NISM Series XI · Unit 9 of 9 · about 10% of the paper
Client management: NISM Series XI notes and practice questions
Dealing with clients correctly: onboarding, communication, suitability and complaints.
What to know in Unit 9
- Onboarding and risk profile.
- Communication and ethics.
- Complaints and records.
Key terms, examples and exam traps
Client onboarding
Onboarding includes KYC, risk profiling, signing documents and explaining services, fees and risks.
Example. A new client completes forms and receives a welcome kit.
Exam trap. This statement is false: Onboarding is complete when the first order is placed.
Risk profiling
Understanding the client's income, experience and tolerance helps in providing suitable products and avoiding mis-selling.
Example. A dealer asks about a client's experience before enabling derivatives.
Exam trap. This statement is false: Risk profiling is optional.
Suitability
A dealer should recommend only products and trades suitable to the client's profile and avoid pushing high-risk trades to inexperienced clients.
Example. A dealer advises a first-time investor on the risks of leverage.
Exam trap. This statement is false: A dealer should encourage maximum trading to earn brokerage.
Disclosures
Brokers must disclose brokerage, charges, risks, and the grievance process clearly to clients.
Example. A dealer tells the client the full list of charges.
Exam trap. This statement is false: Brokers may hide charges.
Unauthorised trading
Trading in a client's account without her instructions is prohibited and exposes the broker to penalties.
Example. A dealer places trades without asking the client.
Exam trap. This statement is false: Dealers may trade freely in an account with consent given once for all.
Churning
Churning is excessive trading in a client's account to generate brokerage rather than serving the client's needs.
Example. A dealer pushes a client to trade repeatedly for commission.
Exam trap. This statement is false: Churning benefits the client.
Confidentiality
Client information must be kept confidential and shared only with consent or as legally required.
Example. A dealer does not share a client's holdings with others.
Exam trap. This statement is false: A dealer may share client data freely.
Complaint handling
Complaints must be recorded, acknowledged and resolved within prescribed timelines, with escalation to the exchange or SEBI if unresolved.
Example. A firm logs a complaint and responds within the time limit.
Exam trap. This statement is false: Complaints can be ignored if the client is wrong.
Dormant accounts
Accounts with no activity for a defined period are marked dormant and need re-verification before use.
Example. A client who has not traded for years must update KYC.
Exam trap. This statement is false: Dormant accounts are closed automatically.
Honest communication
Staff must not make false statements, promise returns or give tips as guaranteed outcomes.
Example. A dealer says there is no risk in a trade.
Exam trap. This statement is false: A dealer may assure profits to build trust.
Conflict of interest
Staff must avoid conflicts, such as trading ahead of clients, and disclose any that cannot be avoided.
Example. A dealer discloses that he holds the stock he recommends.
Exam trap. This statement is false: Conflicts are not relevant in broking.
Record keeping and statements
Brokers must provide periodic statements of accounts and holdings and maintain records for the specified period.
Example. A client receives monthly statements of funds and securities.
Exam trap. This statement is false: Brokers need not give statements.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which term is described here? Onboarding includes KYC, risk profiling, signing documents and explaining services, fees and risks.
- Short selling
- Client onboarding
- Disclosures
- Index circuit breaker
Q2. Which term is described here? Understanding the client's income, experience and tolerance helps in providing suitable products and avoiding mis-selling.
- Greenshoe option
- Risk profiling
- Novation
- Free-float method
Q3. Which statement best describes “Suitability”?
- A clearing member settles trades with the clearing corporation for itself or others.
- The tick size is the minimum price movement, generally ₹0.05 for equity shares.
- SEBI protects investors, promotes market development and regulates the securities market, with powers to make regulations, investigate and penalise.
- A dealer should recommend only products and trades suitable to the client's profile and avoid pushing high-risk trades to inexperienced clients.
Q4. Which term is described here? Staff must avoid conflicts, such as trading ahead of clients, and disclose any that cannot be avoided.
- Insider trading regulations
- Listing timeline
- Conflict of interest
- VaR margin
Q5. Which statement best describes “Complaint handling”?
- An IPO is the first sale of shares to the public by an unlisted company, followed by listing on exchanges.
- The clearing corporation guarantees and settles trades, becoming the central counterparty.
- Exchanges maintain a fund to compensate clients of defaulting brokers up to a limit.
- Complaints must be recorded, acknowledged and resolved within prescribed timelines, with escalation to the exchange or SEBI if unresolved.
Q6. Which term is described here? Trading in a client's account without her instructions is prohibited and exposes the broker to penalties.
- Unauthorised trading
- Authorised person
- Trade-for-trade segment
- Rolling settlement
Frequently asked questions
How much of NISM Series XI comes from Unit 9?
Unit 9 (Client management) usually carries about 10% of the questions. The whole exam has 100 questions and the pass mark is 50%.
What should I study in NISM Series XI Unit 9?
Onboarding and risk profile. Communication and ethics. Complaints and records.
Are these NISM Series XI practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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