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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services

A trading member's client wants to place orders in the derivatives segment. Which document must the member obtain before enabling the client to trade, so that the client is informed about the risks involved in equity derivatives?

The trading member must provide the client with a risk disclosure document on derivatives trading and obtain the client's acknowledgement, so that the client understands the risks of leverage and potential losses before trading begins.

  1. ARisk disclosure document, acknowledged by the clientCorrect
  2. BAnnual report of the stock exchange
  3. CBalance sheet of the clearing corporation
  4. DClient's income tax assessment order

Explanation

Brokers must give clients a risk disclosure document explaining the risks of trading in the derivatives segment and obtain acknowledgement. The other documents have no role in informing the client about derivatives risk.

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