Merchant Banking Overview and Activities
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Questions and Answers

What is a distinguishing feature of OTC markets compared to stock exchanges?

  • OTC trades are settled bilaterally without a central exchange. (correct)
  • OTC markets are regulated by SEBI.
  • Stock exchanges facilitate direct negotiation between buyers.
  • In stock exchanges, transactions are conducted exclusively in cash.

    • Which financial instruments primarily characterize the money market?

  • Real estate investments and venture capital.
  • Long-term bonds and equity shares.
  • Corporate equities and mutual funds.
  • Banker’s acceptances and Treasury Bills. (correct)

    • Preference Shares differ from Equity Shares mainly in which aspect?

  • Preference Shares provide ownership with voting rights.
  • Preference Shares are redeemable within a maximum of 20 years. (correct)
  • Equity Shares have superior rights regarding capital return.
  • Equity Shares guarantee a fixed rate of dividend.

    • Convertibles can be best described as financial instruments that:

    <p>Can be converted into equity shares under specific conditions.</p> Signup and view all the answers

    Which category of products contains the least risk in the Indian Securities Markets?

    <p>Debt Market Products</p> Signup and view all the answers

    Which of the following is NOT a feature of Equity Shares?

    <p>They guarantee dividends irrespective of company profits.</p> Signup and view all the answers

    Which of the following instruments is typically traded in the money market?

    <p>Commercial paper.</p> Signup and view all the answers

    What do investors who prefer less risky products typically choose to invest in?

    <p>Debt market products.</p> Signup and view all the answers

    What is the primary purpose of the NISM Certification programs?

    <p>To enhance the quality and standards of professionals in financial services</p> Signup and view all the answers

    Which of the following areas does NISM focus on for their certification examinations?

    <p>Securities Market Functions including Equities and Derivatives</p> Signup and view all the answers

    What is the primary target audience for NISM's professional education programs?

    <p>Professionals employed in various segments of the financial services sector</p> Signup and view all the answers

    How does NISM contribute to financial literacy and governance standards?

    <p>By conducting training and certification programs for market professionals</p> Signup and view all the answers

    What distinguishes NISM's certifications from other programs?

    <p>They are developed with input from all financial sector regulators</p> Signup and view all the answers

    What is the significance of the School for Certification of Intermediaries (SCI) within NISM?

    <p>It designs certification examinations and CPE programs for professionals</p> Signup and view all the answers

    Which of the following topics is NOT likely covered by NISM certification examinations?

    <p>International Trade Regulations</p> Signup and view all the answers

    What is one role of NISM in relation to financial education?

    <p>To enhance governance standards in securities markets</p> Signup and view all the answers

    What distinguishes Fully Convertible Debentures from Partly Convertible Debentures?

    <p>Fully Convertible Debentures convert the entire amount into equity.</p> Signup and view all the answers

    What is a characteristic of warrants in investment?

    <p>They provide the right but not the obligation to buy shares.</p> Signup and view all the answers

    Which type of mutual fund is generally considered riskier?

    <p>Equity mutual funds</p> Signup and view all the answers

    What is a key feature of Exchange Traded Funds (ETFs)?

    <p>ETFs provide exposure to a diversified basket of securities.</p> Signup and view all the answers

    Which instruments are classified as derivatives?

    <p>Equities and Futures</p> Signup and view all the answers

    What does the term 'underlying asset' refer to in derivatives?

    <p>The asset from which the derivative's value is derived.</p> Signup and view all the answers

    In which segment can derivatives trading occur in India?

    <p>Equities, currency, and commodities</p> Signup and view all the answers

    What is a key agreement in Index/Stock Futures?

    <p>It allows buying or selling an asset at a future date and price.</p> Signup and view all the answers

    What powers does SEBI have under sub-section 3 of Section 11 of the SEBI Act?

    <p>Power akin to civil courts for certain matters.</p> Signup and view all the answers

    Which of the following is NOT a ground for imposing penalties by SEBI under the SEBI Act?

    <p>Reduction of share capital.</p> Signup and view all the answers

    What is the penalty prescribed under Section 15A of the SEBI Act?

    <p>Penalty for failing to furnish documents or reports.</p> Signup and view all the answers

    Which action can SEBI take regarding the inspection of documents?

    <p>Inspect and examine documents of any person.</p> Signup and view all the answers

    What does Section 15B of the SEBI Act penalize?

    <p>Failure to enter into an agreement with clients.</p> Signup and view all the answers

    What type of commission can SEBI issue according to the provisions described?

    <p>Commissions for examinations of witnesses or documents.</p> Signup and view all the answers

    Which of these provisions enables SEBI to summon persons for examination?

    <p>Sub-section 3 of Section 11.</p> Signup and view all the answers

    Which stage in the transaction process is primarily led by investment banks?

    <p>Negotiation of the term sheet</p> Signup and view all the answers

    What is the consequence for failing to rectify investor grievances as directed by SEBI?

    <p>Imposition of a monetary penalty.</p> Signup and view all the answers

    What is the primary purpose of the information memorandum in a financial transaction?

    <p>To incorporate necessary corporate disclosures for investors</p> Signup and view all the answers

    Which of the following best describes the involvement of investment banks in a transaction?

    <p>They play an active role throughout the entire transaction process.</p> Signup and view all the answers

    Which regulatory body is responsible for determining the SLR and CRR rates in India?

    <p>Reserve Bank of India</p> Signup and view all the answers

    Which financial market allows the issuance of securities to investors for the first time?

    <p>Primary Market</p> Signup and view all the answers

    What aspect of merchant banking is primarily covered in this chapter?

    <p>Regulatory framework governing merchant banking activities</p> Signup and view all the answers

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

    <p>Retail investors</p> Signup and view all the answers

    Derivatives in which of the following underlying assets are accepted in the Indian market?

    <p>Equities, currency, and commodities</p> Signup and view all the answers

    Study Notes

    Merchant Banking Evolution & Role

    • Merchant banking emerged during the medieval period as a way to facilitate trade.
    • It involved financing trade expeditions and transactions.
    • Merchant banking transitioned to a wider financial services role in the 19th century.
    • This encompassed underwriting securities and providing advisory services.

    Merchant Banking Activities

    • Merchant banks undertake a variety of activities, including:
      • Underwriting securities: This involves purchasing securities from companies and reselling them to investors
      • Financial advisory: This includes mergers and acquisitions, IPOs, and restructuring
      • Asset management: This involves managing investments for individuals and institutions

    Merchant Banking Regulations in India

    • The Securities and Exchange Board of India (SEBI) regulates merchant banking activities in India.
    • SEBI's powers in the SEBI Act of 1992 enable them to:
      • Obtain information and documents from intermediaries.
      • Summon individuals for questioning and examination.
      • Inspect books, registers, and other documents.
      • Impose penalties for regulatory violations.

    Merchant Banking Penalties

    • The SEBI Act outlines penalties for various non-compliance instances, including:
      • Failing to furnish information or reports to SEBI.
      • Failing to maintain records or books of account.
      • Failing to enter into agreements with clients as obligated by law.
      • Failing to redress investor grievances after SEBI direction.

    SEBI Act Provisions

    • Section 15A: Penalties for failing to provide documents, returns, or reports to SEBI.
    • Section 15B: Penalties for neglecting to sign client agreements as per SEBI Act, 1992.
    • Section 15C: Penalties for listed companies or intermediaries who fail to address investor grievances after being instructed by SEBI.

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    Related Documents

    NISM-Series-IX Merchant Banking Workbook PDF May 2023

    Description

    Explore the evolution and role of merchant banking from its medieval origins to its current functions. This quiz covers key activities, such as underwriting securities, financial advisory, and asset management, along with the regulatory environment in India governed by SEBI. Test your knowledge on this essential aspect of finance!

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