MCQs on SEBI and Financial Awareness Dec 2025

Explanation: SEBI introduced the MF Lite framework specifically for entities exclusively launching passive mutual fund schemes (like Index Funds and ETFs) to reduce compliance burdens and foster market entry.

Explanation: SEBI halved the timeline for listing of shares on stock exchanges after the closure of Initial Public Offerings (IPOs) from T+6 days to T+3 days.

Explanation: To regulate fractional ownership platforms, SEBI introduced SM REITs, which must have a minimum asset value of ₹50 crore and a maximum of ₹500 crore.

Explanation: SEBI allows regulated entities to associate with individuals who are exclusively engaged in investor education and do not offer investment advice or specific stock recommendations.

Explanation: SCORES 2.0 features reduced timelines for the redressal of investor grievances, bringing the maximum resolution time down to 21 calendar days.

Explanation: FPIs holding more than 50% of their Indian equity AUM in a single corporate group, or holding over ₹25,000 crore overall, must disclose detailed granular information about all entities holding ownership or economic interest.

Explanation: BRSR stands for Business Responsibility and Sustainability Reporting, a mandatory ESG disclosure framework for the top 1,000 listed companies by market capitalization.

Explanation: ASBA (Application Supported by Blocked Amount) ensures that funds remain in the investor’s bank account and earn interest until the trade is executed/allotted.

Explanation: T+0 settlement means that the transfer of funds and securities is completed on the very same day the trade is executed, initially introduced as an optional beta version for limited scrips.

Explanation: Madhabi Puri Buch is the Chairperson of SEBI. She is the first woman and the first person from the private sector to head the regulatory body.

Explanation: The top 100 (and later top 250) listed companies must confirm, deny, or clarify any material market rumour reported in the mainstream media within 24 hours of the reporting.

Explanation: The minimum investment limit for an investor in an Alternative Investment Fund (AIF) is generally ₹1 crore, ensuring that only sophisticated or High Net Worth Individuals (HNIs) invest.

Explanation: A direct plan in AIFs allows investors to bypass distributors/intermediaries, thereby saving on placement fees and distribution commissions.

Explanation: NPOs can raise funds on the Social Stock Exchange by issuing Zero Coupon Zero Principal (ZCZP) instruments, which function like donations and yield no financial return.

Explanation: SEBI’s Minimum Public Shareholding (MPS) norm requires all listed companies to maintain at least 25% of their equity shares with the public.

Explanation: The CDMDF acts as a backstop facility to purchase investment-grade corporate debt securities during times of market stress, providing liquidity to the bond market.

Explanation: SEBI expanded the QIB definition to include university funds, pension funds, and insurance funds to deepen institutional participation in public issues.

Explanation: The minimum application value for a retail investor in a mainboard IPO is set between ₹10,000 and ₹15,000 (usually around ₹14,000-₹15,000 depending on the lot size).

Explanation: Individuals with an annual income of at least ₹2 crore, or a net worth of at least ₹7.5 crore (with half in financial assets), qualify as Accredited Investors.

Explanation: Clearing corporations (like NSE Clearing Ltd or Indian Clearing Corporation Ltd) act as the CCP, guaranteeing the settlement of trades.

Explanation: While CRAs rate corporate debt, commercial paper, and NCDs, rating the sovereign debt of the Indian government is typically done by global rating agencies (like Moody’s, Fitch, S&P).

Explanation: SEBI launched the SMART ODR (Online Dispute Resolution) portal to facilitate the online resolution of disputes between investors and listed companies/intermediaries.

Explanation: The maximum TER limit set by SEBI for equity-oriented active mutual funds is 2.25% for the first ₹500 crore of AUM, scaling down as AUM increases.

Explanation: SEBI permitted PE funds to sponsor mutual funds provided they bring in the required capital and agree to a lock-in period of 5 years for their initial shareholding in the AMC.

Explanation: SEBI revised the lock-in rules for anchor investors: 50% of their shares are locked in for 30 days, and the remaining 50% for 90 days.

Explanation: Trillions of rupees track benchmark indices. SEBI brought index providers under its regulatory purview to ensure transparency and prevent conflicts of interest since index rebalancing heavily impacts market liquidity.

Explanation: An API (Application Programming Interface) allows the trader’s algorithmic software to communicate directly and automatically with the broker’s systems to execute trades.

Explanation: An Offer for Sale (OFS) allows promoters or major shareholders of a listed company to sell their existing shares directly to the public through an exchange mechanism, without the company issuing new shares.

Explanation: Insider trading is primarily governed by the SEBI (Prohibition of Insider Trading) Regulations, 2015, which prohibits trading based on Unpublished Price Sensitive Information (UPSI).

Explanation: Depositories (like NSDL and CDSL) hold securities such as shares, bonds, and mutual fund units in an electronic (demat) format and facilitate their transfer.

Explanation: If the chairperson is non-executive and not related to promoters, at least 1/3rd of the board must comprise independent directors. If the chairperson is an executive director or promoter, 50% must be independent.

Explanation: SEBI is phasing out the share buyback through the open market (stock exchange) route in favor of the tender offer route to ensure equitable treatment of all shareholders.

Explanation: Greenwashing is the deceptive practice of marketing financial products or companies as environmentally friendly or sustainable when they actually are not.

Explanation: Saarthi 2.0 is an upgraded mobile application launched by SEBI to empower investors with reliable information about the securities market, KYC, and grievance redressal.

Explanation: To prevent conflicts of interest, SEBI mandates a one-year cooling-off period for its former Chairpersons and Whole-Time Members before joining any SEBI-regulated entity.

Explanation: The Kumar Mangalam Birla Committee initially, and later the Uday Kotak Committee, laid down comprehensive recommendations for corporate governance norms in India.

Explanation: Side pocketing is an accounting method used by mutual funds to separate illiquid, risky, or defaulted debt instruments from the rest of the liquid investments to protect existing investors.

Explanation: SEBI clearly classifies the 1st to 100th companies (by market cap) as Large Cap, 101st to 250th as Mid Cap, and 251st onwards as Small Cap.

Explanation: Due to heavy inflows and potential liquidity risks, SEBI mandated stress testing for Small and Mid Cap mutual funds to determine how long they would take to liquidate the portfolio in a crisis.

Explanation: The RBI and SEBI have enhanced the transaction limit for UPI payments applied to IPOs and Retail Direct Schemes from ₹2 lakh to ₹5 lakh.

Explanation: Margin Trading Facility (MTF) is a SEBI-approved mechanism where the broker funds a part of the trade, allowing investors to buy stocks by paying only a fraction of the total value.

Explanation: Vault managers registered with SEBI are responsible for accepting physical gold, storing it securely, and issuing Electronic Gold Receipts (EGRs) which are then traded on the stock exchange.

Explanation: To align the interests of key employees with those of the unitholders, SEBI requires that 20% of the net salary of designated AMC employees be paid in the form of units of the schemes they manage.

Explanation: Confidential pre-filing allows a company to submit its DRHP to SEBI privately, protecting sensitive business information from competitors until it finalizes the decision to go public.

Explanation: Special Situation Funds are a sub-category of AIFs introduced by SEBI to acquire stressed loans and assets from banks, facilitating resolution of bad debts.

Explanation: A block deal is a single trade having a minimum quantity of 5 lakh shares or a minimum value of ₹10 crore, executed in a separate trading window to avoid market volatility.

Explanation: The pre-open call auction session (9:00 AM to 9:15 AM) matches buy and sell orders to discover a single equilibrium opening price for stocks, reducing volatility.

Explanation: The NIFTY 50 is the benchmark stock market index of the National Stock Exchange of India, representing the weighted average of 50 of the largest Indian companies.

Explanation: Front running is an illegal practice where a broker or dealer executes trades on an equity for their own account because they have advance knowledge of a large, price-influencing pending client order.

Explanation: The SAST Regulations (Takeover Code) mandate that if an acquirer crosses a 25% threshold, they must make an ‘Open Offer’ to minority shareholders.

Explanation: NAV (Net Asset Value) represents the per-unit market value of a mutual fund, calculated by dividing the total value of assets minus liabilities by the number of outstanding units.

Explanation: A rights issue is an invitation to existing shareholders to purchase additional new shares in the company, usually at a discount to the market price, in proportion to their existing holdings.

Explanation: KRAs (like CVL, NDML, Karvy) are SEBI-registered agencies that maintain the KYC records of investors, ensuring they don’t have to submit documents repeatedly for different market entities.

Explanation: Dividends, matured deposits, and shares that remain unclaimed for seven consecutive years are transferred to the IEPF, which uses the funds for investor education and awareness programs.

Explanation: ESG stands for Environmental, Social, and Governance. ERPs assess companies based on their performance in these non-financial, sustainability metrics.

Explanation: A private placement involves a company issuing shares to a select group of investors (maximum 200) rather than raising capital through a public IPO.

Explanation: Index funds are passive mutual funds designed to mimic the portfolio and performance of a specific financial market index (like Nifty 50), offering lower expense ratios.

Explanation: “Pump and dump” is an illegal scheme where manipulators buy cheap stock, hype it up using fake news (pump), and then sell their holdings at the inflated price (dump), causing retail investors to lose money.

Explanation: The Initial Margin is the upfront collateral required by the exchange from traders before they can take a position in the highly leveraged derivative market.

Explanation: As per SEBI regulations, the tenure of a Managing Director or Whole-Time Director cannot exceed 5 years at a time without reappointment via a special shareholder resolution.