Unit study guide · NISM Series III-A
SEBI (Stock Brokers) Regulations, 1992
9 questions in this unit
What this unit covers
- Which document must a stock broker issue to the client for an executed securities transaction in the prescribed form?
- Which alternative investment fund category covers funds employing diverse or complex trading strategies that may use permitted leverage?
- A client gives a buy limit of ₹250. The market is ₹253 and no execution has occurred. What should the broker do?
- Under the 2026 Stock Brokers Regulations, within what period must a broker take adequate grievance-redressal steps after receipt?
- For an illustrative trade, required margin is ₹48,000 and eligible collateral is ₹35,000. What additional eligible margin is needed?
- A portfolio manager selects investments using discretion granted in the client agreement. Which service arrangement is described?
- A broker’s records show a trade, but the client disputes giving the order. What evidence should the review prioritise?
- Illustrative collateral worth ₹80,000 has an assumed 15% haircut. Add ₹12,000 eligible cash against ₹90,000 margin required. What is the shortfall?
- A broker cannot execute a client’s order within its instructions. It records a fictitious fill to avoid a complaint. Which action was required instead?
Key ideas
From the practice bank · 1
Which document must a stock broker issue to the client for an executed securities transaction in the prescribed form?
The broker must issue a contract note for the client’s transaction within the specified timeline. Remember: A contract note is a key record for checking an executed trade.
Hint Common mistake: Treating a price alert or market message as the formal trade document. Recall the formal client record of an executed trade.
III-A-092From the practice bank · 2
Which alternative investment fund category covers funds employing diverse or complex trading strategies that may use permitted leverage?
Category III covers such trading strategies and may employ leverage subject to applicable conditions. Remember: AIF category is linked to the fund’s regulatory characteristics and strategy.
Hint Common mistake: Confusing AIF categories with the separate FPI categories. Match the category to the fund’s trading approach rather than its name.
III-A-093From the practice bank · 3
A client gives a buy limit of ₹250. The market is ₹253 and no execution has occurred. What should the broker do?
The broker must respect the limit and cannot unilaterally replace it with a higher authorised price. Remember: Execute within the client’s authorised terms rather than making unauthorised changes.
Hint Common mistake: Treating a moving market as permission to override an order limit. The client’s price instruction remains important when the market moves.
III-A-094From the practice bank · 4
Under the 2026 Stock Brokers Regulations, within what period must a broker take adequate grievance-redressal steps after receipt?
The registration condition requires adequate redressal steps within 21 calendar days from receipt of the grievance. Remember: A compliance deadline must preserve the exact day count and day type.
Hint Common mistake: Replacing calendar days with trading days in a grievance deadline. Check both the number of days and whether they are calendar or trading days.
III-A-095From the practice bank · 5
For an illustrative trade, required margin is ₹48,000 and eligible collateral is ₹35,000. What additional eligible margin is needed?
The shortfall is ₹13,000. Additional eligible margin = ₹48,000 − ₹35,000 = ₹13,000. The supplied margin amounts are assumptions, not a prescribed market-wide margin rate. Remember: A margin shortfall is the uncovered part of the requirement.
Hint Common mistake: Asking for the entire requirement again instead of calculating the remaining shortfall. Compare the requirement with the eligible amount already available.
III-A-096From the practice bank · 6
A portfolio manager selects investments using discretion granted in the client agreement. Which service arrangement is described?
This is discretionary portfolio management because the agreement permits the manager to make investment decisions for the client. Remember: A portfolio manager’s discretion comes from the agreed mandate and applicable law.
Hint Common mistake: Assuming every portfolio-management arrangement gives identical decision-making authority. Identify who is authorised to make the investment decisions.
III-A-097From the practice bank · 7
A broker’s records show a trade, but the client disputes giving the order. What evidence should the review prioritise?
The order and execution trail should be examined to establish authorisation and what was actually executed. Remember: Trade reviews need a traceable link between instruction and execution.
Hint Common mistake: Assuming a profitable trade cannot be unauthorised. Look for evidence connecting client authority to the specific execution.
III-A-098From the practice bank · 8
Illustrative collateral worth ₹80,000 has an assumed 15% haircut. Add ₹12,000 eligible cash against ₹90,000 margin required. What is the shortfall?
The shortfall is ₹10,000. Eligible non-cash collateral = ₹80,000 × 85% = ₹68,000. Total eligible amount = ₹68,000 + ₹12,000 = ₹80,000. Shortfall = ₹90,000 − ₹80,000 = ₹10,000. The haircut and full cash eligibility are scenario assumptions. Remember: Apply the assumed haircut before assessing available margin.
Hint Common mistake: Using gross collateral value instead of the eligible value after haircut. Adjust the non-cash collateral before adding cash and comparing with the requirement.
III-A-099From the practice bank · 9
A broker cannot execute a client’s order within its instructions. It records a fictitious fill to avoid a complaint. Which action was required instead?
The broker should accurately inform the client of non-execution rather than invent or reassign an execution. Remember: An unfilled order must be reported truthfully rather than concealed.
Hint Common mistake: Trying to solve an execution problem by creating a false trade record. Distinguish service failure from falsifying the evidence of service.
III-A-100