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IBPS PO, IBPS RRB & NABARD Exam: Reading Comprehension Quiz based on ‘The Economics Times’

Sep 27, 2016 14:53 IST

    It has been observed in the recent banking examinations that questions on Reading Comprehension (RC) come from passages taken from newspapers such as The Times of India, The Economic Times, The Hindu etc. Here, the banking team of Jagranjosh is bringing to you RC Passage from The Economic Times (Dated September 27, 2016) and questions based on that. Attempt the quiz as it will help you a lot in your preparation for upcoming bank examinations.

    Question (1-10): Read the following passage carefully and answer the questions that follow. Some words / phrases are printed in bold in the passage in order to help you trace them while answering some of the questions.

    Stock brokers will have to brace for tighter rules while handling clients' money and stocks. The Securities and Exchange Board of India (SEBI) is carrying out a comprehensive review of rules for stock brokers after it recently came across instances of siphoning of funds and securities from investors' accounts. The policy review — the first such exercise of this magnitude for brokers in the regulator's history — comes in the wake of the regulator receiving hundreds of complaints from investors of Unicon Securities and Kassa Securities, where crores of rupees were siphoned off from clients' accounts. 
    The new rules, which may be announced soon, will mandate a uniform nomenclature for the stock broking industry while handling their clients' and own funds and securities. SEBI will put in place "red flag indicators", which will show whether brokers are misusing clients' funds and securities. These indicators would include percentage change in net worth of the broker and his liability to clients among other things. At present, brokers are required to maintain a certain net worth which varies from exchange to exchange. "If the net worth falls below the threshold level, it could be a case of financial distress," said a person familiar with the development.

    The regulator will also mandate sharing of information among stock exchanges and depositories. Currently, information is shared only for inspection findings. "SEBI wants to develop an alerting mechanism where quick action can be taken before things get worse. These reforms will have a significant impact on investors," the person added. After consulting with stock brokers, SEBI has devised a formula wherein, brokers would have to submit data on the credit balance in their ledger account to the stock exchanges on monthly basis and after that, the exchanges will verify the trade and send them to the investors. "SEBI has noticed, at times brokers send false messages to clients. Once, they receive a SMS from stock exchange they would be able to verify the information correctly," the person said. 
    CJ George, managing director, Geojit BNP Paribas said: "Quasi-regulators like exchanges taking up the role of sending SMS to investors. I'm not sure whether it's feasible. It's the same work that is being repeated." 

    1. SEBI has decided to amend rules regarding trade carried out by stock brokers. The reason behind the same is –

    1. SEBI does not want investors to invest their money in stock exchanges anymore as it is concerned about the recent frauds
    2. SEBI has observed that investors are often duped by the stock brokers and the money is used for some other purpose by the dishonest brokers
    3. SEBI is going to make it mandatory that brokers should not take part in retail investment and they should only take care of corporate clients
    4. SEBI is going to make it mandatory that stock brokers are not at all made to invest their own money in any fund regulated by the stock exchanges under which they work
    5. Other than those given in options

    Solution: Option (2)

    Explanation: It has been mentioned in the passage that the stock brokers often siphon off the money of the investors for other purposes and a case like that has recently come to the light. The regulator wants to curb this practice and that is why, it is making rules stricter for the stock brokers so that they cannot run away with the hard earned money of the investors.

    2. Why, according to the passage, the new plan could be a failure despite all the right intentions it has primarily?

    1. SEBI may not be able to take care of all the stock brokers and it will have to depend on the middlemen
    2. SEBI will have to take care of all the exchanges in India as well as abroad since Indian brokers also operate on foreign exchanges
    3. SEBI may find it very cumbersome and difficult to get in touch directly with all the investors in the stock market
    4. SEBI is not going to be able to regulate the market properly as the new move will worsen its relations with all the stock brokers
    5. Other than those given in options

    Solution: Option (3)

    Explanation: According to some market analysts, SEBI will not be able to send messages to each and every investor in the stock market it is not feasible to do so for the regulator. It will take a lot of time and in case SEBI is not able to take care of it properly, it may find itself in the middle of another controversy that it has caused loss to the investors actually.

    3. Which among the following is true regarding the new rules that are going to be implemented soon by the market regulator SEBI?

    1. Stock brokers will need to register themselves with SEBI every day before they start trading in the stock exchanges
    2. Stock brokers will need to understand that the number of investors they deal with is well within range of their highest capacity and not beyond that
    3. Stock brokers will need to take care of the issue that their credit balance in the ledger account should be forwarded to SEBI on monthly basis every month
    4. SEBI will make it mandatory for all investors to carry out trade with the help of the same stock broker every time
    5. Other than those given in options

    Solution: Option (3)

    Explanation: According to the passage, stock brokers need to submit the credit balance in their ledger accounts in the stock exchanges to the market regulator SEBI so that it can verify the same properly. This will be done on a monthly basis and after the verification is done, SEBI will send them to the investors so that they also get an idea regarding the financial health of the stock brokers they are dealing with.

    4. Why is SEBI going to put in place ‘Red Flag Indicators’?

    1. SEBI requires to do something promptly since it is not able to nab the culprits of the crime committed by the dishonest stock brokers
    2. SEBI is going to be under watch by the government since it is not performing its duties properly
    3. SEBI is not able to understand the quantum of duties and responsibilities it should take care of as it does not have proper mandate
    4. SEBI wants to take care of a situation before it gets worse and for that to happen, it needs to know the whole thing beforehand
    5. Other than those given in options

    Solution: Option (4)

    Explanation: SEBI is going to put into place ‘Red Flag Indicators’ since it wants to sure that investors are not duped of their hard earned money by the stock brokers. For that to happen, it needs to know of a bad situation well in advance so that it can take necessary steps to correct the same. These indicators will give the market regulator a chance to get hold of a situation well in advance and make proper corrective measures applicable in advance.

    5. Which among the following will be considered as indicators in the new rules put forward by SEBI for tracking financially distressed investors?

    1. The net worth of the investors will be taken into account in order to understand the financial health of the stock brokers
    2. The total liability of the stock brokers to the clients will be taken into account
    3. The volume of trade carried out by the stock broker will be measured with respect to the previous year trade records
    4. Both (1) and (2)
    5. All the above

    Solution: Option (4)

    Explanation: SEBI has decided to put in place certain indicators so that the investors are not cheated by the stock brokers in the stock exchanges. It has decided that it will check the net worth of the investors on a regular basis and along with that, it will also check the total liability of the stock broker towards the investors as a combination of both will help it understand the financial position of the stock broker in the stock exchange.

    6. Which among the following is / are true regarding the new rules being implemented by SEBI for the stock brokers?

    1. SEBI has decided to implement the new rules since it has received a lot of complaints from the investors about siphoning off their money by the stock brokers for their own purposes
    2. SEBI has decided to put in place certain indicators that will help it understand the quantum of loss occurred to the investors in case of any wrongdoing on the part of the stock broker
    3. SEBI will put in place a rule that will be same for all such as funds of the clients, stock broking firm itself etc
    4. Both (1) and (3)
    5. All the above

    Solution: Option (4)

    Explanation: SEBI has to take the new steps since it has received complaints from several investors regarding the fact that stock brokers have siphoned off their money to some other accounts for other purposes without intimating them in advance. On the other hand, the market regulator is going to put in place a uniform nomenclature for the stock broking industry in general so that no exception remains.

    7. Which among the following is similar in meaning to the word ‘brace’ as used in the passage?

    1. Prepare
    2. Prompt
    3. Pacify
    4. Radical
    5. Other than those given in options

    Solution: Option (1)

    Explanation: The word has been used in the passage to indicate that the market will have to prepare itself for the new rules going to be implemented by SEBI. This makes option (1) the right choice among the given options.

    8. Which among the following is similar in meaning to the word ‘comprehensive’ as used in the passage?

    1. Long
    2. Detailed
    3. Distanced
    4. Derailed
    5. Other than those given in options

    Solution: Option (2)

    Explanation: SEBI has decided to implement new rules for the stock broking industry and in order to do that, it has to carry out a detailed review of the conditions as of now so that the corrective measures are effectively put in place. This makes option (2) the right choice among the given options.

    9. Which among the following is opposite in meaning to the word ‘uniform’ as used in the passage?

    1. Despicable
    2. Dissolute
    3. Distressed
    4. Different
    5. Other than those given in options

    Solution: Option (4)

    Explanation: SEBI has decided to implement new rules for the stock broking industry and the rules will be uniform in nature for the whole industry so that there is no exception for the funds of the clients and that of the broking houses. This makes option (4) the right choice among the given options as the opposite of the given word.

    10. Which among the following is opposite in meaning to the word ‘significant’ as used in the passage?

    1. Minor
    2. Minimal
    3. Accusing
    4. Astonishing
    5. Other than those given in options

    Solution: Option (2)

    Explanation: The word has been used to indicate the quantum of changes that are going to take place in the stock broking industry once the new rules are put into force. This makes option (2) the right choice among the given options as its opposite since it says that the changes will have the minimum of impact on the industry in general.

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