MCQ Bank — Securities Laws (Cross-Topic | All 6 Laws)

Topic 73 — 50 Cross-Topic MCQs: SCRA + SEBI Act + Depositories + PFUTP + SAST + PIT | SEBI Law Officer

This Cross-Topic MCQ Bank tests integration of knowledge across all six securities laws. Questions deliberately probe the boundaries between laws — where they overlap, how they interact, and the precise quantitative details that distinguish them. This is the format most likely to appear in the SEBI Grade A Phase 2 objective paper. Work through these questions under timed conditions (approximately 45 seconds per question).

Section A — SCRA & SEBI Act (Questions 1–8)

1. Which of the following is NOT a 'security' under Section 2(h) of the SCRA, 1956?

(A) Shares in the equity capital of a company
(B) Units of a collective investment scheme
(C) Currency notes issued by RBI
(D) Government securities and bonds

Answer: (C) Currency notes (legal tender) are not 'securities' under SCRA Section 2(h). Securities include shares, bonds, debentures, derivatives, government securities, CIS units, and CG-notified instruments — but NOT currency itself.

2. Under Section 18A of the SCRA, 1956, contracts in derivatives are:

(A) Illegal and void regardless of where traded
(B) Legal if traded on a recognised stock exchange under SEBI regulations
(C) Legal only for institutional investors on any platform
(D) Legal only if approved by RBI

Answer: (B) Section 18A SCRA: derivative contracts are legal and valid IF traded on a recognised stock exchange AND SEBI's regulations are complied with. Off-exchange derivative contracts are void/illegal.

3. Section 13 of the SCRA prohibits all contracts relating to securities EXCEPT:

(A) Spot delivery contracts and government notified contracts
(B) Futures contracts on any platform
(C) Options on unlisted securities
(D) OTC derivatives between two institutions

Answer: (A) Section 13 SCRA: only SPOT DELIVERY contracts and Central Government-notified contracts are permitted. All other contracts in securities are prohibited unless on a recognised exchange under SEBI regulations.

4. The primary duty of SEBI under Section 11(1) is to:

(A) Register and regulate intermediaries
(B) Protect investors + promote development + regulate the securities market
(C) Impose penalties on market manipulators
(D) Approve all initial public offerings

Answer: (B) Section 11(1) SEBI Act: SEBI's statutory duty — protect the interests of investors in securities, promote the development of, and regulate the securities market. This is the foundational three-part mandate.

5. SEBI issues a 'cease and desist' order against a broker without any prior notice or hearing. Under which provision would the broker most effectively challenge this?

(A) Section 15Z — appeal to Supreme Court
(B) Section 15T — appeal to SAT, citing violation of natural justice
(C) Section 11C — investigation procedure
(D) Section 12 — registration conditions

Answer: (B) SAT under Section 15T is the appropriate first forum for appeal from SEBI orders. Natural justice requires a prior hearing for permanent orders — Sterlite Industries v. SEBI (SAT 2003) established this. Section 15Z (SC) comes after SAT, not directly.

6. Section 15J of the SEBI Act requires the Adjudicating Officer to consider which of the following factors?

(A) The accused's net worth and financial capacity
(B) Disproportionate gain; investor loss; repetitive nature of default
(C) The number of investors harmed and their aggregate loss
(D) Political sensitivity and public interest

Answer: (B) Section 15J SEBI Act: the AO MUST consider — (a) disproportionate gain or unfair advantage; (b) amount of loss caused to investors; (c) repetitive nature of default. These are the MANDATORY Section 15J factors.

7. A person files an appeal against a SEBI adjudication order before SAT on Day 46 (one day after the 45-day limitation period). SAT:

(A) Must dismiss the appeal as time-barred — no discretion
(B) May condone the delay if sufficient cause is shown
(C) Transfers the appeal directly to the High Court
(D) Cannot entertain the appeal under any circumstances

Answer: (B) Section 15T(2) SEBI Act: 45-day limitation period from receipt of SEBI order. PROVISO: SAT 'may entertain an appeal after the expiry of the said period if it is satisfied that there was sufficient cause for not filing it within that period.' Delay is condonable — not an absolute bar.

8. SEBI passes an interim ex-parte debarment order against a fund manager under Section 11B without prior notice. Which statement CORRECTLY describes the legal position?

(A) The order is void — interim orders under Section 11B are not permitted
(B) The order is valid if genuine urgency existed; however, a post-decisional hearing must be given at the earliest
(C) The order is valid permanently as no appeal lies against interim Section 11B orders
(D) The order is valid only if the Fund Manager had prior convictions for securities violations

Answer: (B) Sterlite Industries v. SEBI (SAT 2003): interim ex-parte orders under Section 11B are valid in genuine urgency — but a post-decisional hearing must follow immediately. Natural justice is satisfied by giving the opportunity post-order, not necessarily pre-order, in genuine emergencies.

Section B — Depositories Act & PFUTP (Questions 9–15)

9. Under the Depositories Act, 1996, the 'registered owner' for the purposes of effecting transfers is:

(A) The beneficial owner (investor)
(B) The Depository Participant
(C) The Depository (NSDL or CDSL)
(D) The Registrar and Share Transfer Agent

Answer: (C) Section 9 Depositories Act: the DEPOSITORY is the registered owner for purposes of effecting transfers — but has no voting rights or other shareholder rights. ALL rights vest in the beneficial owner (investor).

10. Under Section 9A of the Depositories Act, securities held in a depository are:

(A) Identifiable by distinctive certificate numbers
(B) Subject to transfer restrictions in the Articles of Association
(C) Fungible — not identified by distinctive numbers
(D) Required to be held in physical form for high-value transactions

Answer: (C) Section 9A: Securities held in a depository shall be FUNGIBLE and shall NOT be identified by distinctive numbers. This is the foundational fungibility provision enabling electronic settlement.

11. Section 9B of the Depositories Act provides that dematerialised securities shall be 'freely transferable'. This provision operates:

(A) Only for securities listed on NSE — not BSE
(B) Only where the company's Articles of Association permit transfer
(C) Notwithstanding any other law or contract — overriding AoA restrictions and shareholder agreements
(D) Only where SEBI has specifically granted free transferability

Answer: (C) Section 9B: 'Notwithstanding anything contained in any other law for the time being in force or in any contract, agreement, or instrument, securities held with a depository shall be freely transferable.' The 'notwithstanding' clause overrides AoA restrictions and shareholder agreements.

12. Under Section 16(1) of the Depositories Act, if a Depository Participant's (DP's) negligence causes loss to a beneficial owner:

(A) Only the DP is liable — depository has no responsibility
(B) Only the depository is liable for all DP losses
(C) Both the depository and the DP may be liable — separately for their own negligence
(D) Neither is liable if the BO signed the account opening form accepting risk

Answer: (C) Section 16(1) DA: any loss caused to a BO due to negligence of the DEPOSITORY or the PARTICIPANT — each is liable for their OWN negligence separately. Section 16(2): if the depository compensates BO for DP negligence, it can recover from the DP.

13. Which of the following is NOT a sub-category of 'fraudulent practice' under PFUTP Regulation 2(1)(e)?

(A) Market manipulation
(B) Creating a false market
(C) Impersonation
(D) Failure to redress investor grievances within prescribed time

Answer: (D) PFUTP Regulation 2(1)(e) 'fraudulent practice' includes: market manipulation; misleading appearance; false market; impersonation; illusion of trading; disseminating false information. 'Failure to redress grievances' is a violation of SEBI Act Section 15C — not a 'fraudulent practice' under PFUTP.

14. An operator buys 10,000 shares of a thinly-traded stock at ₹50 each (total ₹5 lakh). He then posts false 'upcoming acquisition' news across multiple WhatsApp groups. The stock rises to ₹80. He sells his holding for ₹8 lakh profit. This is BEST characterised as:

(A) Regulation 4(2)(a) violation only — misleading appearance
(B) Regulation 4(2)(e) violation only — false information dissemination
(C) A pump-and-dump scheme violating Regulations 4(2)(a), 4(2)(b), and 4(2)(e) simultaneously
(D) A Regulation 3 violation only — insider dealing

Answer: (C) This is a classic pump-and-dump: Regulation 4(2)(a) (circular/coordinated buying creating false demand); Regulation 4(2)(b) (transactions causing artificial price rise); Regulation 4(2)(e) (disseminating false information through WhatsApp — digital medium expressly covered after 2022 SEBI circulars). All three apply simultaneously.

15. Under PFUTP Regulation 10, amounts directed to be recovered from any person are recoverable as:

(A) An arbitral award
(B) A decree of a civil court
(C) An arrear of land revenue
(D) A secured debt under IBC

Answer: (C) PFUTP Regulation 10: amounts directed to be recovered shall be recoverable as an ARREAR OF LAND REVENUE — providing a robust mechanism for SEBI to enforce recovery without additional court proceedings.

Section C — SAST Regulations (Questions 16–19)

16. Acquirer X holds 20% in Target Ltd. He signs an SPA to acquire an additional 6%. After this acquisition, his combined holding will be 26%. What is his SAST obligation?

(A) No obligation — 26% is above 25% but the creeping limit is 5% per year
(B) He must make a mandatory open offer for 26% of Target Ltd.'s total shares
(C) He must make a voluntary open offer for 10% of Target Ltd.'s total shares
(D) He must disclose his acquisition to the stock exchange within 2 WD — no open offer needed

Answer: (B) Regulation 3(1): Acquirer reaching or crossing 25% (combined with PAC) must make a MANDATORY OPEN OFFER for minimum 26% of total shares. X will go from 20% to 26% — crossing 25% — therefore mandatory open offer triggered.

17. A promoter holds 55% in a listed company. During financial year 2024-25, she acquires: 3% in May (open market); 1.5% in August (block deal); 0.8% in February (open market). What is the correct regulatory position?

(A) All three acquisitions are valid creeping acquisition — total 5.3% is close to limit
(B) The block deal acquisition is a SAST violation — block deals are not permitted for creeping acquisition
(C) All acquisitions are valid — open market and block deals are both permitted for creeping
(D) Only the February acquisition needs SAST disclosure — others are under the 2% disclosure trigger

Answer: (B) Regulation 3(2): creeping acquisition must be through OPEN MARKET PURCHASES ONLY. Block deals are off-market negotiated transactions — NOT permitted for creeping acquisition. The 1.5% block deal independently triggers a mandatory open offer obligation.

18. Under Regulation 8(1) of SAST 2011, the four parameters for determining the minimum offer price do NOT include which of the following?

(A) The highest negotiated price in the triggering SPA
(B) Volume-weighted average of market price for last 26 trading days
(C) The highest price paid in any acquisition in the last 26 weeks
(D) 60-day volume-weighted average market price

Answer: (B) Regulation 8(1) four parameters: (a) negotiated price; (b) 52-WEEK VWAP of prior acquisitions; (c) highest price in 26-WEEK acquisitions; (d) 60-DAY market VWAP. There is NO '26-TRADING-DAYS market VWAP' parameter — a common confusable option.

19. Company P (listed) is undergoing NCLT-approved amalgamation with Company Q. As a result of the scheme, Q's promoters will acquire 35% in P (a listed company). Which statement is CORRECT under SAST?

(A) Q's promoters must make a mandatory open offer for 26% of P's shares
(B) The acquisition triggers Regulation 3(1) and both Regulation 4 simultaneously
(C) The acquisition is exempt from mandatory open offer under Regulation 10(1)(b)/(c) — NCLT-approved scheme
(D) Q's promoters only need to file the Regulation 28 annual disclosure

Answer: (C) Regulation 10(1)(b)/(c): acquisitions pursuant to a scheme of arrangement (merger/amalgamation) sanctioned by a court or NCLT are exempt from the mandatory open offer obligation. Court/NCLT scrutiny substitutes for the open offer protection.

Section D — PIT Regulations & Cross-Topic (Questions 20–25)

20. Which of the following would MOST LIKELY constitute UPSI under PIT Regulations 2015?

(A) An RBI announcement raising repo rate by 25 bps
(B) A company director's knowledge that the quarterly results will show 40% decline in profit, before results are filed
(C) A published equity research report predicting a company's results will decline
(D) A forward-looking statement made by the CEO at a public investor conference

Answer: (B) The director's knowledge of unpublished results (40% profit decline) meets all three UPSI criteria: (1) company-specific; (2) not generally available (not yet filed with exchanges); (3) likely to materially affect price. The other three are either not company-specific (RBI) or already publicly available.

21. Company A's CEO shares quarterly results (not yet filed with exchanges) with three major institutional investors in a private conference call. Which statement correctly describes the PIT implications?

(A) No violation — institutional investors are sophisticated enough to protect themselves
(B) The CEO has violated PIT Regulation 3(1) — communicating UPSI; the institutional investors who trade become insiders violating Regulation 4(1)
(C) No violation because the investors are registered with SEBI as FPIs
(D) The violation is only under PFUTP Regulation 4(2)(e) — not under PIT

Answer: (B) The CEO's selective disclosure of unpublished results (UPSI) to select investors before exchange filing violates: (i) PIT Regulation 3(1) — communicating UPSI without legitimate purpose (selective briefing ≠ legitimate purpose); (ii) LODR non-selective disclosure obligation. Institutional investors who subsequently trade violate PIT Regulation 4(1). This is the paradigm case of 'selective disclosure.'

22. Under PIT Regulation 5, a Trading Plan is a defence against insider trading charges. Which condition is INCORRECT for a valid trading plan?

(A) The plan must be disclosed to the stock exchange
(B) The plan must be irrevocable once disclosed
(C) The plan can be executed from the very next trading day after disclosure
(D) The minimum gap between disclosure and first trade is 6 months

Answer: (C) A Trading Plan must have a minimum 6-MONTH COOLING-OFF period between disclosure and the first trade. It CANNOT be executed 'the very next trading day' — this would defeat the purpose of separating the trading decision from any future UPSI possession. Option C is incorrect — thus the answer.

23. CFO of Company X resigns on January 1, 2025. He sells Company X shares on June 15, 2025. He had knowledge of the company's Q4 results (which he prepared before resignation) before they were filed with exchanges in May 2025. Which statement is CORRECT?

(A) No violation — he resigned in January and is no longer connected
(B) He is a connected person under the six-month look-back (6 months from Jan 1 = July 1) AND possessed UPSI — insider trading if sale was before results were GAI
(C) He is only liable if he had access to more recent UPSI after his resignation
(D) No violation — the six-month look-back period ended before June 15

Answer: (B) January 1 + 6 months = July 1, 2025. June 15 is WITHIN the 6-month look-back period — the CFO remains a 'connected person' under PIT Regulation 2(1)(d). He also possessed UPSI about Q4 results (prepared by him before resignation, not yet filed in May). Sale on June 15 (before results were filed = before GAI) is insider trading.

24. SEBI initiates concurrent proceedings against Promoter P for: (i) insider trading under PIT Regulation 4; (ii) connected person trading on UPSI under PFUTP Regulation 3; and (iii) SAST disclosure violation under Regulation 29. P argues this is double jeopardy. Is this argument correct?

(A) Yes — the same transaction cannot attract multiple penalties; SEBI must elect one framework
(B) No — each regulation targets a different legal obligation; concurrent proceedings and penalties are valid under Indian securities law
(C) Yes — but only the SAST violation may proceed as it carries no criminal consequence
(D) No — but SEBI must file a single consolidated complaint and proceed under one regulation only

Answer: (B) SEBI v. Ajay Agarwal (2010 SC): double jeopardy does not bar concurrent civil + criminal proceedings in securities law. The three proceedings here are each under a DIFFERENT regulatory framework targeting a different obligation — PIT (trading on UPSI); PFUTP (fraudulent practice by connected person); SAST (disclosure obligation). Each may result in separate penalties — no election required.

25. Which of the following statements about the SEBI Grade A examination topics is INCORRECT?

(A) PIT Regulations 2015 carry higher weightage than SCRA 1956 in the Phase 2 Securities Laws paper
(B) The SAST Regulations 2011 require a voluntary open offer minimum of 26% of total shares
(C) Section 15G of the SEBI Act prescribes a mandatory minimum penalty of ₹10 lakh for insider trading
(D) Section 9B of the Depositories Act allows free transferability of demat securities notwithstanding any contract

Answer: (B) The incorrect statement is (B): the SAST Regulations 2011 require a VOLUNTARY open offer minimum of 10% (Regulation 6(2)), NOT 26%. 26% is the minimum for a MANDATORY open offer (Regulation 7(1)). This is one of the most common exam traps.

🎯 QUICK ANSWER KEY — Cross-Topic MCQ Bank (Topics 1-68)

1-C 2-B 3-A 4-B 5-B
6-B 7-B 8-B 9-C 10-C
11-C 12-C 13-D 14-C 15-C
16-B 17-B 18-B 19-C 20-B
21-B 22-C 23-B 24-B 25-B

← Topic 72: PYQ Analysis — SEBI Grade A Exam | Next → Topic 74: Mock Test — Full Syllabus Securities Laws

Published on The Legal Bridge — Study Notes for SEBI Law Officer, Judiciary Aspirants, AIBE, CLAT & University Exams