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NEW QUESTION # 159
A stock broker executes multiple trades for a client throughout the day in various securities. According to the clearing process regarding the balancing of client accounts within the broker's firm, how is the final obligation handled?
- A. Netting is allowed only for institutional clients, while retail client accounts must be settled on a trade-to-trade basis.
- B. The broker must segregate buy and sell transactions and settle them separately without offsetting.
- C. Client accounts are balanced weekly to determine the net obligation for the settlement cycle.
- D. Every trade is settled gross with the clearing corporation, and netting is strictly prohibited within the broker's books.
- E. At the end of the day, the position of each client is netted against all his transactions and the final pay-in/pay-out is carried out.
Answer: E
Explanation:
The source states: 'The stock brokers are allowed to net the clients account within the firm. At the end of the day, the position of each client is netted against all his transactions and the final pay-in/pay-out of securities/funds is carried out through clearing banks and depository participants.'
NEW QUESTION # 160
According to the SEBI framework for 'Accredited Investors', which of the following combinations of financial criteria would render an Individual, HUF, or Family Trust eligible to be recognized as an Accredited Investor?
- A. Annual Income of INR 1.2 Crore and Net Worth of INR 5.5 Crore, out of which INR 3 Crore is in the form of financial assets.
- B. Net Worth of INR 8 Crore, out of which INR 2 Crore is in the form of financial assets.
- C. Annual Income of INR 1.8 Crore and Net Worth of INR 3 Crore.
- D. Annual Income of INR 90 Lakhs and Net Worth of INR 10 Crore, out of which INR 3 Crore is in the form of financial assets.
- E. Net Worth of INR 6 Crore with no specific requirement on financial assets.
Answer: A
Explanation:
To be an Accredited Investor, an entity must meet one of the following criteria: (i) Annual Income >= INR 2 Crore; (ii) Net Worth INR 7.5 Crore (with at least INR 3.75 Crore in financial assets); or (iii) Annual Income >= INR 1 Crore + Net Worth >= INR 5 Crore (with at least INR 2.5 Crore in financial assets). Option C meets criterion (iii). Option A fails (Income < 2 Cr). Option B fails (Financial Assets < 3.75 Cr). Option D fails (Net Worth < 7.5 Cr and no financial asset proof). Option E fails (Income < 1 Cr and Financial Assets < 3.75 Cr for the Net Worth only criteria).
NEW QUESTION # 161
While institutional trades generally do not attract upfront margins, specific categories of institutional investors are subject to upfront margining similar to non-institutional trades. Identify the category from the list below.
- A. Public Financial Institutions defined under the Companies Act
- B. Category II FPIs who are corporate bodies, individuals, or family offices
- C. Mutual Funds registered with SEBI
- D. Insurance Companies registered with IRDAI
- E. Category I Foreign Portfolio Investors (Sovereign Wealth Funds)
Answer: B
Explanation:
Trades of Category II FPIs who are corporate bodies, individuals, or family offices and domestic entities who may choose to settle trades through a Custodian shall be margined on an upfront basis as per the margining framework of non-institutional trades. Other institutional trades are margined on T+1 day subsequent to confirmation.
NEW QUESTION # 162
According to RBI guidelines for issuance, which of the following combinations correctly specifies the minimum denomination, maturity range, and minimum credit rating required for a Commercial Paper (CP)?
- A. ?5 lakh and multiples thereof; 15 days to 3 years; Rating 'A3'
- B. ? 10 lakh and multiples thereof; 7 days to 1 year; Rating 'AA'
- C. ? 1 lakh and multiples thereof; 15 days to 1 year; Rating 'A2'
- D. ?25 lakh and multiples thereof; 30 days to 1 year; Rating 'A1'
- E. ?5 lakh and multiples thereof; 7 days to 1 year; Rating 'A3'
Answer: E
Explanation:
Commercial Papers (CPs) are issued for ?5 lakh and multiples thereof for maturities between 7 days and one year. The minimum credit rating assigned by a Credit Rating Agency (CRA) for the issuance of CPs shall be 'A3'.
NEW QUESTION # 163
In the context of Settlement Dues, the clearing agency pays moneys payable to clearing members and custodians for every settlement. What is the specific basis for determining these payable amounts?
- A. Information provided by the Exchange or Clearing Agency
- B. The daily margin statement generated by the Clearing Member
- C. The bank statement of the Clearing Bank
- D. The contract notes issued by the broker to the client
- E. The net worth certificate submitted by the member
Answer: A
Explanation:
The text mentions: 'In turn, the clearing agency shall pay to the clearing members and custodians moneys payable to them for every settlement for their transactions / positions. This is based on the information provided by the Exchange or Clearing Agency.'
NEW QUESTION # 164
When a corporate action adjustment (such as a bonus ratio of 3:7) results in fractions, a specific methodology is adopted to minimize fraction settlements. How are the Strike Price and Market Lot rounded off in this process?
- A. Strike Price: Rounded down to nearest tick; Market Lot: Rounded up to nearest integer
- B. Strike Price: Rounded up to nearest integer; Market Lot: Rounded down to nearest 100
- C. Strike Price: Nearest integer; Market Lot: Nearest tick size
- D. Strike Price: Exact value up to 2 decimal places; Market Lot: Exact value
- E. Strike Price: Nearest tick size; Market Lot: Nearest integer
Answer: E
Explanation:
With a view to minimizing fraction settlements, the methodology adopted includes carrying out rounding off for the Strike Price to the nearest tick size and Market Lot to the nearest integer.
NEW QUESTION # 165
Which of the following statements accurately describes the currency and jurisdictional nature of an International Financial Services Centre (IFSC) in India?
- A. It is a deemed domestic territory for FEMA purposes but deals in foreign currency.
- B. It is a jurisdiction providing financial services to non-residents and residents (to the extent permissible) in a currency other than the domestic currency (Indian Rupee).
- C. It operates in Indian Rupee (INR) but is exempt from RBI regulations.
- D. It operates under the jurisdiction of the state government where it is located, dealing in dual currencies.
- E. It caters to domestic customers only, offering products in foreign currency.
Answer: B
Explanation:
An IFSC is defined as a jurisdiction that provides world-class financial services to non-residents and residents (to the extent permissible under current regulations) in a currency other than the domestic currency (Indian rupee) of the location where the IFSC is located.
NEW QUESTION # 166
Regarding the 'Block Mechanism in demat account of clients undertaking sale transactions', what happens if the sale transaction is not executed or is unmatched?
- A. The shares remain blocked until the payout date of the next settlement cycle.
- B. The shares are auctioned by the Clearing Corporation to recover the blockage fees.
- C. The Clearing Corporation uploads cancellation of Block instruction on T day, and securities are unblocked and become free in the client's demat account on T day itself.
- D. The shares are transferred to the Clearing Member's pool account and then returned to the client.
- E. The client must manually submit an unblocking request to the Depository Participant on T+1 day.
Answer: C
Explanation:
In case of unmatched orders, CCs shall upload cancellation of Block instruction on T day so that securities are unblocked and become free in client's demat account on T day itself. If the sale is not executed, shares shall continue to remain in the client's demat account and will be unblocked at the end of the T day.
NEW QUESTION # 167
To enable the validation of Pay-In instructions by Depositories, what is the specific role and timeline mandated for Clearing Corporations (CCs) in this process?
- A. CCs shall transfer the securities from the client account to the pool account directly without Depository intervention.
- B. CCs must validate the ISINs in the client account against the Exchange master list on T-1 day.
- C. CCs shall provide client-wise net delivery obligations on T day to the depositories.
- D. CCs must approve every individual transfer instruction manually before execution on the settlement day.
- E. CCs must generate a physical delivery instruction slip for every client obligation by T+1 morning.
Answer: C
Explanation:
The process requires that 'CCs shall provide client - wise net delivery obligations on T day to the depositories.' The Depositories then use this data to validate the transfer instructions.
NEW QUESTION # 168
Under Section 18A of the Securities Contracts (Regulation) Act, 1956, contracts in derivatives are considered legal and valid only if they satisfy specific conditions. Which of the following is a mandatory condition for such validity?
- A. The contract must involve physical delivery of the underlying asset upon expiry.
- B. The contract must be traded Over-the-Counter (OTC) between two financial institutions.
- C. The contract must be traded on a recognized stock exchange and settled on the clearing house of the recognized stock exchange.
- D. The contract must be settled bilaterally between the buyer and the seller without an intermediary.
- E. The contract must be validated by the Reserve Bank of India (RBI) prior to execution.
Answer: C
Explanation:
Section 18A of the SCRA provides that contracts in derivatives shall be legal and valid if they are traded on a recognized stock exchange and settled on the clearing house of the recognized stock exchange, in accordance with the rules and bye-laws of such stock exchanges.
NEW QUESTION # 169
Based on the classification of membership in the Indian securities market, which of the following categories of members holds both trading and clearing rights but is explicitly restricted from clearing trades for custodian participants?
- A. Trading cum Self-Clearing Member (SCM)
- B. Trading Member-cum-Clearing Member (TCM)
- C. Only Trading Member
- D. Authorized Person
- E. Professional Clearing Member (PCM)
Answer: A
Explanation:
According to the market structure classifications, a Trading cum Self-Clearing Member (SCM) has both trading and clearing rights. However, they are permitted to clear and settle trades executed by them only (either on their own account or on account of their clients) and are not permitted to clear trades for custodian participants. In contrast, a Trading Member-cum-Clearing Member can clear for custodial participants, and a Professional Clearing Member has no trading rights.
NEW QUESTION # 170
Which international capital market instrument issued by Indian companies is subscribed to by a non-resident in foreign currency and carries a fixed interest rate with a conversion feature?
- A. Global Depository Receipts (GDRs)
- B. Foreign Currency Convertible Bonds (FCCBs)
- C. Indian Depository Receipts (IDRs)
- D. External Commercial Borrowings (ECBs)
- E. Masala Bonds
Answer: B
Explanation:
Foreign Currency Convertible Bonds (FCCBs) are bonds issued by Indian companies and subscribed to by a non-resident in foreign currency. They carry a fixed interest or coupon rate and are convertible into a certain number of ordinary shares at a predetermined price,.
NEW QUESTION # 171
Under the SCORES 2.0 framework, if a complainant is dissatisfied with the resolution provided by the entity and requests a first review, the Designated Body (DB) may seek clarification from the entity. What is the specific timeline mandated for the Designated Body to submit the revised Action Taken Report (ATR) to the complainant after seeking such clarification?
- A. Within 30 calendar days of the review sought
- B. Within 15 calendar days of the review sought
- C. Within 21 calendar days of the review sought
- D. Within 10 calendar days of the review sought
- E. Within 7 calendar days of the review sought
Answer: D
Explanation:
According to the SCORES 2.0 framework, the Designated Body shall stipulate the timeline in such a manner to ensure that the Designated Body submits the revised ATR to the complainant on SCORES within 10 calendar days of the review sought.
NEW QUESTION # 172
SEBI has introduced the mechanism of Net Settlement of cash segment and F&O segment upon expiry of stock derivatives. Which of the following scenarios specifically qualifies for this benefit of netting (merged settlements)?
- A. An institutional investor trading through a Custodian in Cash and a Professional Clearing Member in F&O.
- B. An investor whose Trading Member clears trades in F&O segment and cash segment through the same Clearing Member (CM).
- C. An investor trading through different Trading Members who use different Clearing Members.
- D. All institutional investors including Foreign Portfolio Investors (FPIs).
- E. Portfolio Managers (PMS) who are mandatorily directed to enter into delivery backed transactions.
Answer: B
Explanation:
The benefit of netting (merged settlements) shall be available to investors whose trading member (TM) clears trades in F&O segment and cash segment through the same clearing member (CM). It is explicitly stated that this is not available for institutional investors or PMS directed to enter into delivery backed transactions.
NEW QUESTION # 173
Under what specific circumstance is a broker or client strictly **prohibited** from unblocking securities that have been blocked in favour of the Clearing Corporation?
- A. If the client has an outstanding margin obligation in the derivatives segment.
- B. If the Trading Member has not yet transferred the securities to the Clearing Member's pool account.
- C. If the block was created using a physical Delivery Instruction Slip (DIS) instead of eDlS.
- D. If the market price of the security increases by more than 5% during the trading day.
- E. If the Early Pay-In (EPI) benefit has already been provided by the Clearing Corporation to the client for those securities.
Answer: E
Explanation:
The regulations stipulate that the Broker or client shall not be allowed to unblock securities if the Early Pay-In (EPI) benefit is provided by the Clearing Corporation to the client for the same.
NEW QUESTION # 174
When a company announces a Bonus Issue in the ratio of A:B, specific adjustments are made to the Strike Price, Market Lot, and Position of Equity F&O contracts. Which of the following formulas correctly represents the Adjustment Factor used for these calculations?
- A. (A - B) / B
- B. A / (A + B)
- C. (A + B) / B
- D. (A * B) / (A + B)
- E. B / (A + B)
Answer: C
Explanation:
For a Bonus Issue with ratio A:B, the Adjustment factor is calculated as (A+B)/B. For example, for a 1:1 bonus, A= 1, B=1, Factor = (1+1)/1 = 2. This factor is then used to divide the old strike price and multiply the old market lot/position.
NEW QUESTION # 175
Identify the trading sessions or mechanisms that are explicitly NOT applicable under the T+0 settlement cycle. (Select all that apply)
- A. Continuous Trading Session
- B. Post Close Session
- C. Pre-open Session
- D. Auction Session
- E. Early Pay-in via Block Mechanism
Answer: B,C,D
Explanation:
According to the source, 'Pre-open, Special Pre-open, Block window, Auction, Periodic call auction and Post close session are not applicable under T+0 settlement.' Note: While a later circular advised facilitating a block deal window, the core exclusions listed include Pre-Open, Auction, and Post Close. Continuous Trading and Early Pay-in are applicable features.
NEW QUESTION # 176
Distinguishing the roles of market segments is vital for understanding capital formation. Which statement correctly identifies the primary interaction dynamic in the Secondary Market compared to the Primary Market?
- A. Dealings are strictly between two investors, and the issuer does not come into the picture.
- B. It ensures availability of adequate capital at reasonable rates for expansion.
- C. It is used primarily for Initial Public Offers (IPOs) and Rights Issues.
- D. The settlement is always done directly between the issuer and the clearing corporation.
- E. The issuer has direct contact with the investor to raise new capital.
Answer: A
Explanation:
The source clarifies that in the primary market, the issuer has direct contact with the investor. In contrast, in the secondary market, the dealings are between two investors and the issuer does not come into the picture. The secondary market provides liquidity/transferability to existing securities.
NEW QUESTION # 177
Which of the following instruments allow Indian companies to raise resources from international capital markets?
- A. External Commercial Borrowings (ECBs)
- B. Foreign Currency Convertible Bonds (FCCBs)
- C. Masala Bonds
- D. Indian Depository Receipts (IDRs)
- E. Global Depository Receipts (GDRs)
Answer: A,B,C,E
Explanation:
Indian companies can raise resources from international markets through GDRs, ADRs, FCCBs, ECBs, and Masala Bonds„,. IDRs are used by foreign companies to raise capital from Indian markets.
NEW QUESTION # 178
Who is the 'Relevant Authority' empowered to decide on actions such as disciplinary actions or withdrawal of trading facility when a clearing member fails to discharge settlement dues?
- A. The Securities Appellate Tribunal (SAT)
- B. The Depository Participant (DP)
- C. The Association of Mutual Funds in India (AMFI)
- D. The Reserve Bank of India (RBI)
- E. The Relevant Authority (of the Exchange/Clearing Agency)
Answer: E
Explanation:
The text states that the failure shall render the member liable for actions 'as may be decided by the Relevant Authority.'
NEW QUESTION # 179
Clearing Members perform three core functions: Clearing, Settlement, and Risk Management. Which of the following activities correctly falls under the 'Risk Management' function of a Clearing Member?
- A. Setting limits based on upfront deposits/margins for each trading member/client and monitoring positions on a continuous basis.
- B. Confirming the genuineness of transaction details provided by the Clearing Corporation.
- C. Opening demat accounts for retail clients.
- D. Performing the actual transfer of funds and securities to the Clearing Corporation.
- E. Computing obligations of all trading members to determine positions to settle.
Answer: A
Explanation:
The source explicitly lists the functions of Clearing Members. Under Risk Management, it lists: 'Setting limits based on upfront deposits / margins for each trading member/client and monitoring positions on a continuous basis.' Option A is the 'Clearing' function. Option B isthe 'Settlement' function.
NEW QUESTION # 180
A Trading Member executes sell orders in the T+0 settlement cycle. What is the mandatory mechanism required to fulfill the pay-in of securities for these sell obligations?
- A. Standard pay-in instruction via physical DIS submitted to the Depository Participant.
- B. Inter-depository transfer to the settlement account of the Clearing Corporation post-trading hours.
- C. Transfer to the Member Pool Account by 10:30 AM on T day.
- D. Auto-pledge of securities in favor of the Clearing Corporation.
- E. Only by way of early pay-in (EPI) using the block mechanism.
Answer: E
Explanation:
The regulations specify that pay-in for T+0 sell obligations shall be allowed only by way of early pay-in using block mechanism.
NEW QUESTION # 181
Under the SEBI (Foreign Portfolio Investors) Regulations, 2019, which of the following entities are classified as Category I Foreign Portfolio Investors? (Select all that apply)
- A. Government and Government related investors
- B. Entities from Financial Action Task Force (FATF) member countries
- C. Pension funds and university funds
- D. Corporate bodies
- E. Charitable organizations
Answer: A,B,C
Explanation:
According to the SEBI (Foreign Portfolio Investors) Regulations, 2019, Category I FPls include Government and Government related investors (Option E), Pension funds and university funds (Option A), and Entities from FATF member countries (Option C). Charitable organizations and Corporate bodies fall under Category II.
NEW QUESTION # 182
Which of the following statements correctly describe the clearing and netting processes involving brokers and the Clearing Corporation?
(Select all that apply)
- A. The final pay-in/pay-out of securities and funds is carried out through clearing banks and depository participants.
- B. The Clearing Corporation performs multilateral netting to determine the net settlement obligations of members.
- C. Stock brokers are permitted to net client accounts within their firm at the end of the day.
- D. Every day, the Clearing Corporation sends the clearing member a list of all trading transactions made by him and his clients.
- E. Netting at the Clearing Corporation level is done on a bilateral basis between buying and selling brokers.
Answer: A,B,C,D
Explanation:
All selected statements are correct based on the source text.
- 'Stock brokers are allowed to net the clients account within the firm.' [A]
- 'Clearing is performed by multilateral netting.' [B]
- 'Every day, the clearing corporation sends the clearing member a list of all trading transactions...' [C]
- 'Final pay-in/pay-out... is carried out through clearing banks and depository participants.' [E]
- Statement D is incorrect because netting is multilateral, not bilateral.
NEW QUESTION # 183
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