Government and Corporate Securities Market Quiz

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Questions and Answers

What type of securities are referred to as gilt edged securities?

Government securities (correct)

Treasury bills

Corporate bonds

Debentures

Who primarily issues government securities?

Non-governmental organizations

Private corporations

State governments (correct)

Corporate firms

Which of the following is NOT a major investor in the government securities market?

Banks

Insurance companies

Provident funds

Retail customers (correct)

What are the two main types of government securities?

Treasury bills and government dated securities Signup and view all the answers

What is the primary purpose of issuing corporate bonds?

To meet needs for expansion and modernization Signup and view all the answers

What characterizes debentures and bonds in the corporate bond market?

They provide periodic interest payments or zero coupon payments. Signup and view all the answers

What is a characteristic feature of corporate bonds?

They must be secured against company assets. Signup and view all the answers

Which entities participate in the securities market by developing and issuing securities?

Corporate firms Signup and view all the answers

Who is responsible for formulating a code of conduct for regulating trading by employees?

The board of directors Signup and view all the answers

What is the primary role of the compliance officer as mentioned?

To administer the code of conduct Signup and view all the answers

Which groups must be designated by the board of directors to be covered by the code of conduct?

Employees based on their functional role and access to sensitive information Signup and view all the answers

Which employees are specifically included in the designated persons for the code of conduct?

Chief Executive Officer and employees up to two levels below Signup and view all the answers

Which type of staff is explicitly mentioned as having to follow the code of conduct?

Support staff with access to sensitive information Signup and view all the answers

What requirements must a listed company, intermediary, or fiduciary adhere to when formulating their code of conduct?

Minimum standards set out in specific schedules Signup and view all the answers

Promoters of which types of companies are covered under the regulations?

Both listed companies and investment companies for intermediaries Signup and view all the answers

What is the minimum percentage of equity shares that must be offered to the public if the post issue capital is less than or equal to 1,600 crore rupees?

25% Signup and view all the answers

Which of the following is true for companies with a post issue capital between 1,600 crore rupees and 4,000 crore rupees?

The minimum offer is equivalent to the value of 400 crore rupees. Signup and view all the answers

What is the primary purpose of the code of conduct according to the provided information?

To regulate, monitor, and report trading Signup and view all the answers

For a company with a post issue capital greater than 4,000 crore rupees but less than or equal to 1 lakh crore rupees, what is the minimum percentage of shares that must be offered?

10% Signup and view all the answers

If a company has a post issue capital of more than 1 lakh crore rupees, what is the minimum percentage of shares that must be offered?

At least equivalent to the value of 5,000 crore rupees and 5% Signup and view all the answers

Which rule requires a public company to make an application for securities listing on a stock exchange?

Rule 19(1) Signup and view all the answers

What happens if a company's share offering does not comply with the conditions stipulated in SCRR?

The shares may not be listed. Signup and view all the answers

SCRR needs to be read in conjunction with which regulation?

SCRA Signup and view all the answers

Which of the following best describes the purpose of Rule 19(2)(b)?

To outline minimum public offering requirements. Signup and view all the answers

What powers does the SAT have according to Section 15U (2) of the SEBI Act, 1992?

To summon and enforce the attendance of any person Signup and view all the answers

Which of the following statements is true regarding the judicial nature of proceedings before SAT?

Every proceeding is deemed a judicial proceeding. Signup and view all the answers

Who may represent an appellant before the SAT as per Section 15V of the SEBI Act?

Authorized chartered accountants or company secretaries Signup and view all the answers

Which act's provisions apply to appeals made to the SAT according to Section 15W?

The Limitation Act, 1963 Signup and view all the answers

What jurisdictional limitations does Section 15Y of the SEBI Act establish regarding civil courts?

Civil courts cannot entertain matters under SAT's jurisdiction. Signup and view all the answers

What is the time limit for a person aggrieved by a SAT decision to appeal to the Supreme Court as per Section 15Z?

60 days Signup and view all the answers

Which of the following is included in the definition of 'securities' under the Securities Contracts (Regulation) Act, 1956?

Bonds and debentures Signup and view all the answers

Which option is NOT a power held by the SAT as laid out in Section 15U (2)?

Granting monetary compensation Signup and view all the answers

In the context of trading decisions made by non-individual insiders, which statement is a requirement according to the regulations?

Those making trading decisions must not possess unpublished price sensitive information when executing trades. Signup and view all the answers

What is the minimum period during which trades can commence after a trading plan is publicly disclosed?

Six months Signup and view all the answers

Which of the following is not a requirement for a trading plan as per the regulations?

The plan must allow overlap with previously established trading plans. Signup and view all the answers

What is the role of the compliance officer in relation to a trading plan?

The compliance officer assesses whether the trading plan could violate regulations. Signup and view all the answers

During which period are trades not allowed according to the regulations?

Between twenty trading days prior to the financial results announcement and two days after. Signup and view all the answers

What is the minimum duration for which a trading plan must entail trading?

At least twelve months. Signup and view all the answers

Which of the following describes a requirement for trading plans under the regulations?

Trading must be predetermined in terms of either the nature of the trade or the timing. Signup and view all the answers

Which trading activity is explicitly prohibited under the formulated trading plans?

Trading involving market abuse. Signup and view all the answers

Study Notes

Government Securities Market

The government raises short-term and long-term funds through the government securities market.
Government securities are considered "gilt-edged" because they carry no default risk due to government guarantees.
Issuers of government securities include:
- Central Government
- State Government
- Semi-Governmental Authorities
Major investors in this market are:
- Banks
- Insurance Companies
- Provident Funds
- State Governments
- Foreign Portfolio Investors (FPIs)
The two main types of government securities are:
- Treasury Bills (short-term)
- Government Dated Securities (long-term)

Corporate Bond Market

Corporate bonds are issued by companies to raise capital for:
- Expansion
- Modernization
- Restructuring
- Mergers and Acquisitions
Corporate bonds are traded in the corporate bond market by investors such as:
- Banks
- Financial Institutions
- Insurance Companies
- Mutual Funds
- FPIs
Companies can issue bonds through:
- Public Offering
- Private Placement
Corporate bonds can either have:
- Periodic interest payments (Coupons)
- Cumulative terminal payments (Zero Coupons)

Securities Market Participants

The Securities Market is comprised of participants who develop, issue, register, and sell securities for financing purposes.
Investors are also key participants, buying securities to generate returns.
Intermediaries provide crucial services such as trading and brokerage.

Securities and Exchange Board of India (SEBI) Act, 1992

The SEBI Act establishes the Securities Appellate Tribunal (SAT) to handle appeals against SEBI decisions.
The SAT has the same powers as a civil court, including:
- Summoning witnesses
- Requiring document production
- Receiving evidence through affidavits
- Issuing commissions for examinations
- Reviewing its own decisions
- Dismissing applications for default or deciding cases ex-parte
The SAT's proceedings are considered judicial proceedings, and it is deemed a civil court.
Appeals can be filed to the Supreme Court within 60 days of the SAT decision or order.

Securities Contracts (Regulation) Act, 1956 (SCRA)

The SCRA defines "securities" to include:
- Shares, stocks, bonds, debentures, and other marketable securities of a company
- Derivatives
The SCRA outlines listing requirements, including:
- Minimum public offering percentage
- Minimum public shareholding requirement
- Rule 19(1) requires companies seeking listing to submit applications and required documents.
- Rule 19(2)(b) defines minimum offer and allotment percentages to the public for various post-issue capital sizes.

Insider Trading Regulations

Regulation 5 lays out the process for insiders to formulate and disclose trading plans, including:
- A minimum six-month delay before trading
- No trading during specific periods (20 days prior to financial results disclosure and 2 days after)
- Minimum 12-month trading duration
- No overlapping trading plans
- Specification of trade value, security number, and trading intervals
- Prohibition of trading for market abuse
- The trading plan needs to be approved and monitored by the company's compliance officer.

Code of Conduct for Trading

Listed companies, market intermediaries, and other entities handling confidential information must establish and implement codes of conduct:
- These codes should follow minimum standards outlined in Schedule B (for listed companies) and Schedule C (for intermediaries).
- A designated compliance officer must be appointed to manage the implementation and reporting of the code.
- The code must specify designated individuals covered based on their roles and function within the organization, including:
  - Employees with access to sensitive information
  - Employees of subsidiary companies
  - All promoters of listed companies
  - Chief Executive Officer and employees two levels below
  - Support staff with access to sensitive information

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Description

Test your knowledge on the government and corporate securities market. This quiz covers key concepts, types of securities, and major participants in each market. Understand the roles of banks, insurance companies, and more in these financial systems.