Basics of Investing and Market Structure

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Questions and Answers

What should investors assess before making investments?

Risk-return profile, liquidity, and safety (correct)
Investment opportunities offered
Market trends and news
The financial status of the adviser

What is crucial to obtain before investing with an adviser?

Insurance for the investment
A recommendation from a friend
Terms and conditions in writing (correct)
A verbal agreement

How can investors seek redressal for their grievances?

By approaching appropriate authorities (correct)
Through social media complaints
By asking for a refund
By reporting to their banks

What is UPI primarily used for in relation to IPO investments?

A payment mechanism for investing (B) Signup and view all the answers

What must investors provide when bidding through UPI?

Their UPI ID and bid details (C) Signup and view all the answers

What should investors be cautious of when dealing with Investment Advisers?

Advisers offering guaranteed returns (C) Signup and view all the answers

What does UPI allow investors to do?

Transfer funds for different banking features in one application (A) Signup and view all the answers

Which factor is NOT essential for recognizing a safe investment?

Historical performance of the company (D) Signup and view all the answers

What is the primary purpose of the Know Your Client (KYC) process?

To verify the identity of investors (D) Signup and view all the answers

What does ASBA stand for in the context of investing?

Application Supported by Blocked Amount (A) Signup and view all the answers

Which statement about a Basic Services Demat Account (BSDA) is correct?

It has a limit on the total value of securities held (C) Signup and view all the answers

What is indicated by the term 'margin money' in trading?

Funds set aside to cover potential losses (C) Signup and view all the answers

Which of the following is included in the basic services of a demat account?

Holding and safekeeping of securities (B) Signup and view all the answers

What is the role of market intermediaries in the securities market?

To facilitate trades between buyers and sellers (A) Signup and view all the answers

What essential information is included in a contract note?

Details of all securities transactions executed (B) Signup and view all the answers

Which of the following is NOT typically associated with the secondary market?

Issuance of new shares to the public (C) Signup and view all the answers

What type of programs are conducted by SEBI in collaboration with various stakeholders?

Investor Education Programs (A) Signup and view all the answers

Which group is involved in conducting investor education programs in tier II and tier III towns?

Investors Associations (A) Signup and view all the answers

Which trainers are recognized by SEBI to conduct educational programs specifically in commodities derivatives?

Commodities Derivative Trainers (B) Signup and view all the answers

What does the acronym SMARTs stand for in the context of investor education?

Securities Market Trainers (A) Signup and view all the answers

What does pay-in of funds/securities refer to in stock exchanges?

Transfer of funds/securities from the broker's account to the exchange's account. (D) Signup and view all the answers

What is the significance of a Contract Note in trading?

It serves as a legal document detailing the transaction. (C) Signup and view all the answers

Where can details of investor awareness programs be found?

On SEBI's investor website (D) Signup and view all the answers

Which of the following is NOT a website related to SEBI or investor education?

<a href="http://www.investorhelp.com">www.investorhelp.com</a> (D) Signup and view all the answers

What should an investor do if they find a discrepancy in their Contract Note?

Contact the stock broker immediately. (C) Signup and view all the answers

What is the time frame within which a stock broker must issue a Contract Note?

Within 24 hours of execution. (D) Signup and view all the answers

What is the toll-free number provided for investor helpline?

1800 22 7575 (A) Signup and view all the answers

What type of educational programs are provided specifically through CoTs?

Commodities derivatives programs (A) Signup and view all the answers

What can happen if there are insufficient funds or securities for settlement?

Penalty and losses may be imposed on the investor. (D) Signup and view all the answers

What type of authorization is needed for receiving an electronic Contract Note?

A specific authorization along with email ID is required. (B) Signup and view all the answers

Why is it important to preserve Contract Notes?

They are useful if disputes arise regarding trades. (A) Signup and view all the answers

How must electronic Contract Notes be handled to ensure their integrity?

They must be digitally signed and encrypted. (C) Signup and view all the answers

What does the acronym KYC stand for?

Know Your Client (C) Signup and view all the answers

Which institution is referred to by the abbreviation NSDL?

National Securities Depository Limited (B) Signup and view all the answers

The term 'DP' in a financial context refers to which of the following?

Depository Participant (D) Signup and view all the answers

What is the purpose of the SEBI Complaints Redress System (SCORES)?

To provide a platform for redressing investor complaints (C) Signup and view all the answers

Which of the following terms refers to a financial event allowing the public to invest in a company for the first time?

Initial Public Offer (A) Signup and view all the answers

What is the full form of the acronym UID?

Unique Identification (A) Signup and view all the answers

Which committee is responsible for addressing investor grievances according to the provided content?

Investor Grievance Redressal Committee (D) Signup and view all the answers

What does the acronym PAN stand for in a financial context?

Permanent Account Number (A) Signup and view all the answers

Study Notes

Primary and Secondary Markets

Primary Market: Where new securities are issued; investors buy securities directly from the issuer.
Secondary Market: Platform for trading previously issued securities, where investors sell to other investors.

Market Infrastructure Institutions and Intermediaries

Market Infrastructure Institutions (MII): Organizations that provide essential market services, ensuring smooth operations of trading, clearing, and settlement.
Market Intermediaries: Entities like brokers, dealers, and financial advisors that facilitate transactions in the securities markets.

Key Risks in Investing

Market risk, liquidity risk, credit risk, and operational risk can affect investment performance.
Understanding personal risk tolerance is crucial for making informed investment decisions.

Mitigating Risks

Diversification across different asset classes can reduce exposure to market volatility.
Continuous monitoring and assessment of investments are recommended to mitigate risks.

Account Opening Process

Pre-requisites: Individuals need to provide identification such as PAN and KYC documentation.
KYC Process: Know Your Client regulations require verification of identity before an account can be opened.
Basic Services Demat Account (BSDA): A cost-effective demat account option for individuals to hold and trade in securities.

Investment Processes

Primary Market Investment: Involves applying for new issues through processes like ASBA (Application Supported by Blocked Amount).
Secondary Market Investment: Trading is conducted on stock exchanges with settled trades typically on a T+2 basis.

Contract Note Importance

A Contract Note confirms the details of a trade and should be kept for reference. It requires timely issuance within 24 hours post-trade.
Any discrepancies must be reported immediately to the stockbroker.

Margin Money

Refers to the security deposit required when buying securities on credit. It acts as collateral for the loan provided by the broker.

Unified Payment Interface (UPI) in ASBA

Investors can use UPI as a payment method for IPOs, simplifying the bidding and payment process.
Requires bidders to provide their UPI ID along with bid details when applying for an IPO.

Investor Awareness Initiatives by SEBI

Resource Persons Programs: Educational initiatives in local languages to reach diverse demographics.
Regional Seminars: Collaboration with stock exchanges to spread awareness on investing.
SMARTs & CoTs Programs: Specialized training for securities and commodities derivatives education in smaller cities.

Online Resources and Helpline

SEBI and various exchanges offer extensive online resources for investors.
Toll-Free Investor Helpline: 1800 22 7575 for inquiries and complaints.

Regulatory Bodies and Entities

SEBI: Securities and Exchange Board of India oversees the securities market.
Depositories: CDSL and NSDL facilitate the dematerialization of securities.

Important Terms

IPO: Initial Public Offer, a method for companies to raise capital through public investment.
Demat Account: Digital account to hold shares and securities in electronic form.

Reviewing these crucial points ensures a strong foundation for understanding investments in the securities market.

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Description

This quiz covers essential topics in the securities market, including the primary and secondary markets, market infrastructure institutions, key risks associated with investing, and the account opening process. Test your understanding of how to navigate the investment landscape effectively.