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Stock-Broker Risk Assessment and Client Dealing Regulations Quiz

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Stock-Broker Risk Assessment and Client Dealing Regulations Quiz

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Questions and Answers

What is the purpose of Unique Client Code (UCC) according to SEBI regulations?

To apply for trading membership
To identify clients uniquely for trading purposes (correct)
To track client trading patterns
To determine the client's financial status

Why do brokers need to collect and maintain the Permanent Account Number (PAN) of their clients?

To monitor client investments
To track client expenses
To comply with regulatory requirements (correct)
To verify client addresses

What is the responsibility of stock exchanges/clearing corporations regarding clients' PAN and UCC?

To use the information for marketing purposes
To maintain a database of client details submitted by brokers (correct)
To update the details without broker involvement
To keep the information confidential

Why is it essential for brokers to verify the documents related to the unique client code?

To ensure compliance with SEBI regulations (B) Signup and view all the answers

What is the significance of maintaining a database of client details submitted by brokers by stock exchanges?

For regulatory oversight and monitoring (D) Signup and view all the answers

How do Unique Client Codes (UCC) benefit trading members or brokers?

By reducing the risk of client default (A) Signup and view all the answers

What is the purpose of the agreement that the trading member (TM) is required to enter into with the client?

To ensure compliance with NSE regulations (D) Signup and view all the answers

What should be done with a copy of the agreement between the trading member and the client?

It should be kept permanently by the trading member (D) Signup and view all the answers

Which of the following is true regarding additional clauses that a stock broker may add to the client agreement?

They can be included as long as they don't conflict with clauses in the model document or regulations (D) Signup and view all the answers

What is a unique client code?

An identification code for each client used in trading (D) Signup and view all the answers

Why is there segregation of mandatory and voluntary documents/clauses pertaining to client registration?

To ensure clients understand which documents/clauses are necessary (B) Signup and view all the answers

In addition to the Uniform Documentary Requirement (UDR), what do clients have to specify in case of internet trading?

Clauses related to internet trading (C) Signup and view all the answers

What are some of the information that the trading member (TM) should seek under Know Your Client (KYC) requirements?

Investor risk profile, financial profile, investor identification details (A) Signup and view all the answers

Who should the TM obtain recent passport size photographs of as part of the KYC requirements?

Partners, whole time directors, individual promoters holding 5% or more in shareholding (C) Signup and view all the answers

What should be done during in-person verification according to KYC requirements?

Trading member's staff should perform in-person verification and sign the KYC form (A) Signup and view all the answers

Under the Member Constituent Agreement (MCA), what are trading members required to make clients aware of?

Trading segment, SEBI registration number, risks involved in trading (D) Signup and view all the answers

What is one of the specific pieces of information that should be provided to clients under MCA?

Nature of trading member's liability for business conducted (D) Signup and view all the answers

Why is it important for TMs to collect PAN numbers and proof of identification from clients?

To comply with regulatory requirements and prevent fraud (B) Signup and view all the answers