NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services
Before a trading member opens a derivatives account for a retail client, which document set out by the regulator must be given to the client so that the client understands the risks of trading in derivatives?
The Risk Disclosure Document must be given to the client at account opening. It explains the risks of derivatives trading, such as leverage and potential losses exceeding margin. Contract notes and margin statements are issued later and do not serve this purpose.
- ARisk Disclosure DocumentCorrect
- BContract note
- CDaily margin statement
- DAnnual report of the exchange
Explanation
Regulations require that the client be given a Risk Disclosure Document, which explains the risks of trading in equity derivatives, at the time of account opening. A contract note is issued after trade execution, and a margin statement reports margins. The exchange annual report is not a client risk document.
Did you get it right without looking?
One question tells you little. A timed set on Sales Practices and Investors Protection Services shows your real accuracy, how long you take and where you lose marks.
More Sales Practices and Investors Protection Services questions
- Under the risk disclosure practices for derivatives, which statement about a client's margin position is correct?
- Before opening a derivatives trading account for a client, a trading member collects the client's financial details such as income and net w…
- A trading member's sales person recommends equity derivatives to a retail client. Which of the following practices is consistent with the 'k…
- A client with limited knowledge of derivatives asks an agent to recommend a highly leveraged position in index options because a friend made…
- Before an investor begins trading in the equity derivatives segment, which document must the trading member obtain from the client as part o…
- A trading member sells a client an index futures contract. Within what period must the member issue the contract note to the client under th…