Why it is wrong: Share premium is part of an equity issue price, not bond income.
Answer: B. Interest is the contractual return on a fixed-coupon bond, although the issuer may still default. Remember: A promised bond coupon is not a guarantee against default.
Hint, shown before you answer in practice mode: Recall what a borrower agrees to pay for using borrowed money. Common mistake: Assuming a contractual payment cannot be missed.
II-A-002easyconceptual
Q3Which security combines a debt claim with a contractual feature for becoming an equity investment?
Option A. An ordinary equity share
Why it is wrong: An ordinary equity share already represents equity rather than convertible debt.
Option B. A convertible debenture — Correct answer
Option C. A non-convertible debenture
Why it is wrong: A non-convertible debenture does not include conversion into shares.
Option D. A Treasury bill
Why it is wrong: A Treasury bill is a short-term government debt instrument, not convertible equity.
Answer: B. A convertible debenture combines a debt claim with conversion into equity under specified terms. Remember: Conversion terms make some securities a blend of debt and equity.
Hint, shown before you answer in practice mode: Look for a security whose legal form can change under its issue terms. Common mistake: Calling every debt security a hybrid.
II-A-003easyconceptual
Q4An investor owns fully paid shares and has given no personal guarantee. The company cannot repay its loans. What normally limits this investor’s exposure?
Option A. The investment in those shares — Correct answer
Option B. The investor’s unrelated bank savings
Why it is wrong: Unrelated personal savings are not automatically available to company lenders.
Option C. The loans owed by other shareholders
Why it is wrong: One shareholder does not become liable for another shareholder’s personal loans.
Option D. The company’s entire unpaid borrowing
Why it is wrong: Company borrowing does not become the shareholder’s personal borrowing merely through share ownership.
Answer: A. The investment in the fully paid shares is normally at risk because a shareholder does not become personally liable for company debt merely by owning shares. Remember: Fully paid share ownership normally carries limited liability.
Hint, shown before you answer in practice mode: Consider whether the company and its shareholders have separate legal responsibilities. Common mistake: Confusing a company’s liabilities with its owners’ personal liabilities.
II-A-004mediumapplication
Q5A listed share has very few willing buyers. Its holder must accept a large discount to sell quickly. Which risk is illustrated?
Option A. Coupon-reset risk
Why it is wrong: An ordinary share has no coupon that resets.
Option B. Currency risk
Why it is wrong: No exchange-rate movement is described.
Option C. Liquidity risk — Correct answer
Option D. Reinvestment risk
Why it is wrong: The case is not about reinvesting a cash payment at a lower return.
Answer: C. Liquidity risk is illustrated because the investor cannot sell promptly without accepting a substantial price discount. Remember: Being listed does not ensure that a security is easy to sell.
Hint, shown before you answer in practice mode: Focus on the difficulty of converting an investment into cash at a reasonable price. Common mistake: Equating listing with strong trading liquidity.
II-A-005mediumapplication
Q6Compared with ordinary equity holders, what is the usual position of creditors when a company is wound up?
Option A. Their claims become ordinary equity automatically
Why it is wrong: Winding up does not automatically convert every debt into equity.
Option B. Their valid claims rank ahead of ordinary equity — Correct answer
Option C. Their valid claims rank behind ordinary equity
Why it is wrong: Ordinary equity is the residual claim, not the usual first claim.
Option D. Their claims disappear when trading stops
Why it is wrong: Stopping trading does not by itself extinguish valid creditor claims.
Answer: B. Creditors’ valid claims usually rank ahead of ordinary equity because equity holders receive only the residual value after prior claims. Remember: Ordinary equity stands behind prior claims on winding up.
Hint, shown before you answer in practice mode: Distinguish contractual claims from the residual ownership claim. Common mistake: Assuming ownership means first access to the company’s remaining assets.
II-A-006mediumconceptual
Q7What does the usual absence of a maturity date mean for an ordinary equity shareholder?
Option A. The exchange must buy the share after one year
Why it is wrong: An exchange provides a market and does not promise to buy each share.
Option B. The issuer need not repay the share price on a fixed date — Correct answer
Option C. The investor must hold the share for life
Why it is wrong: The holder may be able to sell even though the share has no maturity.
Option D. The issuer must pay the original price whenever the holder asks
Why it is wrong: Ordinary equity does not give an on-demand redemption promise.
Answer: B. The issuer need not repay the share price on a fixed date because ordinary equity normally has no contractual maturity. Remember: No maturity does not mean that an investor can never exit.
Hint, shown before you answer in practice mode: Separate the company’s repayment obligation from the investor’s ability to sell. Common mistake: Treating perpetual capital as a compulsory lifetime holding.
II-A-007mediumconceptual
Q8What normally distinguishes preference shares from ordinary equity shares in their claim on declared dividends?
Option A. An unconditional government guarantee
Why it is wrong: Preference status does not create a government guarantee.
Option B. Automatic interest on every trading day
Why it is wrong: Dividends are not automatic daily interest.
Option C. A dividend linked only to trading volume
Why it is wrong: Trading volume does not by itself determine the contractual dividend preference.
Option D. Priority according to their issue terms — Correct answer
Answer: D. Preference shares normally have dividend priority according to their terms, but that priority is not an unconditional guarantee of payment. Remember: Preference means priority, not a risk-free payment.
Hint, shown before you answer in practice mode: The security’s name points to the order of a claim rather than a guaranteed payment. Common mistake: Confusing a preferred claim with a guaranteed return.
II-A-008mediumconceptual
Q9An investor holds 600 shares of ₹10 face value, with ₹7 paid on each. What unpaid amount remains callable?
Option A. ₹600
Why it is wrong: ₹600 assumes only ₹1 remains unpaid on each share.
Option B. ₹6,000
Why it is wrong: ₹6,000 is the total face value and includes money already paid.
Option C. ₹1,800 — Correct answer
Option D. ₹4,200
Why it is wrong: ₹4,200 is the amount already paid, not the unpaid amount.
Answer: C. ₹1,800 remains unpaid on the shares. Unpaid amount per share = ₹10 − ₹7 = ₹3. Total unpaid amount = 600 × ₹3 = ₹1,800. Remember: Partly paid shares can carry an obligation to pay the unpaid amount.
Hint, shown before you answer in practice mode: Identify the unpaid part of each share before considering the number of shares. Common mistake: Applying the fully paid share rule to partly paid shares.
II-A-009hardnumerical
Q10A winding-up example leaves ₹18 lakh after expenses. Creditor claims total ₹14 lakh and preference capital is ₹6 lakh. What reaches ordinary equity?
Option A. ₹4 lakh
Why it is wrong: ₹4 lakh remains before meeting the preference claim, not after it.
Option B. ₹18 lakh
Why it is wrong: ₹18 lakh ignores both stated prior claims.
Option C. ₹0 — Correct answer
Option D. ₹6 lakh
Why it is wrong: ₹6 lakh is the preference claim and is not an equity residual.
Answer: C. Ordinary equity receives ₹0 because the prior claims exhaust the available amount. After creditors, ₹18 lakh − ₹14 lakh = ₹4 lakh remains, which is less than the ₹6 lakh preference claim. Remember: Equity receives a residual only after all higher-ranking claims are met.
Hint, shown before you answer in practice mode: Apply the stated claims in order before looking for a residual amount. Common mistake: Stopping the calculation after paying creditors.
II-A-010hardnumerical
Introduction to Securities: common questions
How many practice questions are there on Introduction to Securities?
10 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 15 practice topics for NISM Series II-A, which has 150 questions in total.
Are these real NISM Series II-A questions on Introduction to Securities?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
How much of the NISM Series II-A exam is Introduction to Securities?
NISM's published syllabus outline gives it 3 of the paper's 100 marks, or 3% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: March 2025 Annexure I, Unit 1: Introduction to Securities
Does negative marking apply to NISM Series II-A?
No. NISM applies no negative marking to Series II-A. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Characteristics of Equity Shares
10 questions on Characteristics of Equity Shares. Its quiz opens on that unit.
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