UPSC Prelims Practice Questions — SC: no public disclosure of AIF, FPI beneficiaries sans legal framework

Q1. With reference to the writ of mandamus, consider the following statements: Which of the statements given above is/are correct?

  1. It commands a public authority to perform a duty that the law already places on that authority.
  2. Where a regulation already mandates a disclosure and the regulator fails to enforce it, a court may direct compliance through mandamus.
  3. It can compel a regulator to frame new regulations on a subject on which the parent statute merely empowers, but does not oblige, the regulator to make them.
  • A. 2 and 3 only
  • B. 1 and 2 only
  • C. 1, 2 and 3
  • D. 1 only

Q2. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. A court cannot use mandamus to compel a market regulator to adopt a disclosure obligation that no law or regulation yet imposes.
  2. A statutory regulator such as SEBI is not amenable to the writ jurisdiction of the Supreme Court under Article 32.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q3. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. The writ jurisdiction of the High Courts is wider in scope than the writ jurisdiction of the Supreme Court.
  2. Article 226 empowers High Courts to issue writs not only to enforce fundamental rights but also 'for any other purpose', whereas Article 32 is confined to enforcing the rights in Part III.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q4. With reference to ultimate beneficial ownership (UBO) and look-through disclosure for foreign portfolio investors in India, consider the following statements: Which of the statements given above is/are correct?

  1. Under SEBI's granular-disclosure regime, an FPI needs to identify only those persons whose stake in the fund exceeds a minimum percentage.
  2. An ultimate beneficial owner, in the sense used for such disclosure, is necessarily a natural person rather than a company or a trust.
  3. Look-through disclosure can reveal whether money routed through a fund based in a third country actually belongs to persons from a country sharing a land border with India.
  • A. 1 and 2 only
  • B. 3 only
  • C. 1, 2 and 3
  • D. 2 and 3 only

Q5. Suppose several FPIs, whose ultimate owners are in fact linked to the promoters of a listed company, together hold a large block of its shares while being classified as public shareholders. With reference to this situation, consider the following statements: Which of the statements given above is/are correct?

  1. The company could appear to meet the minimum public shareholding requirement even though its genuinely independent free float is smaller.
  2. Because FPI investment is portfolio investment, such holdings fall outside SEBI's supervision and can be examined only by the RBI.
  3. If the regulator obtains look-through disclosure of these FPIs' beneficial owners, it can detect the arrangement even without any public disclosure.
  • A. 1 and 3 only
  • B. 1 only
  • C. 1 and 2 only
  • D. 2 and 3 only

Q6. With reference to the Securities and Exchange Board of India (SEBI) and the Securities Appellate Tribunal (SAT), consider the following statements: Which of the statements given above is/are correct?

  1. SEBI's power to make regulations flows directly from the Constitution, so its regulations do not depend on any parent statute.
  2. An appeal against an order of SAT lies to the Supreme Court only on a question of law.
  3. While hearing such an appeal, the Supreme Court ordinarily re-weighs the commercial merits of market decisions and substitutes its own findings of fact.
  • A. 1, 2 and 3
  • B. 1 only
  • C. 2 only
  • D. 2 and 3 only

Q7. In disposing of a petition that sought public disclosure of the ultimate beneficial owners of AIFs and FPIs, the Supreme Court made three observations. It found that no legal framework for such full public disclosure existed. It asked the Union government and SEBI to consider the need for suitable transparency regulations. It questioned why the petitioner, a Member of Parliament, had not raised the matter in Parliament. Which of the following inferences can be drawn from the above?

  1. The Court treated the question of whether, and how far, beneficial-ownership data should be made public as a policy matter to be settled first by the legislature, the executive and the regulator.
  2. The Court held that public disclosure of the beneficial owners of FPIs would violate the investors' fundamental right to privacy.
  3. The Court's decision sets aside SEBI's existing requirement that certain FPIs disclose their beneficial owners to the regulator.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q8. Consider the following assertion: Knowing only the registered name and domicile of a pooled foreign fund is not enough to identify who ultimately controls the money invested through it. Which of the following statements support/supports the above assertion?

  1. A fund may be owned by other entities that are themselves owned by further entities, spread across several jurisdictions.
  2. Sovereign wealth funds and central banks are exempt from SEBI's granular ownership-disclosure requirement for FPIs.
  3. The persons who exercise control over a fund or derive economic benefit from it need not be the persons in whose names its units are formally held.
  • A. 1 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3