NISM Series IX: Merchant Banking Certification Mock Test (Set 3)

Explanation:

The applicant should have in his employment minimum of TWO persons who have the experience to conduct the business of merchant banker. The applicant should have in his employment minimum of TWO persons who have the experience to conduct the business of merchant banker.

Explanation:

Application Supported by Blocked Amount (ASBA) is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed. Under ASBA facility, investors can apply in any public/ rights issues by using their bank account.

Explanation:

Explanation:

Application Supported by Blocked Amount (ASBA) is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed. Under ASBA facility, investors can apply in any public/ rights issues by using their bank account.

Explanation:

The offer price may be paid in – a) cash; b) by issue, exchange or transfer of listed shares in the equity share capital of the acquirer or of any person acting in concert; c) by issue, exchange or transfer of listed secured debt instruments issued by the acquirer or any person acting in concert with a rating not inferior to investment grade as rated by a SEBI registered credit rating agency; d) by issue, exchange or transfer of convertible debt securities entitling the holder thereof to acquire listed share in the equity share capital of the acquirer or of any person acting in concert; or e) a combination of payment mode as mentioned in points (a), (b), (c) and (d).

Explanation:

A daily statement has to be sent by the designated controlling branch of the bankers to the issue to the registrar to an issue. This statement indicates the number of applications received on that date from the investors investing in the issue of the issuer company and the amount of application money received. The daily reporting requirement helps maintain transparency and allows timely tracking of the subscription status of the issue. It ensures that accurate and up-to-date information is available throughout the duration of the issue, allowing relevant parties to make informed decisions based on the current state of the subscription.

Explanation:

Regulation 21A of the SEBI Merchant Banking regulation requires that a merchant banker shall not be lead manager or associated with any activity undertaken under any regulations made by SEBI, if he is a promoter or a director or an associate of the issuer of securities.

Explanation:

Offer Document is called “Prospectus” in case of a public issue or offer for sale and “Letter of Offer” in case of a rights issue.

Explanation:

In case of issue of Debt Securities, issuers are allowed to retain over-subscription money upto a maximum of 100% of the base issue size. In case of issuers filing a shelf prospectus, they can retain oversubscription upto the rated size as specified in their shelf prospectus.

Explanation:

As per SEBI ICDR Regulations – The merchant banker related to the post-issue activities shall ensure that advertisements giving details relating to over subscription, basis of allotment, etc. are released within ten days from the date of completion of the various activities in atleast one English national daily newspaper and one Hindi national daily newspaper with wide circulation and one regional language daily newspaper with wide circulation at a place where the issuer company has its registered office.

Explanation:

In case an issuer makes an issue through the book building process, he shall appoint syndicate members. In case of any other issue, the issuer company shall appoint bankers to issue at all mandatory collection centers as specified in the Regulation.

Explanation:

In the overall process of issue management, the merchant banker plays a variety of important roles such as, an expert advisor to the management of the issuer company, who performs due diligence on the company, as an event manager and coordinator to ensure timely completion of the issue, as a watch dog for the statutory compliance and as a person in fiduciary capacity for protection of the interests of the investors. At the time of an issue, it also acts as an interface between the issuer company and the SEBI.

Explanation:

Merchant banking is a fee based service for management of public offers, popularly known as “issue management” and for private placement of securities in the capital market. In India, the merchant banker leading a public offer is popularly known as the “Lead Manager”.

Explanation:

SCRR provides for the actual procedures to be followed by applicants for recognition as a recognised stock exchange and the requirements with respect to listing of securities on a recognised Stock Exchange. Rule 19(2)(b) states that the minimum offer and allotment to public in terms of an offer document shall be as per the following sub-rules: Rule 19 (2)(b)(i) specifies that at least 25% of each class or kind of equity shares or debentures convertible into equity shares issued by the company, if the post issue capital of the company calculated at offer price is less than or equal to one thousand six hundred crore rupees.

Explanation:

Penalty for non-disclosure of acquisition of shares and take-overs : The penalty shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of such failure, whichever is higher.

Explanation:

The issuer company has to get into an agreement with a Depository for dematerialization of the securities.

Explanation:

Allotment of Preference Shares shall only be made in dematerialised form.

Explanation:

Where the company has 300 or less public shareholders and paid up value of shares held by public shareholders in such company is not more than Rs.1 crore then also the equity shares can be delisted without adopting reverse book building method.

Explanation:

Explanation:

Explanation:

As per the SEBI ICDR regulations, the minimum number of allottees for each placement of eligible securities made under QIP shall not be less than: (a) two, where the size is less than or equal to Rs.250 crore; (b) five, where the issue size is greater than Rs. 250 crore, subject to the condition that no single allottee shall be allotted more than 50% of the issue.

Explanation:

Explanation:

Explanation:

As per the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, an acquirer and persons acting in concert with him, who have made a public announcement under this regulation to acquire shares of a target company, shall not be entitled to acquire any shares of the target company for a period of SIX MONTHS after completion of the open offer except pursuant to another voluntary open offer.

Explanation:

As per the SEBI ICDR Regulation, allotment pursuant to the special resolution shall be completed within a period of 15 days from the date of passing such resolution.

Explanation:

Investment banking encompasses not merely merchant banking but other related capital market activities such as stock trading, market making and underwriting, stock broking and asset management as well.

Explanation:

Custodian is an entity that helps safeguard the securities of its clients. Custodians may also be clearing members like Professional Clearing Members but not trading members. They settle trades on behalf of the clients of the trading members, when a particular trade is assigned to them for settlement.

Explanation:

When an already listed company makes either a fresh issue of securities to the public i.e. other than to its existing shareholders or an offer for sale to the public or both through an offer document it is called a further public offer. FPO can be made through a book building process or a fixed price issue. FPO may also be made through the Fast Track Issue (FTI) process, provided certain conditions as prescribed under the SEBI ICDR Regulations are complied with.

Explanation:

The non-refundable fees are prescribed in the SAST Regulations : 1. Open offer upto Rs. 10 crore : Rs. 5,00,000 2. Open offer > Rs. 10 crore but = Rs. 1000 crore : 0.5 percent of the offer size 3. Open offer > Rs. 1000 crore : Five crore rupees plus 0.125 percent of the portion of the offer size in excess of one thousand crore rupees.

Explanation:

Every Merchant Banker is required to pay a fee of Rs.20 lakh as registration fees. A merchant banker who has been granted a certificate of registration, to keep its registration in force, shall pay a fee of nine lakh rupees every three years from the sixth year, from the date of grant of certificate of registration.

Explanation:

Explanation:

According to the Securities Contracts (Regulation) Rules, a company applying for listing must undertake to issue certificates in respect of shares or debentures lodged for transfer within a period of 1 month from the date of lodgment of transfer. Additionally, if the transfer is accompanied by a larger certificate, the company must also issue balance certificates within the same period. This requirement ensures timely processing of share or debenture transfers, enhancing efficiency and transparency in the securities market.

Explanation:

As and when required by any investor, the lead merchant banker and the recognised stock exchange should furnish a copy of the draft offer document and final offer document. A reasonable sum of money can be charged by the merchant banker or the recognised stock exchange for the same.

Explanation:

The preamble of the Securities and Exchange Board of India (SEBI) Act outlines the basic functions of SEBI. These functions include:

• To protect the interests of investors in securities: SEBI works to safeguard the rights and interests of investors by implementing regulations that promote fairness, transparency, and integrity in the securities market.

• To promote the development of securities market: SEBI plays a crucial role in fostering the growth and development of the securities market in India. This involves creating a regulatory framework that encourages market participants, ensures efficient operations, and facilitates capital formation.

• To regulate the securities market: SEBI is responsible for regulating various participants in the securities market, such as issuers, intermediaries, and other entities, to maintain a well-functioning and orderly market.

Explanation:

As per SEBI ICDR Regulations there is a prohibition of payment of incentives.

Explanation:

A rights issue shall be open for subscription for a minimum period of 15 days and a maximum period of 30 days.

Explanation:

Explanation:

Minimum promoters’ contribution including contribution made by alternative investment funds shall be locked-in for a period of three years from the date of commencement of commercial production or date of allotment in the public issue, whichever is later.

Explanation:

Every Merchant Banker is required to pay an initial fee of Rs. 20 lakh as registration fees. The certificate of initial registration granted shall be valid for a period of five years from the date of its issue to the applicant.

Explanation:

• Acquisition of shares through direct negotiations with one who owns controlling interest: This involves negotiating and acquiring a significant number of shares directly from existing shareholders, especially those who hold a controlling interest in the target company.

• A merger of a solvent acquirer with a sick company: While mergers can be a method of taking over a company, it’s not limited to merging a solvent acquirer with a sick company. Mergers can occur for various strategic reasons, and the health of the companies involved can vary.

• An open offer or market purchase of requisite voting rights to change the management of the company: This involves making a public offer to the existing shareholders to purchase their shares in the open market, thereby acquiring the requisite voting rights to effect a change in the management of the target company.

Explanation:

Pricing of Preferential issues for Frequently Traded shares 1) If the equity shares of the issuer have been listed on a recognised stock exchange for a period of twenty-six weeks or more as on the relevant date, the price of the equity shares to be allotted pursuant to the preferential issue shall be not less than higher of the following: a) the average of the weekly high and low of the volume weighted average price of the related equity shares quoted on the recognised stock exchange during the twenty-six weeks preceding the relevant date; OR b) the average of the weekly high and low of the volume weighted average prices of the related equity shares quoted on a recognised stock exchange during the two weeks preceding the relevant date.

Explanation:

Regulation 6 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 states the requirements to be met by an acquirer for making a public announcement of an open offer. It states that – An acquirer and persons acting in concert with him, who have made a public announcement under this regulation to acquire shares of a target company shall not be entitled to acquire any shares of the target company for a period of six months after completion of the open offer except pursuant to another voluntary open offer.

Explanation:

Capital Market is divided into the Primary Market and Secondary Market. Primary Market is the new issue market, which provides opportunity to issuers of securities, to raise resources to meet their requirements of investments Secondary Market helps in providing liquidity to the securities which has already been issued in the primary market. Eg – Stock Exchanges.

Explanation:

It should be on the Company website and not on SEBI website.

Explanation:

No person connected with the issue shall offer any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any person for making an application for allotment of specified securities. However, this does not apply to fees or commission for services rendered in relation to the issue

Explanation:

Explanation:

This ensures transparency in the process and provides relevant stakeholders, including the target company and stock exchanges, with the necessary information. The filing with SEBI and distribution to the target company and stock exchanges are crucial steps in the regulatory framework to keep all concerned parties informed about the open offer details and facilitate a fair and transparent process.

Explanation:

An issuer shall be eligible to issue warrants in a further public offer subject to the following conditions:
(a) the tenure of such warrants shall not exceed eighteen months from the date of their allotment in the public issue;
(b) a specified security may have one or more warrants attached to it

Explanation:

Investment banking encompasses not merely merchant banking but other related capital market activities such as stock trading, market making and underwriting, stock broking and asset management as well. So the functions of an Investment Banker are much more than a Merchant Banker.

Explanation:

Merchant Bankers means any entity who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management. They need to be registered with SEBI to act & perform as Merchant Banker.