24 extra multiple-choice questions for Securities and Exchange Board of India (SEBI) (12th Standard Commerce, Samacheer Kalvi), beyond the ones printed in the textbook — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Q1
When SEBI was first set up in 1988, what was its status?
- A. A statutory body under the SEBI Act
- B. A department of the Reserve Bank of India
- C. A non-statutory body without statutory powersCorrect
- D. A self-regulatory organisation of brokers
Explanation. SEBI was first established in 1988 as a non-statutory body for regulating the securities market. It initially had no statutory power; statutory powers came only in 1992.
Q2
On which date did the Government of India make SEBI an autonomous body?
- A. 12 May 1992Correct
- B. 13 September 1994
- C. 12 May 1988
- D. 13 September 1992
Explanation. SEBI was made an autonomous body by the Government of India on 12 May 1992 and got statutory powers the same year when Parliament passed the SEBI Act 1992. 13 September 1994 is the Finance Ministry notification date.
Q3
Match the regional offices of SEBI with their cities.
(a) Northern Regional Office - 1. Ahmedabad
(b) Eastern Regional Office - 2. Chennai
(c) Southern Regional Office - 3. New Delhi
(d) Western Regional Office - 4. Kolkata
- A. (a)-3, (b)-4, (c)-2, (d)-1Correct
- B. (a)-4, (b)-3, (c)-1, (d)-2
- C. (a)-3, (b)-2, (c)-4, (d)-1
- D. (a)-1, (b)-4, (c)-2, (d)-3
Explanation. SEBI's Northern, Eastern, Southern and Western Regional Offices are in New Delhi, Kolkata, Chennai and Ahmedabad respectively. Its headquarters is in the Bandra Kurla Complex, Mumbai.
Q4
In which business district of Mumbai is the SEBI headquarters located?
- A. Nariman Point
- B. Dalal Street
- C. Bandra Kurla ComplexCorrect
- D. Fort area
Explanation. The lesson states that SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai, with regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.
Q5
Which one of the following is NOT one of the three key functions that SEBI performs?
- A. Quasi-legislative
- B. Quasi-judicial
- C. Quasi-executive
- D. Quasi-federalCorrect
Explanation. SEBI performs three key functions: quasi-legislative (drafting regulations), quasi-judicial (passing rulings and orders) and quasi-executive (investigation and enforcement action). Quasi-federal is not one of them.
Q6
Buying and selling of securities by directors, promoters and others who have access to confidential information about the company, to take advantage of it, is called ____.
- A. Insider tradingCorrect
- B. Dematerialization
- C. Underwriting
- D. Portfolio management
Explanation. Insider trading means buying and selling of securities by directors, promoters and others who have access to confidential company information and wish to profit from it. It harms general investors, so SEBI checks it.
Q7
Which of the following is NOT one of the objectives of SEBI listed in the lesson?
- A. Regulation of stock exchanges
- B. Protection to the investors
- C. Issue of currency notesCorrect
- D. Control over brokers
Explanation. The lesson lists four objectives of SEBI: regulation of stock exchanges, protection to the investors, checking insider trading and control over brokers. Issuing currency is not a SEBI objective.
Q8
Protecting investors from wrong information given by companies in their prospectus and reducing the risk of delivery and payment is described in the lesson as ____.
- A. Control over brokers
- B. Protection to the investorsCorrect
- C. Regulation of stock exchanges
- D. Checking insider trading
Explanation. Under the objective of protection to the investors, the lesson says this means protecting them from wrong prospectus information and reducing delivery and payment risk. It calls this the foremost objective of SEBI.
Q9
Consider the following statements about the functions of SEBI.
1. Registration of brokers and sub-brokers is mandatory.
2. SEBI regulates mergers and acquisitions to protect the interest of investors.
3. SEBI provides training to financial intermediaries.
4. SEBI collects income tax from listed companies.
Which of these are correct?
- A. 1 and 4 only
- B. 1, 2 and 3 onlyCorrect
- C. 2, 3 and 4 only
- D. 1, 2, 3 and 4
Explanation. The lesson lists mandatory registration of brokers and sub-brokers, regulation of mergers and acquisitions, and training of intermediaries among SEBI's functions. Collecting income tax is not a SEBI function.
Q10
Assertion (A): SEBI motivates financial intermediaries to create their own professional associations.
Reason (R): Self-regulation is considered preferable to external regulation.
- A. Both A and R are true and R is the correct explanation of ACorrect
- B. Both A and R are true but R is not the correct explanation of A
- C. A is true but R is false
- D. A is false but R is true
Explanation. Under promoting self-regulatory organisations, the lesson says self-regulation is preferable to external regulation, so SEBI motivates intermediaries to form professional associations that control harmful actions of members.
Q11
Why has SEBI issued guidelines on mergers and takeovers?
- A. To raise the share prices of the merging companies
- B. So that mergers and takeovers are not at the expense of small investorsCorrect
- C. To stop all takeovers of listed companies
- D. To collect stamp duty on the transfer of shares
Explanation. SEBI regulates mergers and acquisitions to protect investors and has released guidelines so that such mergers and takeovers are not at the expense of small investors.
Q12
Besides imposing monetary penalties on capital market intermediaries for violations, what further action can SEBI take against them?
- A. Suspend their registration for a short periodCorrect
- B. Nationalise their business
- C. Close the stock exchange permanently
- D. Cancel their PAN
Explanation. Under its power to impose monetary penalties, SEBI can penalise intermediaries and other participants for a range of violations and can even suspend their registration for a short period.
Q13
Through which notification did SEBI receive several powers under the Securities Contracts (Regulations) Act?
- A. A Reserve Bank notification of 12 May 1992
- B. A Ministry of Finance notification of 13 September 1994Correct
- C. An NSE circular of December 1996
- D. A BSE circular of December 1997
Explanation. For effective regulation of stock exchanges, the Ministry of Finance issued a notification on 13 September 1994 delegating several of its powers under the Securities Contracts (Regulations) Act to SEBI.
Q14
The process by which an investor's physical share certificates are taken back and destroyed, and an equal number of securities in electronic form are credited to his account, is called ____.
- A. Rematerialisation
- B. Listing
- C. Underwriting
- D. DematerializationCorrect
Explanation. Dematerialization is the process in which physical share certificates are taken back by the company or registrar and destroyed, and equivalent electronic securities are credited to the investor's account with his Depository Participant.
Q15
Securities held in dematerialized form are said to be fungible. This means that they ____.
- A. carry distinctive numbers for each share
- B. can be held only by banks
- C. are identical and interchangeable, with no distinguishing featuresCorrect
- D. cannot be sold for one year
Explanation. Dematerialized shares have no distinctive numbers or distinguishing features. All holdings of a particular security are identical and interchangeable, which the lesson calls fungible.
Q16
Which company was the first to trade its shares in demat form on the NSE in December 1996?
- A. Tata Steel
- B. Reliance IndustriesCorrect
- C. Infosys
- D. State Bank of India
Explanation. Trading in dematerialized shares began on the NSE in December 1996, and Reliance Industries was the first company to trade its 100 shares in demat form.
Q17
Arrange the following events in chronological order.
1. Demat trading begins on the BSE
2. SEBI is first established
3. Demat trading begins on the NSE
4. SEBI Act is passed by Parliament
- A. 2, 4, 1, 3
- B. 4, 2, 3, 1
- C. 2, 4, 3, 1Correct
- D. 2, 3, 4, 1
Explanation. SEBI was set up in 1988, the SEBI Act was passed in 1992, demat trading began on the NSE in December 1996 and on the BSE in December 1997.
Q18
Consider the following statements about the benefits of dematerialization.
1. Risks such as loss, theft, forgery and damage of certificates are eliminated.
2. No stamp duty is needed for transfer of securities.
3. A loan can be taken against securities held in a demat account.
4. A demat account holder can buy or sell only a limited number of shares.
Which of these are correct?
- A. 1 and 2 only
- B. 2, 3 and 4 only
- C. 1, 3 and 4 only
- D. 1, 2 and 3 onlyCorrect
Explanation. Statements 1, 2 and 3 are benefits listed in the lesson. Statement 4 is wrong: a demat holder can buy or sell any amount of shares; the limit on transactions applies to physical securities.
Q19
According to the lesson, a demat account is to shares what a ____ is to money.
- A. bank accountCorrect
- B. stock exchange
- C. prospectus
- D. share certificate
Explanation. The lesson explains that a demat account is to shares what a bank account is to money. It holds shares, bonds, government securities, mutual funds and ETFs in electronic form.
Q20
Arrange the steps of opening a demat account in the correct order.
1. In-person verification by a member of the DP's staff
2. Fill up the account opening form and submit it with the documents
3. The DP provides an account number or client ID
- A. 1, 2, 3
- B. 2, 3, 1
- C. 2, 1, 3Correct
- D. 3, 2, 1
Explanation. The investor first fills the account opening form and submits documents, then the DP's staff carry out in-person verification, and once processed the DP provides an account number or client ID.
Q21
PAN, used as an identity proof for a demat account, is a unique ____ identity allotted to each taxpayer by the Income Tax Department.
- A. 8-digit numeric
- B. 10-digit alphanumericCorrect
- C. 12-digit numeric
- D. 16-digit alphanumeric
Explanation. PAN, or permanent account number, is a unique 10-digit alphanumeric identity allotted to each taxpayer by the Income Tax Department. It also serves as an identity proof.
Q22
Which document appears in the lesson's list of address proofs for a demat account but not in its list of identity proofs?
- A. PAN card
- B. Voter's ID
- C. Ration cardCorrect
- D. Driving licence
Explanation. The ration card is listed only as a proof of address. PAN card is an identity proof, while the voter's ID and driving licence appear in both lists.
Q23
Assertion (A): A demat account can be opened with no balance of shares.
Reason (R): A demat account holder pays no fees of any kind to the Depository Participant.
- A. Both A and R are true and R is the correct explanation of A
- B. Both A and R are true but R is not the correct explanation of A
- C. A is true but R is falseCorrect
- D. A is false but R is true
Explanation. A demat account needs no minimum balance of shares, so A is true. R is false: the holder pays an annual maintenance fee, transaction fees and a conversion fee to the DP.
Q24
A bank chairman tipped off a friend to buy his bank's shares before a takeover announcement, and SEBI detected it through inspection and enquiries of the brokers and imposed a heavy penalty. Which SEBI function does this case show?
- A. Barring insider trading in securitiesCorrect
- B. Registering mutual funds
- C. Providing training to intermediaries
- D. Levying fees to carry out the Act
Explanation. The chairman used confidential information about the takeover, which is insider trading. SEBI's inspection and enquiries of brokers and its penalty show its functions of conducting inquiries and barring insider trading.
