NISM Certification Overview

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Questions and Answers

What is the primary aim of NISM certification programs?

To enhance the quality and standards in financial services. (correct)

To eliminate all regulatory requirements.

To provide free financial education.

To reduce the number of financial professionals.

Which area does NISM NOT focus on according to its certification examinations?

Equities

Compliance

Operations

Social Media Marketing (correct)

How does NISM contribute to the financial market?

By reducing the number of financial educators.

By restricting access to financial information.

Through capacity building among securities market stakeholders. (correct)

By establishing a monopoly in financial education.

What aspect of financial education does NISM focus on?

Enhancing governance standards Signup and view all the answers

Which of the following is NOT a function of NISM’s School for Certification of Intermediaries?

Conducting financial literacy campaigns Signup and view all the answers

What do NISM's certification examinations aim to ensure for professionals?

Meeting a defined minimum knowledge benchmark. Signup and view all the answers

Which sector does NISM collaborate with for enhancing financial education?

All financial sector regulators Signup and view all the answers

What type of programs does NISM conduct alongside certification examinations?

Continuing Professional Education programs Signup and view all the answers

What is the primary role of securities markets in the financial market system?

Providing a regulated framework for capital flow Signup and view all the answers

Which of the following is NOT a participant in the securities market?

Real estate agents Signup and view all the answers

What main components make up the financial market?

Money market, debt market, and securities market Signup and view all the answers

What is the role of regulatory bodies like SEBI and RBI in securities markets?

Overseeing transactions and ensuring market integrity Signup and view all the answers

Which statement best explains the structure of securities markets?

It includes issuers, investors, intermediaries, and regulatory authorities. Signup and view all the answers

What type of capital flow do securities markets primarily facilitate?

Equity and debt capital from investors to businesses Signup and view all the answers

Which of these markets is primarily included in the financial market?

Securities market Signup and view all the answers

How does the securities market contribute to the allocation of capital?

By allowing efficient pricing and transactions of securities Signup and view all the answers

Which of the following best describes derivatives as defined by SCRA?

A contract deriving its value from underlying securities prices. Signup and view all the answers

What is the primary benefit for investors purchasing securities?

To convert savings into financial assets that provide returns. Signup and view all the answers

Which of the following statements about the issuer of a security is true?

The issuer raises capital through regulated contracts. Signup and view all the answers

How are securities categorized in terms of risk and return?

Risk and return characteristics differ significantly between equity and debt securities. Signup and view all the answers

What primary benefit does a certificate of deposit (CD) provide compared to a fixed deposit?

A CD can be transferred before maturity. Signup and view all the answers

Why do companies list securities on a stock exchange?

To provide liquidity and transparency to investors. Signup and view all the answers

What role does the investor play in the context of securities?

The investor has a claim to rights represented by the securities. Signup and view all the answers

What is a key risk associated with investing in securities?

Companies may default on interest or principal repayments. Signup and view all the answers

What characterizes a bond as a debt security?

It represents a borrowing by the issuer. Signup and view all the answers

How can investors evaluate risks associated with securities?

By obtaining information about the company. Signup and view all the answers

What is a key feature of securities markets?

They allow for mutual satisfaction of investor and issuer goals. Signup and view all the answers

What is a characteristic of a fixed deposit receipt?

It is not transferable. Signup and view all the answers

What does the term 'liquid market' refer to in the context of securities?

A market that allows investors to sell securities easily. Signup and view all the answers

What must investors do if they wish to access their funds before a fixed deposit matures?

Break the deposit which may incur penalties. Signup and view all the answers

Which of the following accurately describes a standard security?

It is a pre-defined security with accepted terms. Signup and view all the answers

What is the main difference between a one-to-one transaction and a standard security?

One-to-one transactions involve negotiations, while standard securities do not. Signup and view all the answers

What is the primary focus of the top-down approach in equity analysis?

Identification of macro trends to inform sector selection Signup and view all the answers

Which of the following is NOT a source of information for equity analysis?

Personal investment blogs Signup and view all the answers

What do relative valuation models strive to achieve in equity analysis?

Assess fair value by comparing with similar assets Signup and view all the answers

What is a potential limitation of relative valuation models?

They can incorporate errors from market price valuations Signup and view all the answers

Which model relies primarily on an understanding of the business’s earnings, growth, and dividends?

Discounted cash flow models Signup and view all the answers

What does the economy-industry-company (EIC) framework describe?

The process of analyzing market and macro factors Signup and view all the answers

Which of the following actions is a part of equity analysis?

Estimating future cash flows for valuation Signup and view all the answers

How do bottom-up approaches in equity analysis differ from top-down approaches?

They focus first on individual stock potential before considering macro indicators. Signup and view all the answers

What does the principal of a debt security represent?

The amount of money borrowed by the issuer Signup and view all the answers

Which of the following factors does NOT influence the coupon rate of a debt security?

The investor's credit score Signup and view all the answers

What is the primary difference between a bond and a debenture in the context of Indian securities markets?

Bonds are typically issued by government or public sector organizations Signup and view all the answers

What happens to a bond once it is redeemed or repaid?

It ceases to exist Signup and view all the answers

What rights do investors have when they hold secured debt securities?

The right to the issuer’s assets if there is a default Signup and view all the answers

Which of the following statements regarding unlisted securities is correct?

They must be held until maturity. Signup and view all the answers

Which of the following is a feature of all debt securities?

They provide the investor with the right to coupon payments and principal repayment as per the contract. Signup and view all the answers

How is the interest from a debt security typically expressed?

As a percentage of the face value Signup and view all the answers

Study Notes

NISM-Series-XII Workbook

This workbook is for preparing for the National Institute of Securities Markets (NISM) Certification Examination for Securities Markets Foundation.
It was published in May 2019.
The National Institute of Securities Markets (NISM) published it.
The address of the publisher is Plot 82, Sector 17, Vashi, Navi Mumbai – 400 703, India.
Reproduction of this workbook in any form, without permission from the publishers, is strictly prohibited.

Foreword

NISM provides high-end professional education, certifications, training, and research in financial markets.
NISM builds capacity among stakeholders in the securities markets through professional education, enhancing governance standards, and fostering policy research.
NISM works closely with financial sector regulators and develops programs catered to various segments of financial professionals.

Disclaimer

The content of the workbook does not imply endorsement, recommendation, or favoring by NISM or SEBI.
The workbook is for general reading and educational purposes only.
NISM and SEBI have no responsibility for actions or wrong moves based on information presented in this workbook.
The information is based on the understanding of reliable sources, however, the material does not provide any guarantee about the accuracy of the information.

About NISM

NISM was established by the Securities and Exchange Board of India (SEBI) in February 2005.
SEBI's goal for establishing NISM was to promote securities market education and research.
NISM caters to various constituencies – investors, researchers, intermediaries, regulatory staff, and policy makers.
NISM provides financial and securities education at various levels and across various segments in India and abroad.

About the Workbook

This workbook aids NISM-Series-XII candidates in understanding the Indian securities markets.
It details the schemes and products in Mutual Funds and Derivatives Markets in India.
It covers the essentials of financial planning processes.

About the Certification Examination for Securities Markets Foundation

The examination is meant for entry-level professionals who wish to pursue a career in securities markets.
This certification examination is suitable for those wanting a basic knowledge of the Indian securities markets, including: entry-level professionals, employees in the securities industry, professionals from other industries interested in learning about securities markets, students, homemakers, and teachers.

The workbook has chapters on understanding securities markets, securities types and concepts, primary markets, secondary markets, mutual funds, derivative markets, financial planning and securities markets.

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Description

This quiz explores various aspects of the NISM certification programs, including their primary aims, contributions to financial education, and roles in the financial market. Test your knowledge on the functions of NISM, securities markets, and regulatory bodies like SEBI and RBI.