NISM Certifications Securities Markets Foundation and Structure Syllabus

Securities Markets Foundation and Structure syllabus: all 4 chapters

Expand any chapter to see its topics and sub-topics.

1. 1

   Introduction to the Indian Securities Market

   4 topics

   • Role and Functions of Securities Markets
     • Capital formation and resource mobilization
     • Primary versus secondary market functions
     • Savings, investment, and intermediation
   • Market Participants and Intermediaries
     • Issuers, investors, and depositories
     • Stock exchanges, clearing corporations, depositories
     • Brokers, merchant bankers, registrars, custodians
   • Types of Securities and Financial Instruments
     • Equity shares and preference shares
     • Debentures, bonds, and money market instruments
     • Hybrid instruments and derivatives overview
   • Regulatory Framework Overview
     • SEBI Act, 1992 and SEBI's mandate
     • SCRA, 1956 and Companies Act, 2013
     • Depositories Act, 1996
2. 2

   Primary Market and Public Issues

   4 topics

   • Methods of Raising Capital
     • IPO, FPO, and rights issues
     • Private placement and preferential allotment
     • Qualified Institutional Placement (QIP)
   • Book Building and Price Discovery
     • Fixed price versus book-built issues
     • Price band, cut-off price, and bidding
     • ASBA and UPI-based application process
   • Issue Process and Allotment
     • Anchor investors and reservation categories
     • Basis of allotment and refund mechanism
     • Listing and post-issue compliance
   • Role of Merchant Bankers and Intermediaries
3. 3

   Secondary Market Operations

   4 topics

   • Trading Mechanism and Order Types
     • Limit, market, and stop-loss orders
     • Order matching and trade execution
     • Circuit filters and price bands
   • Clearing and Settlement
     • T+1 rolling settlement cycle
     • Role of clearing corporations and netting
     • Settlement guarantee fund
   • Depository System and Dematerialisation
     • NSDL and CDSL functioning
     • Demat account, ISIN, and rematerialisation
     • Pledge, hypothecation, and corporate actions
   • Market Indices and Benchmarks
4. 4

   Regulation, Investor Protection and Grievances

   3 topics

   • SEBI Regulations and Code of Conduct
     • Prohibition of insider trading
     • Prohibition of fraudulent and unfair trade practices
     • Listing Obligations and Disclosure Requirements (LODR)
   • Investor Grievance Redressal
     • SCORES platform and complaint handling
     • Online Dispute Resolution (ODR)
     • Investor Protection Fund
   • KYC and Anti-Money Laundering
     • PMLA, 2002 obligations
     • KYC Registration Agencies (KRA)
     • Suspicious transaction reporting

NISM Certifications Securities Markets Foundation and Structure flashcards — 51 questions with answers

1. What is the primary economic function of securities markets?

   To channel savings from surplus units (investors) to deficit units (issuers like companies and governments) for productive investment, enabling efficient capital allocation, price discovery, and liquidity.

2. Distinguish between the primary market and the secondary market.

   The primary market is where securities are issued for the first time to raise fresh capital (e.g., IPO), with money going to the issuer. The secondary market is where existing securities are traded among investors (e.g., on stock exchanges), with money flowing between buyers and sellers, not to the issuer.

3. What are the main functions of a securities market?

   Mobilising savings, capital formation, price discovery, providing liquidity and marketability, ensuring transparency, and facilitating efficient allocation of resources.

4. Who is the apex regulator of the securities market in India, and under which Act was it established?

   The Securities and Exchange Board of India (SEBI), established as a statutory body under the SEBI Act, 1992 (originally formed in 1988).

5. What are the three stated objectives of SEBI under the SEBI Act, 1992?

   To protect the interests of investors, to promote the development of the securities market, and to regulate the securities market.

6. Name the key legislations governing India's securities market.

   SEBI Act 1992, Securities Contracts (Regulation) Act 1956 (SCRA), Depositories Act 1996, Companies Act 2013, and Prevention of Money Laundering Act 2002 (PMLA).

7. What is the role of a stock exchange in the securities market?

   It provides a regulated platform/marketplace for trading securities, ensuring transparent price discovery, liquidity, order matching, and acting as a self-regulatory organisation (SRO) for its members.

8. Name the two major stock exchanges in India.

   The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

9. What is a depository, and name the two depositories in India.

   A depository holds securities in electronic (dematerialised) form on behalf of investors. India's two depositories are NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited).

10. What is a Depository Participant (DP)?

    A DP is an agent of the depository (such as a bank, broker, or financial institution) that acts as the intermediary between the investor and the depository, through whom investors open and operate demat accounts.

11. Differentiate between a broker and a sub-broker.

    A broker (trading member) is registered with SEBI and the stock exchange and can trade directly on the exchange. A sub-broker (now Authorised Person) acts on behalf of a broker, assisting investors but cannot independently trade on the exchange.

12. What is the role of a merchant banker in the securities market?

    A merchant banker manages public issues (IPOs/FPOs) — handling due diligence, drafting the offer document, pricing, marketing, underwriting, and compliance with SEBI regulations as a lead manager.

13. What is the function of a Registrar and Transfer Agent (RTA)?

    An RTA maintains records of securities holders, processes share applications and allotments in public issues, handles transfers, dividends, and other corporate-action-related investor servicing.

14. What is an underwriter in the context of a securities issue?

    An underwriter agrees to subscribe to (buy) any unsubscribed portion of a securities issue, thereby guaranteeing the issuer that the targeted capital will be raised.

15. Define an equity share.

    An equity share represents ownership in a company, giving the holder voting rights, a residual claim on profits (dividends), and a residual claim on assets on liquidation, with returns not fixed.

16. Define a preference share and state its key features.

    A preference share carries a fixed rate of dividend and a preferential right over equity shares for dividend payment and capital repayment on liquidation, but usually carries no voting rights.

17. What is a debenture/bond?

    A debt instrument under which the issuer borrows money and agrees to pay a fixed/floating rate of interest and repay the principal on maturity; bondholders are creditors, not owners.

18. Differentiate between equity and debt instruments.

    Equity gives ownership, variable returns (dividends), voting rights, and last claim on assets; debt gives creditor status, fixed/contractual returns (interest), no voting rights, and priority claim over equity holders on repayment.

19. What is a hybrid security? Give an example.

    A hybrid security has features of both equity and debt. Example: a convertible debenture, which pays interest like debt but can be converted into equity shares later.

20. What is a mutual fund?

    A mutual fund is a pooled investment vehicle that collects money from many investors and invests it in a diversified portfolio of securities, managed professionally by an Asset Management Company (AMC).

NISM Certifications Securities Markets Foundation and Structure FAQ