SEBI - General awareness questions on current affairs

1)   Which trading individuals has SEBI decided to grant a unified license to operate in commodity derivative and equity markets?

a. Clearing Members
b. Brokers
c. NBFCs
d. Only a and b
e. All the above
Answer  Explanation 

ANSWER: Only a and b

Explanation:
Market regulator SEBI on 26th April, 2017 decided to grant a unified licence to brokers and clearing members to operate in commodity derivative as well as equity markets.

SEBI’s board approved a proposal for integration of stock brokers in equity and commodity derivative space.

Following this, a broker or clearing member dealing in the securities markets will be allowed to buy, sell or deal in commodity derivatives without setting up a separate entity and vice-versa.

To enable the integration, SEBI will amend norms pertaining to stock broker and securities contract regulations.

The integration of stock brokers in equity and commodity derivative markets while having many synergies in terms of trading and settlement mechanism, risk management, redressal of investor grievances, etc would benefit investors, brokers, stock exchanges and SEBI.

Besides, it will increase economic efficiency in terms of meeting operational and compliance obligations at the member level, potentially resulting in ease of doing business.

Also, the integration will help in widening market penetration and facilitate effective regulatory oversight by stock exchanges and SEBI.

Bolstering steps to curb any flow of illicit funds in markets, SEBI also decided to bar resident as well as non-resident Indians from making investments through participatory notes.

The decision is part of efforts to strengthen the regulatory framework for offshore derivative instruments (ODIs), commonly known as participatory notes (P-Notes).

These have been long seen as being possibly misused for routing of black money from abroad.

The notional value of these instruments has declined over the years from 55.7% of overall FPI investments in June 2007 to just 6.7% in December 2016.

P-Note investments may now start coming from other jurisdictions like the US, France and the Netherlands after tightening of rules for inflows from Mauritius, Singapore and Cyprus.


2)   What is the latest amendment to the FPI regulations by capital and commodities market regulator SEBI?

a. Barring Indians, NRIs and entities beneficially owned by NRIs from trading
b. Barring Indians, NRIs, and entities beneficially owned by NRIs from being owners of participatory notes
c. Barring Indians and NRIs from FDI in India
d. None of the above
Answer  Explanation 

ANSWER: Barring Indians, NRIs, and entities beneficially owned by NRIs from being owners of participatory notes

Explanation:
Capital and commodities market regulatory authority SEBI is set to amend the FPI regulations to formally bar Indians, NRIs and entities beneficially owned by NRIs from being beneficial owners of participatory notes.

PNs are derivative instruments issued by foreign institutional investors to overseas clients who want to invest in Indian securities, but do not want to register with SEBI, for reasons perfectly legitimate or even dubious.

The underlying asset could be shares, derivatives or debentures.

Till now, the restriction on Indians and NRIs from being beneficial owners was imposed by way of Frequently Asked Questions on the regulator’s website.

The move to include this in FPI regulations will give the restriction more legal sanctity.

Also, the move will help curb round-tripping of funds to evade taxes.

Often, money siphoned out of the country by inflating import bills and under-reporting export income is brought back through the stock market.

Foreign investors who invest in Indian through PNs are often fronts for Indian and NRI entities.

PNs are often onward issued, meaning, PNs issued to client A are then sold by A to the next client B.

The onward issuances - one or more - of PNs are done to create a layer to shield the actual beneficiary from the regulator's glare.

SEBI rules are clear if the PNs issued to a client A onward issued to another client B, the responsibility for identifying and the accountability for reporting the end beneficial owners rests entirely with the issuer, the FII.

But enforcing it is the biggest challenge for the regulator, given the magnitude of the foreign funds coming in through the P-note route.

At present, roughly USD 27 billion of FII holdings are through the P-note route.


3)   SEBI has allowed celebs to endorse which products?

a. Stocks and shares
b. Mutual funds
c. Dividends
d. Insurance
Answer  Explanation 

ANSWER: Mutual funds

Explanation:
The Securities and Exchange Board of India (SEBI) has allowed celebrities to endorse mutual fund products at the industry level.

The purpose is of increasing awareness of mutual funds as a financial product category.

However, such endorsements will be not used as a branding exercise of an asset management company or promoting scheme of a particular mutual fund.

Prior approval of SEBI will be required for issuance of such advertisements which feature celebrities.

SEBI also issued new advertising code that will require fund houses to communicate in a simple manner with the public.


4)   SEBI announced plans to tighten regulations for which type of trading?

a. Spot trading
b. Investor trading
c. Algorithmic trading
d. None of the above
Answer  Explanation 

ANSWER: Algorithmic trading

Explanation:
The Securities and Exchange Board of India (SEBI) plans to further tighten the regulations for algorithmic trading.

This aims to minimise instances of misuse of such systems that can be used to execute complex trading strategies at a very high speed.

SEBI chairman U.K. Sinha said that while India was one of the few countries in the world to regulate algorithmic trading - popularly called algo trading - the market regulator is looking to further strengthen the norms.

The aim is for instances of flash crashes that have happened overseas, and also in India a few times, could be minimised.

Algorithmic trading refers to the use of software programmes to execute trading strategies at a much faster pace.

On the National Stock Exchange (NSE), algo trades accounted for close to 16% of all trades.

On the BSE, it was 8.56% in January.

The SEBI chairman also said that while many countries and regulators, including the International Organization of Securities Commissions (IOSCO), have been debating on this issue for many years, only India had been able to come out with proper regulations.

SEBI: Know More

  • Formed : 12 April 1992
  • Agency executive : Ajay Tyagi, Chairman
  • Headquarters : Mumbai, Maharashtra


5)   Who has been appointed the new SEBI chief w.e.f March 1, 2017?

a. UK Sinha
b. Ajay Tyagi
c. Brijesh Mishra
d. None of the above
Answer  Explanation 

ANSWER: Ajay Tyagi

Explanation:
The government has appointed senior finance ministry official Ajay Tyagi as the chairman of the India markets watchdog, Securities and Exchange Board of India (Sebi) for a five-year term.

Tyagi, who is currently an additional secretary at finance ministry’s economic affairs department, will succeed Upendra Kumar Sinha as the chairman of Sebi. Sinha’s current term ends on 1 March.

Upendra Kumar Sinha's extended tenure ends on March 1.

Tyagi, a 1984 batch IAS officer of Himachal Pradesh cadre, is at present Additional Secretary (Investment) in the Department of Economic Affairs and handles capital market, among others.

Tyagi has been appointed as chairman of the markets regulator, an official order said.

Sinha's three-year term began in February 2011, following which he got two extensions, making him one of the longest-serving SEBI chiefs.

The Appointments Committee of the Cabinet-headed by Prime Minister Narendra Modi has approved Tyagi's appointment for a period not exceeding five years or till the age of 65 years, it said.

58-year-old Tyagi hails from Uttar Pradesh.

As per the eligibility criteria, a person can hold the position of Sebi chairman till the age of 65 years or for a term decided by the government.

Sinha, a 1976 batch IAS officer of Bihar cadre, had assumed office as the Sebi chairman on February 18, 2011, when the previous UPA government was in power.

He was later given a two-year extension. Days before the end of his tenure in February last year, he was given another extension till March 1, 2017.

Tyagi for a short while was also on the board of Reserve Bank of India (RBI).

The process for selecting the next chief of the Sebi started in September 2015, pursuant to which several applications were received for the position.

GoI had decided to give a one-year extension to Sinha to ensure stability due to volatile market conditions.

Sebi chairman receives consolidated pay package of Rs 4.5 lakh per month.


6)   Which financial body has asked intermediaries and companies to make regulatory payments in digital mode?

a. SEBI
b. RBI
c. NSE
d. BSE
Answer  Explanation 

ANSWER: SEBI

Explanation:
Joining focuses with the government on the post-demonetization cashless drive, market regulator SEBI plans to give option to market intermediaries and companies to make digital payments.

Move will help speed and ease of transactions while lowering failures due to payment gateway issues.

SEBI is said to follow many organisations on the digital drive, following demonetisation of high value currency by the RBI in Nov.

Intermediaries such as brokers, Foreign Portfolio Investors, Stock Exchanges, Custodians make payments to SEBI through online banking.

Payments made include penalties, disgorgement amounts, settlement amounts, legal charges and recovery amounts. An option for e-payment of the same through RTGS has been approved.

To enable digital payment, SEBI will pass an amendment in different regulations setting the option for payment to the regulatory authorities through the digital mode.


7)   SEBI has relaxed investment rules for which funds?

a. Angel Funds
b. Mutual Funds
c. Debt Funds
d. None of the above
Answer  Explanation 

ANSWER: Angel Funds

Explanation:
For boosting startup funding, SEBI has relaxed rules for investment by angel funds, permitting them to invest in up to 5-year-old entities.

The lock-in requirement has been reduced from three to one year for angel funds and their minimum investment threshold has been slashed to INR 25 lakh.


Upper limit for number of angel investors in a scheme will be increased from 49 to 200 in a notification dated Jan 4, 2016.

Regulatory SEBI has made an amendment to SEBI (Alternative Investment Funds) Regulations 2012 following which the definition of startup for angel fund investments are similar to DIPP. As given in their startup policy.

Angel funds can invest in startups incorporated within 5 years, which was earlier 3 years.

To diversify risks, SEBI has also permitted angel funds to make overseas investments up to 25 percent of their investible corpus in line with other AIFs/ Alternative Investment Funds.

Angel Fund, a subcategory of AIF encourages entrepreneurship in the country by financing startups at a stage when firms find it difficult to obtain capital from traditional sources of finance such as banks and financial institutions.

Currently, 266 AIFs are registered with SEBI of which 84 are registered under Category 1. Angel Investors fund startups in their seed stage.

Angel investors generally make early-stage investments and highly risky bets in the start-up universe, but are essential to these companies’ growth trajectory.

The amendments are part of SEBI’s larger efforts to encourage young entrepreneurship in the country, and provide founders with access to private and eventually public funds.


8)   SEBI has proposed a set of changes to relax rules and rename the institutional trading platform as what?

a. High Tech Start Up & Other New Business Platform
b. High Tech Incubation & Other New Business Platform
c. High Tech Innovation % Other New Business Platform
d. None of the above
Answer  Explanation 

ANSWER: High Tech Start Up & Other New Business Platform

Explanation:
The Securities and Exchange Board of India has proposed considerable changes for startup listing platform to enhance its appeal for new age firms going public in local markets.

  • Regulator indicated that based on feedback received from market participants, the decision has been taken to relax rules and rename the institutional trading platform as High Tech Start Up & Other New Business Platform.
  • The proposal has been to eliminate the rule which says no single shareholder shall own more than 25 percent after listing, which many promoters were not comfortable with and has increased the allocation of shares more for HNIs and corporates.
  • Earlier only 25 percent was reserved for HNIs and corporates.
  • The hike in the limit on share allotment to individual institutional investors has gone up from 10 to 25 percent.
  • Regulator also proposed to permit market making compulsory for at least three years for IPO of less than INR 100 crore.
  • There is no provision mandates market making currently. Under the current rules, startups can also list on the separate institutional trading platforms of stock exchanges.
  • Platform has not attracted a single start up for listing so far.
  • SEBI has now eased the rules.
  • Regulator has also proposed lock in for pre-issue shares held by venture capitalists and employees under the ESOP scheme for six months following the IPO
  • Proposal has also been made to lower minimum trading lot from 10 to 5 lakh.


9)   SEBI has just set up plans for a special court in the national capital. Where else is the special court located in India?

a. Mumbai
b. Hyderabad
c. Cochin
d. Agartala
Answer  Explanation 

ANSWER: Mumbai

Explanation:
To fast-track proceedings and ensure timely disposal of cases filed by capital market regulator Sebi, a special court is in the process of being set up in the national capital.

  • This would be the fourth special court to be established in the country to hear cases filed by the Securities and Exchange Board of India (Sebi).
  • Following amendment in the Sebi Act, back in 2014, three special courts have already been constituted in Mumbai, Kolkata and Chennai


10)   Entities under probe for serious violation in which market can seek settlement of the case if they make good on losses suffered by investors to SEBI’s satisfaction?

a. Share Market
b. Stock market
c. Capital market
d. Money market
Answer  Explanation 

ANSWER: Capital market

Explanation:
Entities under probe for “serious violations” in capital markets can seek settlement of case only if they make good on their losses suffered by investors as per the consent of SEBI.

  • Regulations provide settlement of cases where proceedings have not been initiated
  • Regulations provide for settlement of cases where proceedings are yet to be initiated


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