NISM VIII Sales Practices and Investor Protection — Practice Questions
Questions on conduct and investor safeguards: risk disclosure and client suitability, the code of conduct for members and sales staff, grievance redressal and arbitration, and the investor protection fund.
32 questions on Sales Practices & Investor Protection in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Risk disclosure and suitability
- Code of conduct for members
- Grievance redressal and arbitration
- Investor protection fund
Free sample questions
1. There are many products in the market which give high returns in risk-free manner - State whether True or False?
- A. True
- B. False ✅
Answer: B — False
Why: Returns are related to the risk taken and hence there cannot be a product in the market that gives high return in risk free manner. Investors should be careful of opportunities that promise spectacular profits or "guaranteed" returns. The deal sounds too good to resist. An individual may claim that unrealistic returns can be realized from "Low-Risk Investment Opportunities", but one has to keep in mind no investment is risk-free.
💡 NO product gives high return risk-free -> return follows risk. Beware 'guaranteed' returns. FALSE.
2. Which one of these complaints against a trading member can an Exchange take up for redressal?
- A. Complaints regarding land dealings between a client and trading member
- B. Complaints in respect of transactions which are already subject matter of Arbitrage proceedings
- C. Claims regarding notional loss for the disputed trade
- D. Claims regarding unauthorized transaction in the client’s account ✅
Answer: D — Claims regarding unauthorized transaction in the client’s account
Why: Complaints against trading members on account of the following can be taken by an Exchange for redressal : - Non-receipt of funds / securities - Non- receipt of documents such as member client agreement, contract notes, settlement of accounts, order trade log etc. - Non-Receipt of Funds / Securities kept as margin - Trades executed without adequate margins - Delay /non – receipt of funds - Squaring up of positions without consent - Unauthorized transaction in the account - Excess Brokerage charged by Trading Member / Sub-broker - Unauthorized transfer of funds from commodities account to other accounts etc.
💡 Exchange redresses UNAUTHORIZED transaction in client a/c (not land/notional/arbitration matters).
3. 'SCORES' is the name given to ________ .
- A. SEBI’s web-based compliant redressal system ✅
- B. Securities Collateral Records System
- C. Exchange’s risk management and margin system
- D. Suspicious transaction reporting system
Answer: A — SEBI’s web-based compliant redressal system
Why: SEBI’s web-based complaints redressal system is called SCORES (Sebi COmplaints REdress System). SCORES is a centralized grievance management system with tracking mechanism to know the latest updates and time taken for complaint resolution.
💡 SCORES = SEBI COmplaints REdress System (web-based grievance portal).
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