Chitra, a software engineer, received a bonus for best performance from her company and wanted to invest it in the stock market. Having researched various companies, she identified XYZ Ltd. as a promising investment opportunity. She approached her registered stock broker and placed an order to buy 100 shares of XYZ Ltd. at ₹ 500 per share. The order was executed electronically and the broker issued a trade confirmation slip to Chitra. After the trade was executed, the broker issued a note which was sent to Chitra electronically within 24 hours, fulfilling regulatory requirements.
(i) Name the note issued by the broker to Chitra.
(ii) List the four details which are mentioned in the note identified in (i) above.
(iii) Why is the note issued by the broker to Chitra considered an important document ? State.
Chitra, a software engineer, received a bonus for best performance from her company and wanted to invest it in the stock market. Having researched various companies, she identified XYZ Ltd. as a promising investment opportunity. She approached her registered stock broker and placed an order to buy 100 shares of XYZ Ltd. at ₹ 500 per share. The order was executed electronically and the broker issued a trade confirmation slip to Chitra. After the trade was executed, the broker issued a note which was sent to Chitra electronically within 24 hours, fulfilling regulatory requirements.
(i) Name the note issued by the broker to Chitra.
(ii) List the four details which are mentioned in the note identified in (i) above.
(iii) Why is the note issued by the broker to Chitra considered an important document ? State.
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Solution and Explanation
After a trade is executed, the broker sends a note to the client. The case says it was sent electronically within 24 hours as per regulations.
This note is the contract note.
Step 2: Part (ii): Details in the contract note:
A contract note shows the following details. Any four can be written.
1. Name of the company whose shares are bought. Here, XYZ Ltd.
2. Number of shares bought or sold. Here, 100 shares.
3. Price at which the deal was done. Here, Rs. 500 per share.
4. Date and time of the transaction.
5. Brokerage charged by the broker. This is also shown in the note.
Step 3: Part (iii): Why it is an important document:
It is a legal record of the deal. It proves that the order was carried out at the stated price and quantity.
It works as evidence if a dispute arises between the broker and the client.
It also helps the investor to check the amount charged and to keep accounts for tax and other records.
Final Answer:
(i) Contract note. (ii) Name of company, number of shares, price and date and time of the transaction. (iii) It is legal proof of the trade and helps in settling disputes.
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