Unit study guide · NISM Series XIII
Sales Practices, Code of Conduct and Investor Protection Measures
5 questions in this unit
What this unit covers
- What is the main purpose of client KYC before allowing derivatives activity?
- A new client has limited knowledge and cannot afford large losses. What is the most appropriate step before explaining leveraged derivatives?
- A salesperson describes option writing as income without downside risk. Which response meets responsible sales practice?
- An investor has an unresolved complaint against a regulated intermediary. What is the usual first step before using SEBI's SCORES system?
- An investor alleges a trade was executed contrary to instructions. The intermediary's response does not resolve the dispute. Which formal mechanism may address eligible exchange-linked disputes?
Key ideas
From the practice bank · 1
What is the main purpose of client KYC before allowing derivatives activity?
Know Your Customer procedures establish and verify relevant client identity and other required information. Remember: Identity verification is a foundational client safeguard.
Hint Common mistake: Completing KYC does not make a derivative risk-free. Think about identifying the investor properly.
XIII-146From the practice bank · 2
A new client has limited knowledge and cannot afford large losses. What is the most appropriate step before explaining leveraged derivatives?
Risk profiling considers the client's capacity, experience and tolerance before discussing complex products. Remember: Risk profiling precedes responsible product discussion.
Hint Common mistake: is not a loss ceiling. Consider suitability and financial risk tolerance.
XIII-147From the practice bank · 3
A salesperson describes option writing as income without downside risk. Which response meets responsible sales practice?
Responsible communication discloses material risks, including writer losses and potential margin demands. Remember: Option selling has obligations as well as premium income.
Hint Common mistake: Do not market as guaranteed income. Distinguish receiving premium from accepting obligation.
XIII-148From the practice bank · 4
An investor has an unresolved complaint against a regulated intermediary. What is the usual first step before using SEBI's SCORES system?
SEBI's SCORES process asks investors to first approach the regulated entity's grievance channel before escalating an unresolved issue. Remember: Use the intermediary's grievance route before escalation.
Hint Common mistake: Do not confuse an order entry screen with a complaint channel. Think about the grievance sequence described by SEBI.
XIII-149From the practice bank · 5
An investor alleges a trade was executed contrary to instructions. The intermediary's response does not resolve the dispute. Which formal mechanism may address eligible exchange-linked disputes?
Eligible trading disputes may proceed through the applicable exchange-linked dispute-resolution and arbitration framework. Remember: Formal dispute mechanisms address eligible grievances.
Hint Common mistake: Arbitration resolves disputes, not market direction. Look for a structured dispute channel rather than an investment outcome.
XIII-150Margin is the money a participant must keep in place to carry a leveraged position.
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