NISM Series XXV-B flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

SEBI Act, 1992

The statute that gave SEBI statutory status, defined its powers and functions, and created the framework for regulating India's securities market.

SCRA, 1956

The Securities Contracts (Regulation) Act, 1956 governs securities contracts and makes options and derivatives trading lawful only on recognised stock exchanges.

Securities Appellate Tribunal

A statutory tribunal under the SEBI Act that hears appeals against orders passed by SEBI, with a further appeal lying to the Supreme Court.

Depositories Act, 1996

Legislation that allows securities to be held and transferred in dematerialised electronic form through SEBI-registered depositories such as NSDL and CDSL.

Primary market

The segment where securities are issued and sold for the first time by companies to investors, through public issues, rights issues or private placements.

SEBI's three mandates

Protecting investors, developing the securities market and regulating the securities market are the three functions set out in the SEBI Act.

NISM certification requirement

SEBI-mandated certification under which investment advisers, principal officers and persons associated with advice must clear NISM Series XXV before advising clients.

Fiduciary duty of adviser

An investment adviser must act in the client's best interest, placing the client's interest above its own and giving suitable, unbiased advice.

Principal officer

The person responsible for an adviser's overall operations and compliance; an individual adviser is himself the principal officer of his practice.

Persons associated with advice

Salaried or remunerated individuals who give investment advice on behalf of a registered adviser and must meet qualification, certification and conduct requirements.

Suitability of advice

Advice must match the client's risk tolerance, objectives, time horizon and financial position, as established through a documented risk profile.

Advisory versus execution

Advice is the recommendation of a course of action, while execution means placing orders for the client, permitted only with the client's written consent.

IA registration categories

SEBI grants investment adviser registration in two forms: individual advisers, and non-individual advisers such as companies, partnership firms and proprietorships.

Implementation service

A distinct service in which the adviser helps the client execute recommended trades, disclosed separately and charged separately with the client's consent.

Distribution vs advisory firewall

An adviser may not distribute the same or similar products it advises on, and must not accept commission from product manufacturers or distributors.

Mutual fund distributor's role

Acts on behalf of the asset management company, earns commission, is not a fiduciary to the client, and needs AMFI ARN and NISM Series V-A certification.

No guarantee of returns

An adviser must not promise or advertise assured or minimum returns, since securities markets carry risk and past performance does not indicate future results.

Custody of client funds

An investment adviser may not hold client funds or securities in its own name or account; client transactions are routed through SEBI-registered intermediaries.

Permitted non-core activities

Activities such as execution support or referrals that an adviser may offer only if disclosed to the client, segregated from advice and within regulatory limits.

Charging separate fees

Where an adviser offers both advisory and implementation services, the two services must be separately described, separately consented to and separately charged.

PAN as KYC identifier

The Permanent Account Number is the mandatory identity document for know-your-client verification at SEBI-registered intermediaries, including investment advisers.

CKYC number

A unique identifier issued under the Central KYC Registry maintained by CERSAI, allowing a single KYC record to be reused across financial intermediaries.

Risk profiling of client

A documented assessment of the client's risk tolerance, objectives, horizon and finances, used to decide suitable advice and reviewed periodically.

Advisory agreement

A written contract between adviser and client setting out services, fees, conflict disclosures, termination terms and the grievance redressal mechanism.

In-person verification

Physical or video verification of a client's identity during onboarding, done to establish that the documents belong to the person being onboarded.

Record retention period

Investment advisers must preserve client records, advice rationale, KYC documents and agreements for at least five years and produce them to SEBI on demand.

Code of conduct for advisers

Part of the Investment Advisers Regulations requiring honesty, integrity, due diligence, confidentiality and written disclosure of conflicts to clients.

SCORES platform

SEBI's online complaint redress system where an investor may escalate a grievance if the intermediary fails to resolve it within one month.

SMART ODR

SEBI's online dispute resolution portal through which unresolved investor complaints are referred to conciliation or arbitration by registered institutions.

Conflict of interest disclosure

An adviser must disclose conflicts in writing, including its holdings or associations, and must avoid advice where a conflict cannot be managed.

Front-running prohibition

Trading on one's own account ahead of client or firm orders using knowledge of those orders, prohibited as a fraudulent and unfair trade practice.

Suspicious transaction report

A report filed with FIU-IND under the anti-money laundering framework when an intermediary detects a transaction apparently linked to illegal activity.