Q1) SEBI

Introduction
SEBI is also known as the Security and Exchange Board of India was
established on 12 April 1992 through the SEBI Act, 1992. It was a non-
statutory body established to regulate the securities market. The
headquarters of the board is situated in Bandra Kurla Complex, Mumbai.
SEBI helps in regulating the Indian Capital Market by protecting the interest
of investors and establishing the rules and regulations for the development of
the capital market. 

SEBI or the Security and Exchange Board of India is a regulatory body

controlled by the Government of India to regulate the capital and security
market. Before the Security and Exchange Board of India, the Controller of
Capital Issues was the regulating body to regulate the market which was
controlled by the Capital Issues (Control) Act, 1947.

Purpose and Role of SEBI

SEBI helps in creating a healthy environment to facilitate an effective
mobilization between the market participants and investors. It helps in
locating the resources with the help of the securities market. SEBI establish
rules and regulations, policy framework and infrastructure to meet the needs
of the market. 

The financial market majorly comprises of three groups:

The Issuer of Securities 

Issuers are the group that works in the corporate department to easily raise
funds from the various sources of the market. So, SEBI helps the issuers by
providing them a healthy and open environment to work efficiently. 

Investors 
The investors are the soul of the market as they keep the market alive by
providing accurate supplies, correct information, and protection to the people
on a daily basis. SEBI helps investors by creating a malpractice free
environment to attract and protect the money of the people who invested in
the market. 
Financial Intermediaries
The intermediaries are the people who act as middlemen between the issuers
and the investors. SEBI helps in creating a competitive professional market
which gives a better service to the issuers and the investors. They also
provide efficient infrastructure and secured financial transactions. 

Organizational Structure of SEBI

The members of the Security and Exchange Board of India are:

 The Chairman who is appointed by the Union Government of India.

 Two members who are selected from the officers of the Union
Finance Ministry.
 One member who is appointed from the Reserve Bank of India.
 The other five members are appointed by the Union Government of
India, out of five three must be whole-time members. 
Dr. S.A. Dave was the first Chairman of SEBI who was appointed on 10th
April 1988. Ajay Tyagi is the present Chairman appointed on 10th February
2017 replacing U K Sinha.

Functions of SEBI
SEBI basically protects the interest of the investors in the security market,
promotes the development of the security market and regulates the
business. The functions of the Security and Exchange Board of India can
primarily be categorized into three parts:

 Protective Function
Protective functions are used to protect the interest of investors and other
financial participants. These functions are: 

 Prevent Insider Trading: When the people working in the market like
director, promoters or employees working in the company starts to
buy or sell the securities because they have access to the
confidential price which results in affecting the price of the security
is known as insider trading.
Checks price rigging: The malpractices which create unreasonable
fluctuations in the price of the securities with the help of increasing or
decreasing the market price of stocks which results in an immense loss for
the investors or traders are known as price rigging
Checks price rigging: The malpractices which create unreasonable
fluctuations in the price of the securities with the help of increasing or
decreasing the market price of stocks which results in an immense loss for
the investors or traders are known as price rigging

 Regulatory Function
Regulatory functions are generally used to check the functioning of the
financial business in the market. They establish rules to regulate the financial
intermediaries and corporates for the efficiency of the market. These
functions are: 

 SEBI designed guidelines and code of conduct for efficient working

of financial intermediaries and corporate.
 Established rules for taking over a company. 
 Conducts regular inquiries and audits of stock exchanges.
 Regulates the process of mutual funds.
 Registration of brokers, sub-brokers, and merchant bankers is
controlled by SEBI.
 Levying of fees is regulated by SEBI. 
 Restrictions on private placement.

 Development Function
The development functions are the steps taken by SEBI to improve the
security of the market through technology. The functions are:

 By providing training sessions to the intermediaries of the market. 

 By promoting fair trading and restrictions on malpractices of any
kind. 
 By introducing the DEMAT format. 
 By promoting self-regulating organizations. 
 By introducing online trading through registered stock brokers. 
 By providing discount brokerage.
Objectives of SEBI
The objectives of SEBI are:

 Protection of investors: The primary objective of SEBI is to protect

the rights and interests of the people in the stock market by guiding
them to a healthy environment and protecting the money involved
in the market. 
 Prevention of malpractices: The main objective for the formation of
SEBI was to prevent fraud and malpractices related to trading and
to regulate the activities of the stock exchange.
 Promoting fair and proper functioning: SEBI was established to
maintain the functioning of the capital market and to promote
functioning of the stock exchange. They are ordered to keep eyes on
the activities of the financial intermediaries and regulate the
securities industry efficiently. 
 Establishing Balance: SEBI has to maintain a balance between the
statutory regulation and self-regulation of the securities industry.
 Establishing a code of conduct: SEBI is required to develop and
regulate a code of conduct to avoid frauds and malpractices caused
by intermediaries such as brokers, underwriters and other people. 

Features of SEBI
Sebi is an organization that is responsible for maintaining an environment
that is free from malpractices to restore the confidence of the general public
who invest their hard-earned money in the market. SEBI controls the bylaws
of every stock exchange in the country. SEBI keeps an eye on all the books
of accounts related to the stock exchange and financial intermediaries to
check their irregularities. The features of the Security and Exchange Board of
India are given below: 

 Quasi-Judicial 
SEBI is allowed to conduct hearings and can pass judgments on unethical
cases and fraudulent trade practices. This feature of SEBI helps to protect
transparency, accountability, reliability, and fairness in the capital market. 

 Quasi-Legislative
SEBI is allowed to draft legislatures with respect to the capital market. SEBI
drafts rules and regulations to protect the interests of the investors. For eg:
SEBI LODR or Listing Obligation and Disclosure Requirements. This helps in
consolidating and streamlining the provisions of existing listing agreements
for several segments of the financial market like equity shares. This helps in
protecting the market from malpractices and fraudulent trading activities
happening at the bay. 

 Quasi-Executive 
SEBI covers the implementation of the legislation. They are allowed to file a
complaint against any person who violates their rules and regulations. They
also have the power to inspect all the books and records to check for
wrongdoings.

Penalty for fraudulent and unfair trade practices. - If any person indulges in
fraudulent and unfair trade practices relating to securities, he shall be liable to a
penalty of twenty-five crore rupees or three times the amount of profits made
out of such practices, whichever is higher.

Q2) Scheduled Caste and Scheduled Tribe

(Prevention of Atrocities) Act, 1989
The Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 (its
correct name) was enacted by the Parliament of India to prevent atrocities and hate crimes
against the scheduled castes and scheduled tribes. The Act is popularly known as the SC/ST
Act, PoA, or simply the 'Atrocities Act'.
It is an Act that prevents atrocities committed against persons who belong to
the SC and ST. According to the Act, there is no provision for anticipatory
bail for the accused. Additionally, it gives the investigating officer the right to
arrest the accused without getting prior approval from senior police officials.

Objectives and purpose of the SC and ST Act,

1989
Scheduled Castes and Scheduled Tribes in the state and union territories are
defined in Article 342(1) and Article 366(25) of the Indian Constitution as a
special category of tribe or community as and whenever declared by the
President. The following are the objectives and the purpose of the Act:

 The Act is the primary legislation aimed at preventing the

occurrence of crimes against Scheduled Castes and Scheduled
Tribes.
  According to the Act, Special Courts and Exclusive Special Courts
shall be established for the purpose of trying individuals charged
with such atrocities.
 As per the Act, funds are provided for their free rehabilitation, 
travel expenses, and maintenance expenses, with officers
empowered to ensure that the act is appropriately implemented.
 Additionally, the Act sets out to make the Dalits an integral part of
society and to protect their rights when crimes threaten to violate
their social, economic, democratic, and political rights.
 The Act works to prevent deprivation and assists marginalized
communities in avoiding it.

Salient features and rules of the SC and ST Act,

1989
The Rationalities of the Act and the associated Rules cover a number of
issues or problems pertaining to atrocities against SC/ST people and their
status within society. The following are the three different categories under
the Act:

 Provisions relating to criminal law make up the first category. A

number of crimes are defined in this category, and it also extends
the scope of several categories of penalties described in the Indian
Penal Code. 
 In the second category, victims of atrocities are entitled to relief and
compensation.
 Thirdly, the Act establishes special authorities for its implementation
and enforcement.
The following are the salient features of the Act:

 The Act tries to add new types of offences that are neither
mentioned in the Indian Penal Code, 1860 nor in the Protection of
Civil Rights Act, 1955.
 Offences can only be committed by certain individuals, e.g.
barbarity against SCs or STs can be committed only by non-SCs.
This Act does not apply to crimes committed between SCs and STs
or between STs and SCs.  In Kanubhai M. Parmar v. State of
Gujarat (2000), the Court ruled that persons belonging to the
Scheduled Caste or Scheduled Tribe who commit a crime against
another Scheduled Caste or Scheduled Tribe cannot be prosecuted
or punished as per the Act. 
  There are 37 offences [offences mentioned in sub-section (1) and
(2) of Section 3] included in the Act that involve patterns of
behaviour inflicting criminal offences and breaking the self-respect
and esteem of the scheduled castes and tribes community. Among
these are the denial of economic, democratic, and social rights, as
well as exploitation and abuse of the legal system.
 Different types of atrocities committed against SCs/STs are defined
under the Act and strict penalties are prescribed for such atrocities
[Section 3(1) (i) to (xv) and 3(2) (i) to (vii) of the Act]. The
Penalties for public servants are enhanced in some cases.
 Punishment for public officials who are delinquent in performing
their duties. [Section 3(2) (vii) of the Act].
 Attachment and forfeiture of property. [Section 7 of the Act].

PUNISHMENT
Section 4 of the Act outlines the penalties for atrocity crimes. If an upper caste member
commits an offence against a lower caste member, that person will be punished under
section 4 of the act. Sections 3 (1) I to (xv) and 3 (2) I to (viii) outline various heinous crimes
and give various punishments and remedies.

Section 3(1) defines 15 different acts, such as force-feeding of injurious substances,

threatening to vote, contaminating commonly used water, etc., punishable by a minimum
punishment of six months in prison, with a maximum punishment of five years in jail and a
fine.

Section 3 (2) lists major offences such as creating false evidence and causing the execution
of an innocent SC/ST, among others, with penalties ranging from seven years to life in prison
or death. The crimes can only be committed by those who are neither SCs nor STs.

Any public servant who is not a SC or ST who intentionally neglects duties under this Act
would be sentenced to a minimum of six months and a maximum of one year in prison.
Section 7 permits the seizure of the captive's property in favor of the state. The property
might be attached during the trial and then surrendered after the conviction

Q3) Foreign Exchange Management Act

The Foreign Exchange Management Act, 1999 (FEMA), is an Act of the Parliament of India "to
consolidate and amend the law relating to foreign exchange with the objective of facilitating
external trade and payments and for promoting the orderly development and maintenance of
foreign exchange market in India". [1] It was passed on 29 December 1999 in parliament, replacing
the Foreign Exchange Regulation Act (FERA). This act makes offences related to foreign
exchange civil offenses. It extends to the whole of India,[2] replacing FERA, which had become
incompatible with the pro-liberalization policies of the Government of India. It enabled a
new foreign exchange management regime consistent with the emerging framework of the World
Trade Organization (WTO). It also paved the way for the introduction of the Prevention of Money
Laundering Act, 2002, which came into effect from 1 July 2005.
Foreign Exchange Regulation Act
The Foreign Exchange Regulation Act (FERA) was legislation passed in India in 1973[4] that
imposed strict regulations on certain kinds of payments, the dealings in foreign exchange (forex)
and securities and the transactions which had an indirect impact on the foreign exchange and the
import and export of currency.[5] The bill was formulated with the aim of regulating payments and
foreign exchange.
FERA came into force with effect from January 1, 1974. [
FERA was introduced at a time when foreign exchange (Forex) reserves of the country were low,
Forex being a scarce commodity. FERA therefore proceeded on the presumption that all foreign
exchange earned by Indian residents rightfully belonged to the Government of India and had to
be collected and surrendered to the Reserve Bank of India (RBI). FERA primarily prohibited all
transactions not permitted by RBI.
FEMA served to make transactions for external trade and easier – transactions involving current
account for external trade no longer required RBI’s permission. The deals in Foreign Exchange
were to be ‘managed’ instead of ‘regulated’. The switch to FEMA shows the change on the part
of the government in terms of for the capital

Fundamental principle
Under FEMA, the general principle is that all current account transactions are permitted
unless expressly prohibited and all Capital account transactions are prohibited unless
expressly permitted. (see Sections 5 and 6 of FEMA)
“Capital account transaction” means a transaction which alters the assets or liabilities,
including contingent liabilities, outside India of persons resident in India or assets or liabilities in
India of persons resident outside India, and includes transactions referred to in sub-section (3) of
section 6;[14]
It generally refers to Capital inflows like Equities, Grants and Debt. Inflows within the country are
called as 'Foreign Direct Investment' (FDI). Capital debt is termed - External Commercial
Borrowings (ECB).
Equity outflows are termed as 'Foreign outbound investment' .
Any corporate entity receiving FDI or making an outbound investment has to file an annual FEMA
return called as Foreign Liabilities and Assets (FLA). 

Main features

 Activities such as payments made to any person outside India or receipts from them,
along with the deals in foreign exchange and foreign security is restricted. It is FEMA
that gives the central government the power to impose the restrictions.
 Free transactions on current account subject to reasonable restrictions that may be
imposed.
 “Without general or specific permission of FEMA, MA restricts the transactions
involving foreign exchange or foreign security and payments from outside the country
to India – the transactions should be made only through an authorized person”.
 Deals in foreign exchange under the current account by an authorized person can be
restricted by the Central Government, based on public interest generally.
 Although selling or drawing of foreign exchange is done through an authorized
person, the RBI is empowered by this Act to subject the capital account transactions
to a number of restrictions.
 Residents of India will be permitted to carry out transactions in foreign exchange,
foreign security or to own or hold immovable property abroad if the currency, security
or property was owned or acquired when he/she was living outside India, or when it
was inherited by him/her from someone living outside India.
Regulations/Rules under FEMA

 Foreign Exchange Management (Current Account Transactions) Rule, 2000

 Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000
 Foreign Exchange Management (Transfer or Issue of any Foreign Security)
regulations, 2004
 Foreign Exchange Management (Foreign currency accounts by a person resident in
India)Regulations, 2000
 Foreign Exchange Management (Acquisition and transfer of immovable property in
India) regulations, 2018
 Foreign Exchange Management (Establishment in India of branch or office or other
place of business) regulations, 2000
 Foreign Exchange Management (Manner of Receipt and Payment) Regulations,
2016
PENALITY

As per Section 13 (1A), if any person is found to have acquired any foreign exchange, foreign
security or immovable property situated outside India of the aggregate value exceeding the
prescribed threshold under section 37A, he shall be liable to a penalty up to three times the sum
involved in such contravention and direct confiscation of value equivalent to foreign exchange,
security and money or property situated in India. Also, the offence is punishable with
imprisonment for a term which may be extended to 5 years with fine (Section 13 (1C)).

Under Section 13 (1B), the Adjudicating Authority if deems fit, may recommend the initiation of
the prosecution after recording the reasons in writing. And if the Director of Enforcement is
satisfied, he may after recording the reasons in writing, direct the prosecution of the guilty person
by filing a criminal complaint by an officer not below the rank of assistant director.

The Adjudicating Authority under Section 13(2), adjudging the contravention under section 13
(1), may in addition to any penalty, direct that any currency, security or any money or property in
respect of which the contravention has taken place shall be confiscated to Central Government
and if the contravener holds any foreign exchange, it shall be brought back to India or retained
outside as per the direction made in this behalf.

If the person contravening the provisions of the Act fails to make full payment of the penalty
imposed on him under Section 13 within the period of 90 days from the date on which notice of
such penalty is served on him, he shall be liable to civil imprisonment under this section.

Q4)What is Monetary Policy Committee? (MPC)

The Monetary Policy Committee (MPC) is a committee constituted by the Central Government
and led by the Governor of RBI. Monetary Policy Committee was formed with the mission of
fixing the benchmark policy interest rate (repo rate) to restrain inflation within the particular
target level. The RBI governor controls the monetary policy decisions with the support and advice
of the internal team and the technical advisory committee.

Initially, the main decisions related to interest rates were taken by the Governor of RBI alone
before the establishment of the committee. MPC was constituted under the Reserve Bank of
India Act, 1934 as an initiative to bring more transparency and accountability in fixing the
Monetary Policy of India. MPC conducts meetings at least 4 times a year and the monetary
policy is published after every meeting with each member explaining his opinions. 
Instruments of Monetary Policy
There are both direct and indirect instruments used for implementing monetary policy.
Few include:

 Repo rate 
 Reverse Repo rate
 Liquidity Adjustment Facility (LAF)
 Marginal Standing Facility (MSF)
 Corridor
 Bank Rate
 Cash Reserve Ratio (CRR)
 Statutory Liquidity Ratio (SLR)
 Open Market Operations (OMOs)
 Market Stabilisation Scheme (MSS)

Objectives of Monetary Policy

Monetary Policy was implemented with an initiative to provide reasonable price stability, high
employment, and a faster economic growth rate. The major four objectives of the Monetary
Policy are mentioned below:

1. To stabilize the business cycle.

2. To provide reasonable price stability.
3. To provide faster economic growth.
4. Exchange Rate Stability.

How was the Monetary Policy Committee formed?

Urijit Patel Committee first proposed the idea for the formation of a five-member Monetary Policy
Committee. Later, the government proposed the setting up of a seven-member committee. MPC
is assisted by the Monetary Policy Department (MPD) of the Reserve Bank in the formulation of
the policy.  The monetary Policy Committee came into force on 27th June 2016. The Financial
Markets Operations Department (FMOD) operationalizes the monetary policy, mainly through
day-to-day liquidity management operations.

Function of the MPC 

The main responsibility of the MPC will be to keep the inflation

targets set by the RBI. The MPC decides the changes to be made to
the policy rate (repo rate) to contain inflation within the target
(based on CPI) level set under India’s inflation targeting regime.
Members of the MPC can suggest reasons for their support or
opposition for a policy rate change. This will be published in the
minutes of the MPC and the minutes should be published after 14
days of MPC meeting. The minutes should contain the reasons for
each member proposing or opposing the monetary policy decision
taken by the NPC.

In case the inflation target is failed to achieve (2% higher or lower

than the set target of 4% for continuous three quarters), the RBI has
to give an explanation to the government about the reasons, the
remedial actions and the estimated time for realizing the target.
Another responsibility for the RBI is to publish a Monetary Policy
Report every six months, elaborating inflation forecasts and inflation
sources for the next six to eighteen months.

Q5)What is IBC?
IBC (Insolvency and Bankruptcy Code) is one of the biggest insolvency reforms that the
parliament implemented in November 2016 to bring uniformity to India’s scattered
bankruptcy laws. IBC got its Presidential assent in May 2016 and was necessitated due to
piling up of non-performing assets of banks and delay in debt resolution.

The IBC proceedings are regulated by the Insolvency and Bankruptcy Board of India (IBBI).
The IBBI has 10 members from the Law Ministry, Finance Ministry and the Reserve Bank of
India to oversee the proceedings.

IBC aims to reorganise and resolve the insolvency of corporations, individuals, and
partnerships in a time-bound manner.

The sole intention of the Insolvency and Bankruptcy Code, 2016 is to provide a
justified balance between

 the loss that a creditor might face because of the default, and

 the interest of all the stakeholders of the company so that they enjoy credit

availability.
What are the objectives of IBC?
 To consolidate all existing insolvency laws in India and make amends if needed.

 To make the process of Insolvency and Bankruptcy Proceedings in India simple and

fast

 To protect the interest of creditors, including stakeholders in a company

 To help creditors who have been waiting for the payments for a long time get

necessary relief

 To timely revive the company

 To resolve India’s bad debt problem by creating a database of defaulters

 To promote entrepreneurship

 To create a new and timely recovery procedure to be adopted by the financial

institutions, banks, or individuals.

 To maximise the value of assets of interested persons

 To set up an Insolvency and Bankruptcy Board of India as a regulatory body for

insolvency and bankruptcy law

Following are the key features of the Insolvency

and Bankruptcy Code 2016:
1. Resolution of Insolvency: 
The Insolvency and Bankruptcy Code, 2016  lays down the separate
insolvency resolving procedures for companies, individuals as well as
partnership companies.

2. Regulator of Insolvency: 
The Code lays down that the Insolvency and Bankruptcy Board of
India   shall oversee the proceedings related to insolvency in the nation
and also regulate all the organizations that have been registered by the
board. The Insolvency and Bankruptcy Board shall consist of ten
members, which would also include the representatives of the Law and
Finance ministries as well as the RBI (Reserve Bank of India)

3. Licensed Insolvency Professionals: 

The management of insolvency procedures shall be done by licensed
insolvency professionals. They would also exercise control on the debtor’s
assets at the time of the insolvency procedure.

4. Insolvency and Bankruptcy Adjudicator: 

The Code has introduced two distinct tribunals for overseeing the procedure
resolving insolvency, for companies and individuals. These are (i) the National
Company Law Tribunal for organizations and Limited Liability Partnership
companies;

5. Procedure: 
An insolvency plea is given to the authority that adjudicates (incorporate
debtor’s case it is NCLT) by operation or financial creditors or the corporate
debtor. The plea can be accepted or rejected in a maximum time period of
fourteen days.

Offences And Penalties Under IBC

Before enacting the Insolvency and Bankruptcy Code, 2016 ("Code"), the law governing

insolvency and bankruptcy was multitudinous. The erstwhile framework created ambiguity

leading to problems like multiple forums and lack of business or financial expertise. A company

may adopt a successful business model although, it may fail to repay its creditors. The

insolvency process incorporated...

Section 68 : Punishment for concealment or property.

Section 69 : Punishment for transactions defrauding creditors.
Section 70 : Punishment for misconduct in courses of corporate insolvency resolution
process.
Section 71 : Punishment for falsification of books of corporate debtor.
Section 72 : Punishment for wilful and material omissions from statements relating to affairs
of corporate debtor.

Section 73 : Punishment for false representations to creditors.

Q6)Ministry of Finance (India) MOF
The Ministry of Finance (IAST: Vitta Maṃtrālaya) is a ministry within the Government of
India concerned with the economy of India, serving as the Treasury of India. In particular, it
concerns itself with taxation, financial legislation, financial institutions, capital
markets, centre and state finances, and the Union Budget.
The Ministry of Finance is the apex controlling authority of four central civil
services namely Indian Revenue Service, Indian Audit and Accounts Service, Indian Economic
Service and Indian Civil Accounts Service. It is also the apex controlling authority of one of
the central commerce services namely Indian Cost and Management Accounts Service

Policy Aims and Objectives of the Ministry of Finance 

Enhancing financial management to improve fiscal effectiveness
(1) Enhancing operating efficiency of the national treasury agent institutions,
providing sound internal financial control mechanisms of government
agencies.
(2) Establishing multiple channels for the cultivation of financial resources to
support government administration.

Improving national asset management to create asset activation benefits

(1) Actively implementing national real estate take-over to promote the benefits
of activating non-public use properties. Speeding up the survey of national
property to improve operational performance.
(2) Utilizing the national property database modification platform to complete
property registration data, integrate information resources, and enhance and
promote the management and utilization performance of national property.

Improving the investment environment of promotion of Private Participation

in Infrastructure Project (PPIP) to boost the momentum of economic
development
(1) Optimizing the regulatory environment for promotion of PPIP to attract
private investment.
(2) Operating the investment platform for promotion of PPIP to eliminate
obstacles and to implement works on promoting PPIP.

4. Building up a high-quality tax environment to maintain the fairness and

reasonableness of taxation
(1) Proposing amendments to relevant tax laws and implementation of tax
reforms to make a sound tax system.
(2) Reviewing and amending tax laws and regulations in a timely manner to
meet the needs of economic and social development.

5. Introducing emerging information and communication technologies to

create value-added benefit for fiscal data
(1) Optimizing the cloud invoice service environment to upgrade services as a
whole and to create value-added applications.
(2) Establishing a foundation for cross-agency e-tax service and extending the
application of tax services.
(i) The particulars of its organization, function and duties
i. Analysis of States Budgets.
ii. Coordination work relating to States Market Borrowings and Guarantees.
iii. Coordination with RBI in connection with RBI Committees, Finance Secretaries
meetings.
iv. Issue of Consent under Article 293 (3) for raising loans by the State Governments as
providing in Annual Plans.

DEFINED THE TERMS

1.SECURITIES

Securities are fungible and tradable financial instruments used to raise

capital in public and private markets. There are primarily three types of

securities: equity—which provides ownership rights to holders; debt—

essentially loans repaid with periodic payments; and hybrids—which combine

aspects of debt and equity

Types of Securities
Equity Securities
An equity security represents ownership interest held by shareholders in
an entity (a company, partnership, or trust), realized in the form of shares
of capital stock, which includes shares of both common and preferred
stock.

Debt Securities
A debt security represents borrowed money that must be repaid, with
terms that stipulate the size of the loan, interest rate, and maturity or
renewal date.

Hybrid Securities
Hybrid securities, as the name suggests, combine some of the
characteristics of both debt and equity securities. Examples of hybrid
securities include equity 

Derivative Securities
A derivative is a type of financial contract whose price is determined by the
value of some underlying asset, such as a stock, bond, or commodity.
Among the most commonly traded derivatives are call options, which gain
value if the underlying asset appreciates, and put options, which gain
value when the underlying asset loses value.

Asset-Backed Securities
An asset-backed security represents a part of a large basket of similar
assets, such as loans, leases, credit card debts, mortgages, or anything
else that generates income. Over time, the cash flow from these assets is
pooled and distributed among the different investors.
2What Is a Derivative?
The term derivative refers to a type of financial contract whose value is
dependent on an underlying asset, group of assets, or benchmark. A
derivative is set between two or more parties that can trade on an
exchange or over-the-counter (OTC).

Types of Derivatives
Derivatives today are based on a wide variety of transactions and have
many more uses. There are even derivatives based on weather data, such
as the amount of rain or the number of sunny days in a region.

Futures
A futures contract, or simply futures, is an agreement between two parties
for the purchase and delivery of an asset at an agreed-upon price at a
future date. Futures are standardized contracts that trade on an exchange.
Traders use a futures contract to hedge their risk or speculate on the price
of an underlying asset. The parties involved are obligated to fulfill a
commitment to buy or sell the underlying asset

Forwards
Forward contracts, or forwards, are similar to futures, but they do not trade
on an exchange. These contracts only trade over-the-counter. When a
forward contract is created, the buyer and seller may customize the terms,
size, and settlement process. As OTC products, forward contracts carry a
greater degree of counterparty risk for both parties.

Swaps
Swaps are another common type of derivative, often used to exchange
one kind of cash flow with another. For example, a trader might use
an interest rate swap to switch from a variable interest rate loan to a fixed
interest rate loan, or vice versa

Options
An options contract is similar to a futures contract in that it is an agreement
between two parties to buy or sell an asset at a predetermined future date
for a specific price.