SEBI (Merchant Bankers) Regulations 1992, etc.
9 questions. Each answer is explained.
Question 1 of 9Practice · Series III-A — Securities Intermediaries Compliance (Non-Fund)
0 right · 0 wrong · 9 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series III-A
- Introduction to the Financial System8
- Regulatory Framework – General View14
- Introduction to Compliance6
- Securities and Exchange Board of India Act, 199211
- Securities Contracts (Regulation) Act, 1956 and Rules, 19576
- SEBI (Intermediaries) Regulations, 20089
- SEBI (Prohibition of Insider Trading) Regulations, 20159
- SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 20039
- Prevention of Money Laundering Act, 200211
- SEBI (KYC Registration Agency) Regulations, 20113
- SEBI (Foreign Portfolio Investors) Regulations, 20195
- SEBI (Stock Brokers) Regulations, 19929
- SEBI (Issue of Capital and Disclosure Requirements) Regulations 20189
- Depositories Act 19963
- SEBI (Depositories and Participants) Regulations 20184
- SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, 19934
- SEBI (Research Analyst) Regulations, 20143
- SEBI (Investment Advisers) Regulations, 20133
- SEBI (Debenture Trustees) Regulations, 19934
- SEBI (Credit Rating Agencies) Regulations, 19994
- SEBI (Custodian) Regulations, 19964
- Proxy Advisors3
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series III-A Securities Intermediaries Compliance (Non-Fund)
Exam rules read on NISM's site on 17 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 17 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 9 questions on SEBI (Merchant Bankers) Regulations 1992, etc., with answers
Q1Which activity most directly describes a merchant banker’s role in a securities issue?
Option A. Processing all applications and maintaining allotment records
Why it is wrong: Application and allotment administration primarily describes the registrar’s role.
Option B. Holding application monies through the designated banking process
Why it is wrong: Handling issue application monies primarily describes the banker-to-an-issue role.
Option C. Safekeeping allotted securities in every investor’s account
Why it is wrong: Securities safekeeping is a depository or custody function rather than issue management.
Option D. Managing the issue and performing due diligence — Correct answer
Answer: D. A merchant banker manages issue-related work and performs the associated professional due-diligence responsibilities. Remember: Merchant banking is a professional issue-management role, not a return guarantee.
Hint, shown before you answer in practice mode: Common mistake: Confusing management of an issue with assurance of its investment performance. Focus on organising and checking the capital-raising process.
III-A-101easyconceptual
Q2Which task is most closely associated with a banker to an issue?
Option A. Handling application monies under the prescribed process — Correct answer
Option B. Checking offer-document claims as lead merchant banker
Why it is wrong: Offer-document due diligence is a merchant-banking function.
Option C. Processing applications and finalising the allotment records
Why it is wrong: Application processing and allotment records primarily describe the registrar’s role.
Option D. Holding allotted securities as the depository participant
Why it is wrong: Holding electronic securities belongs to the depository framework rather than issue banking.
Answer: A. A banker to an issue handles the relevant issue-related monies and payment functions under the applicable process. Remember: Different issue intermediaries perform distinct payment, advisory and record functions.
Hint, shown before you answer in practice mode: Common mistake: Assuming the lead merchant banker and banker to the issue have identical duties. Separate payment processing from advice, record administration and regulation.
III-A-102easyconceptual
Q3What does delisting of equity shares from a stock exchange mean?
Option A. Removal from that exchange’s list of traded securities — Correct answer
Option B. Temporary suspension of trading while the listing continues
Why it is wrong: Suspension can stop trading temporarily without ending the listing.
Option C. Cancellation of the company’s shares and every ownership interest
Why it is wrong: Delisting does not itself cancel the shares or all ownership interests.
Option D. Transfer of every shareholder’s holdings to the stock exchange
Why it is wrong: Delisting does not transfer beneficial ownership to the exchange.
Answer: A. Delisting removes the shares from an exchange’s listing and does not by itself cancel every shareholder’s ownership. Remember: Listing status and ownership of the security are different concepts.
Hint, shown before you answer in practice mode: Common mistake: Assuming delisting automatically means the company’s shares cease to exist. Distinguish exchange-listing status from the existence of the shares.
III-A-103easyconceptual
Q4An issuer asks its merchant banker to accept a major business claim without checking supporting evidence. What should the merchant banker do?
Option A. Accept the claim because the issuer signed it
Why it is wrong: A signature does not automatically replace professional verification.
Option B. Use the claim only in the most prominent advertisement
Why it is wrong: Prominent advertising does not cure an unsupported claim.
Option C. Exercise due diligence and independently assess the support — Correct answer
Option D. Remove every risk factor to balance the claim
Why it is wrong: Removing risk factors would weaken rather than improve disclosure.
Answer: C. The merchant banker should assess the supporting evidence using due diligence and independent professional judgment. Remember: Issuer assertions require professional scrutiny rather than automatic acceptance.
Hint, shown before you answer in practice mode: Common mistake: Treating an issuer’s confirmation as a substitute for due diligence. Recall the difference between repeating an issuer’s statement and checking it.
III-A-104mediumapplication
Q5A sole underwriter agrees to cover the full shortfall in a 10-lakh-share issue. Valid public subscriptions total 8 lakh shares. What is the underwriting liability?
Option A. 8 lakh shares
Why it is wrong: Eight lakh shares are already covered by the valid public subscriptions.
Option B. 2 lakh shares — Correct answer
Option C. 10 lakh shares
Why it is wrong: Ten lakh ignores the subscriptions already received.
Option D. 18 lakh shares
Why it is wrong: Eighteen lakh adds the issue size and subscriptions rather than finding the shortfall.
Answer: B. The liability is 2 lakh shares under the stated agreement. Shortfall = 10 lakh − 8 lakh = 2 lakh shares. No firm underwriting or other adjustments are assumed. Remember: Underwriting liability depends on the agreed commitment and adjusted subscription shortfall.
Hint, shown before you answer in practice mode: Common mistake: Ignoring valid public subscriptions when calculating the assumed liability. Use the agreed shortfall coverage and the valid subscription amount.
III-A-105mediumnumerical
Q6A company completes a compliant buyback and extinguishes the bought-back equity shares. What happens to the number of outstanding shares?
Option A. It decreases by the extinguished shares — Correct answer
Option B. It increases by the bought-back shares
Why it is wrong: Extinguishing shares reduces rather than increases the count.
Option C. It stays unchanged because ownership only rotates
Why it is wrong: A completed buyback with extinguishment is not merely a secondary transfer between investors.
Option D. It automatically doubles for every shareholder
Why it is wrong: Doubling holdings describes a different kind of corporate action.
Answer: A. Outstanding shares decrease when the company extinguishes the shares bought back. Remember: A buyback with extinguishment reduces the outstanding share count.
Hint, shown before you answer in practice mode: Common mistake: Treating every share purchase as an unchanged transfer of ownership. Distinguish an issuer’s buyback and cancellation from ordinary investor-to-investor trading.
III-A-106mediumapplication
Q7An acquirer obtains control over a listed target without reaching 25% voting rights. No exemption applies. Can an open-offer obligation still arise?
Option A. No, only crossing 25% can ever trigger an offer
Why it is wrong: The 25% test is not the only open-offer trigger.
Option B. No, control matters only after all shares are acquired
Why it is wrong: Control can be acquired without owning every share.
Option C. Yes, acquisition of control is a separate trigger — Correct answer
Option D. Yes, but only if every shareholder requests it
Why it is wrong: A unanimous shareholder request is not the statutory trigger.
Answer: C. An open-offer obligation can arise because acquisition of control is a separate trigger under regulation 4. Remember: Evaluate both voting rights and control in a takeover analysis.
Hint, shown before you answer in practice mode: Common mistake: Checking only a shareholding percentage and overlooking control rights. Distinguish the voting-percentage trigger from the control trigger.
III-A-107mediumapplication
Q8An acquirer holds 18% and its persons acting in concert hold 5% of a listed target. It proposes another 3%. No exemption applies. What follows?
Option A. Only the acquirer’s 21% matters, so no trigger arises
Why it is wrong: Ignoring persons acting in concert understates the relevant holding.
Option B. The combined 23% remains unchanged after purchase
Why it is wrong: The additional 3% must be included in the combined holding.
Option C. The combined 26% crosses the 25% open-offer trigger — Correct answer
Option D. The trigger arises only when combined holdings exceed 50%
Why it is wrong: The regulation 3(1) trigger is not a greater-than-50% test.
Answer: C. The combined holding becomes 26% and crosses the regulation 3(1) trigger. Existing combined holding = 18% + 5% = 23%. After acquisition = 23% + 3% = 26%. The required open-offer announcement must be addressed as part of the acquisition process. Remember: Aggregate the acquirer and persons acting in concert when testing the takeover threshold.
Hint, shown before you answer in practice mode: Common mistake: Applying the threshold to the acquirer’s account in isolation. Aggregate the relevant concert-party holdings before adding the proposed acquisition.
III-A-108hardnumerical
Q9Due diligence uncovers a material inconsistency between an offer-document claim and verified records. The issuer wants to proceed unchanged. What should the merchant banker do?
Option A. Proceed because the issuer bears every responsibility
Why it is wrong: The issuer’s duties do not eliminate the merchant banker’s own due-diligence responsibilities.
Option B. Require resolution and appropriate correction before proceeding — Correct answer
Option C. Delete the verified records from the review file
Why it is wrong: Deleting contrary evidence conceals rather than resolves the issue.
Option D. Treat the inconsistency as immaterial because demand is strong
Why it is wrong: Investor demand does not determine whether a fact is material or accurate.
Answer: B. The inconsistency must be resolved and the disclosure appropriately corrected rather than knowingly proceeding with an unsupported material claim. Remember: Material contradictory evidence must change the review outcome, not be ignored.
Hint, shown before you answer in practice mode: Common mistake: Allowing commercial pressure or issue demand to override due diligence. Consider the professional response to evidence contradicting a material claim.
III-A-109hardapplication
SEBI (Merchant Bankers) Regulations 1992, etc.: common questions
How many practice questions are there on SEBI (Merchant Bankers) Regulations 1992, etc.?
9 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 23 practice topics for NISM Series III-A, which has 150 questions in total.
Are these real NISM Series III-A questions on SEBI (Merchant Bankers) Regulations 1992, etc.?
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.
Does negative marking apply to NISM Series III-A?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. 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.
SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018
9 questions on SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018. Its quiz opens on that unit.
Open SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018Paper Trading Try it on the practice trading desk