The highest weightage topics in the NISM Series V-A (Mutual Fund

Distributors) Certification Examination, as indicated in the syllabus outline

within the PDF, are:
* Unit 9: Investor Services (15% weightage)
* Unit 12: Mutual Fund Scheme Selection (15% weightage)

The syllabus outline explicitly states the weightage for each unit, making these two units the most
crucial areas to focus on during your preparation.
he following are the sample questions provided at the end of Chapter 9: Investor Services in the
reference text, along with their answers and explanations based on the chapter's content.

Chapter 9: Sample Questions

 What term is used to describe the Net Asset Value (NAV) of the scheme after the dividend
is paid out (Remember the NAV would have dropped to the extent of the dividend paid)?

* (a) Ex-Dividend NAV

* (b) Cum-Dividend NAV

* (c) Lower NAV

* (d) Dividend NAV

Answer: (a) Ex-Dividend NAV

Explanation: The NAV of a mutual fund scheme drops after a dividend is paid out. The reduced NAV is
referred to as the ex-dividend NAV. The NAV before the dividend payout is called the cum-dividend
NAV.

 At what price are the bonus units issued to the unitholder?

* (a) The price is decided by the AMC in consultation with the trustees

* (b) The bonus units are allotted free of cost

* (c) At the prevailing NAV

* (d) At the prevailing NAV divided by the bonus ratio

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Answer: (b) The bonus units are allotted free of cost

Explanation: In a bonus issue, the mutual fund allots additional units to existing investors free of
cost. The NAV of the scheme decreases proportionately to maintain the overall value of the
investor's holdings.

 3. Which of the following statements is True?

* (a) Hindu Undivided Families (HUFs) are not allowed to invest in mutual fund schemes

* (b) Minors cannot invest in mutual fund schemes

* (c) Foreign investors can invest in Indian mutual fund schemes, provided they have completed the
Know-Your-Client (KYC) formalities

Answer: (c) Foreign investors can invest in Indian mutual fund schemes, provided they have
completed the Know-Your-Client (KYC) formalities

Explanation: The reference text states that foreign investors, including Foreign Portfolio Investors
(FPIs) and Qualified Foreign Investors (QFIs), can invest in Indian mutual fund schemes after
completing the necessary KYC procedures.

 4. Whose KYC needs to be completed in case of an application by a minor?

* (a) The minor

* (b) The guardian

* (c) Any family member of the minor

* (d) No KYC is required in case of applications by minors

2
Answer: (b) The guardian

Explanation: Minors cannot enter into contracts directly. Therefore, investments on behalf of a minor
are made through a guardian. The KYC process needs to be completed for the guardian, who acts on
behalf of the minor.

 5. How many (maximum) bank accounts can a resident individual investor register
with a mutual fund folio?
* (a) 1

* (b) 2

* (c) 3

* (d) 5

Answer: (d) 5

Explanation: The reference text states that individual investors can register a maximum of five bank
accounts with a mutual fund folio. One of these accounts is designated as the default account, and
unless specified otherwise, all payouts (dividends, redemptions) are credited to this account.

These are just a few sample questions from Chapter 9. For a comprehensive understanding and
preparation, it is crucial to thoroughly study the entire chapter and practice with more questions and
mock tests.

 Which of the following statements is TRUE regarding the Consolidated Account Statement
(CAS) in mutual funds?

* (a) It is sent to investors only once a year.

* (b) It provides a consolidated view of all the investor's holdings across different mutual funds.

* (c) It is issued only for physical unit holdings.

* (d) It is not mandatory for mutual funds to send CAS to investors.

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Answer: (b) It provides a consolidated view of all the investor's holdings across different mutual
funds.

Explanation: The CAS is a monthly statement that consolidates an investor's holdings across various
mutual funds, offering a comprehensive overview of their investments.

 What is the primary purpose of the 'Instant Access Facility' (IAF) in liquid funds?
* (a) To guarantee higher returns

* (b) To allow investors to redeem units and receive proceeds on the same day

* (c) To provide tax benefits

* (d) To invest in a diversified portfolio of stocks

Answer: (b) To allow investors to redeem units and receive proceeds on the same day

Explanation: The IAF enables investors in liquid funds to redeem their units and receive the proceeds
in their bank account on the same day, subject to certain limits. This enhances liquidity for investors.

 Which of the following is NOT a valid mode of payment for purchasing mutual fund
units?
* (a) Cheque

* (b) Demand Draft

* (c) Credit Card

* (d) Net Banking

4
Answer: (c) Credit Card

Explanation: SEBI regulations prohibit the use of credit cards for purchasing mutual fund units. This is
to prevent investors from taking on debt to invest in mutual funds.

 What is the maximum amount that can be invested in cash in mutual funds per
investor per financial year?

* (a) ₹20,000

* (b) ₹30,000

* (c) ₹40,000

* (d) ₹50,000

Answer: (d) ₹50,000

Explanation: The reference text states that small investors (who may not be taxpayers and may not
have PAN/bank accounts) are allowed to make cash transactions for purchasing mutual fund units up
to a limit of ₹50,000 per investor, per mutual fund, per financial year.

 What is the primary purpose of the 'Application Supported by Blocked Amount'

(ASBA) facility in mutual fund investments?

* (a) To guarantee allotment of units in an NFO

* (b) To allow investors to make payments in installments

* (c) To block the application amount in the investor's bank account until allotment

* (d) To provide tax benefits

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Answer: (c) To block the application amount in the investor's bank account until allotment

Explanation: ASBA is a facility where the application money for an NFO is blocked in the investor's
bank account until units are allotted. This ensures that the money remains in the investor's account,
earning interest, until the allotment is finalized.

 Which of the following statements is TRUE regarding the change of distributor in a

mutual fund folio?
* (a) The investor needs to obtain a No Objection Certificate (NOC) from the existing distributor.

* (b) The new distributor will receive trail commission on the existing investments in the folio.

* (c) The AMC can reject the investor's request for a change of distributor.

* (d) No commission is payable to any distributor (old or new) in case of a change of distributor
code.

Answer: (d) No commission is payable to any distributor (old or new) in case of a change of
distributor code.

Explanation: To prevent any malpractices, the mutual fund industry has decided that no commission
will be paid to any distributor (existing or new) if the investor changes the distributor code in their
folio.

 What is the maximum number of bank accounts that a non-individual investor can
register with a mutual fund folio?
* (a) 3

* (b) 5

* (c) 7

* (d) 10

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Answer: (d) 10

Explanation: Non-individual investors (companies, trusts, etc.) can register a maximum of ten bank
accounts with a mutual fund folio.

 The cut-off time for purchase transactions in liquid funds to receive the same-day
NAV is:

* (a) 1:30 PM

* (b) 3:00 PM

* (c) 5:00 PM

* (d) There is no cut-off time for liquid funds

* Answer: (a) 1:30 PM

Explanation: The cut-off time for purchase transactions in liquid funds to receive the same-day NAV is
1:30 PM. If the application and funds are received before this time, the investor gets the closing NAV
of the same day. If received after 1:30 PM, the NAV of the next business day applies.

 Which of the following statements is TRUE regarding the account statement for SIP
(Systematic Investment Plan) transactions?

* (a) It is sent to investors on a daily basis

* (b) It is sent to investors on a monthly basis

* (c) It is sent to investors on a quarterly basis

* (d) It is sent to investors only once a year

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* Answer: (c) It is sent to investors on a quarterly basis

Explanation: The account statement for SIP transactions is dispatched to investors quarterly (i.e., at
the end of March, June, September, and December), within 10 working days of the end of the
respective quarter.

 The process of converting physical units of a mutual fund into dematerialized units is
called:

* (a) Rematerialization

* (b) Dematerialization

* (c) Transmission

* (d) Nomination

* Answer: (b) Dematerialization

Explanation: Dematerialization is the process of converting physical securities or units into electronic
form, held in a demat account.

 Which of the following is NOT a benefit of holding mutual fund units in demat form?

* (a) Reduced paperwork

* (b) Direct credit of dividends and redemption proceeds

* (c) Guaranteed higher returns

* (d) Consolidation of investments under one account

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* Answer: (c) Guaranteed higher returns

Explanation: Holding mutual fund units in demat form does not guarantee higher returns. Returns
depend on the performance of the underlying investments in the scheme.

 The 'Change of Bank Details' form is used for:

* (a) Changing the nominee in a mutual fund folio

* (b) Updating the investor's contact details

* (c) Changing the bank account linked to the folio

* (d) Switching between different schemes of the same mutual fund

* Answer: (c) Changing the bank account linked to the folio

Explanation: The 'Change of Bank Details' form is used to update the bank account information
associated with a mutual fund folio. This is important for receiving dividends and redemption
proceeds.

 The payment for the purchase of mutual fund units by a minor should be made from:

* (a) The minor's bank account

* (b) The guardian's bank account

* (c) A joint account of the minor with the guardian

* (d) Any of the above

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* Answer: (d) Any of the above

Explanation: SEBI regulations allow payments for investments by a minor to be made from the
minor's bank account, the guardian's bank account, or a joint account of the minor with the
guardian.

 Which of the following statements is FALSE regarding the One-Time Mandate

(OTM) facility in mutual funds?
* (a) It allows investors to authorize their bank to process debits for mutual fund purchases

* (b) It eliminates the need for investors to initiate payment for each purchase transaction

* (c) It can be used for SIP investments

* (d) It can be used for making payments to any mutual fund house

* Answer: (d) It can be used for making paym…

Certainly, let's continue with more questions from Unit 9 (Investor Services) of the NISM Series V-A
workbook, along with their answers and explanations.

 What is the maximum amount that can be subscribed to mutual fund schemes through e-
wallets per investor per financial year?

* (a) ₹10,000

* (b) ₹25,000

* (c) ₹50,000

* (d) There is no limit

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The correct answer is (c) ₹50,000.

According to the Securities and Exchange Board of India (SEBI), the maximum amount that can be
subscribed to mutual fund schemes through e-wallets per investor per financial year is ₹50,000. This
is an umbrella limit that applies to both e-wallet and cash investments for a specific mutual fund
scheme.

1 The process by which the ownership of units in a mutual fund scheme is

transferred to the legal heir(s) upon the death of the unitholder is known as:
* (a) Nomination

* (b) Transmission

* (c) Dematerialization

* (d) Repurchase

2 Which of the following is NOT a mandatory document required for the transmission of
units in case of the death of a sole unitholder with no nomination?

* (a) Death certificate of the deceased unitholder

* (b) KYC documents of the claimant(s)

* (c) Will of the deceased unitholder

* (d) Indemnity bond from the claimant(s)

3 The 'Change in Status' form is used when:

* (a) A minor becomes a major

* (b) An NRI becomes a Resident Indian

* (c) The Karta of a HUF changes

* (d) All of the above

4 Which of the following statements is TRUE regarding investments by a minor in

mutual funds?
* (a) Investments can be made directly by the minor

* (b) The guardian's KYC is not required

* (c) The investment can have joint holders

* (d) The guardian can operate the minor's account only until the minor attains the age of majority

11
 5 The maximum amount that can be redeemed from a liquid fund under the Instant
Access Facility (IAF) per day per investor is:
* (a) ₹20,000

* (b) ₹30,000

* (c) ₹50,000 or 90% of the latest value of investment in the scheme, whichever is lower

* (d) There is no limit

6 Which of the following statements is FALSE regarding the cut-off time for mutual
fund transactions?
* (a) It is the time before which the application must reach the official points of acceptance.

* (b) It determines the applicable NAV for the transaction.

* (c) It is the same for all types of mutual fund schemes.

* (d) It is crucial for ensuring fairness to investors.

7 The process of valuing each security in the investment portfolio of a mutual fund
scheme at its current market value is called:
* (a) Mark-to-market

* (b) Net Asset Value (NAV) calculation

* (c) Asset allocation

* (d) Portfolio rebalancing

8 Which of the following is NOT a key function of the Registrar and Transfer Agent
(RTA) in mutual funds?
* (a) Maintaining investor records

* (b) Processing purchase and redemption transactions

* (c) Managing the investment portfolio

* (d) Generating account statements

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 9 Which of the following statements is TRUE regarding the role of AMCs in facilitating
demat accounts for investors?
* (a) AMCs are required to open demat accounts for all investors

* (b) AMCs have to tie up with depositories to offer the demat facility

* (c) AMCs can charge additional fees for providing demat services

* (d) AMCs cannot offer the option to hold units in physical form

Answers and Explanations:

1 Answer: (b) Transmission

Explanation: Transmission is the process by which the ownership of units is transferred to the legal
heir(s) upon the death of the unitholder.

2 Answer: (c) Will of the deceased unitholder

Explanation: In the absence of a nomination, the legal heir(s) need to provide various documents,
including a legal heir certificate or succession certificate, to claim the units. A will may be helpful in
determining the legal heirs, but it's not mandatory for the transmission process itself.

13
3 Answer: (d) All of the above

Explanation: The 'Change in Status' form is used in all these scenarios to update the investor's
information in the mutual fund records.

4 Answer: (d) The guardian can operate the minor's account only until the minor attains the age of
majority

Explanation: Once a minor turns 18 (attains the age of majority), the guardian can no longer operate
the account. The minor needs to complete the KYC process and provide their own bank account
details to operate the folio.

5 Answer: (c) ₹50,000 or 90% of the latest value of investment in the scheme, whichever is lower

Explanation: The Instant Access Facility (IAF) allows redemptions up to ₹50,000 or 90% of the
investment value, whichever is lower, per day per investor in liquid funds.

14
6 Answer: (c) It is the same for all types of mutual fund schemes.

Explanation: The cut-off time varies for different types of mutual fund schemes. For example, it's
3:00 PM for most equity and debt funds, but 1:30 PM for liquid funds.

7 Answer: (a) Mark-to-market

Explanation: Mark-to-market is the process of valuing securities at their current market price. This is
done to ensure that the NAV reflects the true worth of the scheme's portfolio.

8 Answer: (c) Managing the investment portfolio

Explanation: The RTA's primary functions are maintaining investor records, processing transactions,
and generating account statements. Managing the investment portfolio is the responsibility of the
fund manager and the AMC.

15
9 Answer: (b) AMCs have to tie up with depositories to offer the demat facility

Explanation: AMCs are not required to open demat accounts directly for investors, but they need to
have arrangements with depositories (like NSDL or CDSL) to facilitate holding units in demat form.

The reference text provides sample MCQs at the end of each chapter. The
following are the sample questions provided at the end of Chapter 12:
Mutual Fund Scheme Selection, along with their answers and explanations
based on the chapter's content.
Chapter 12: Sample Questions

1. Which of the following scheme categories would be considered the least risky in terms
of credit risk?
* (a) Credit risk fund

* (b) Corporate bond fund

* (c) Dynamic bond

* (d) Gilt fund

16
Answer: (d) Gilt fund

Explanation: Gilt funds invest primarily in government securities, which are considered to have the
lowest credit risk as they are backed by the government. The other options involve investments in
corporate bonds, which carry a higher degree of credit risk compared to government securities.

2. For an investor to get a quick sense of the level of risk involved in a mutual fund
scheme, SEBI suggested a simplified framework known as __.
* (a) Risk-o-meter

* (b) Risk factors

* (c) Fact sheet

* (d) Investor’s risk profile

Answer: (a) Risk-o-meter

Explanation: The Risk-o-meter is a pictorial representation of the risk associated with a mutual fund
scheme. It categorizes schemes into different risk levels (low, low to moderate, moderate,
moderately high, high, very high) to help investors quickly assess the risk involved.

17
3. Passive funds are safe, as the NAV of such funds do not go down even when the
respective markets fall. State whether this is True or False.
* (a) True

* (b) False

Answer: (b) False

Explanation: The NAV of passive funds, such as index funds, can go down when the market falls.
Passive funds aim to replicate the performance of a benchmark index. If the index falls, the NAV of
the fund will also fall.

4. Which among the following schemes would have a lower risk of concentration?

* (a) Multi-cap fund

* (b) Focused fund

* (c) Thematic fund

* (d) Sector fund

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Answer: (a) Multi-cap fund

Explanation: Multi-cap funds invest across large-cap, mid-cap, and small-cap stocks, offering greater
diversification and lower concentration risk compared to focused funds (limited number of stocks),
thematic funds (specific theme), and sector funds (single sector).

5. ___ are close-ended debt funds.

* (a) Fixed maturity plans (FMPs)

* (b) Overnight funds

* (c) Dynamic debt funds

* (d) Arbitrage funds

Answer: (a) Fixed maturity plans (FMPs)**

Explanation: Fixed maturity plans (FMPs) are close-ended debt funds with a defined maturity date.
They invest in a portfolio of debt securities that mature around the same time as the scheme's
maturity, aiming to provide relatively predictable returns.

19
6 The scheme's portfolio is actively managed by the fund manager in which of
the following types of funds?
* (a) Index Fund

* (b) Exchange Traded Fund (ETF)

* (c) Fund of Funds (FoF)

* (d) Diversified Equity Fund

6 * Answer: (d) Diversified Equity Fund

Explanation: In an actively managed fund like a Diversified Equity Fund, the fund manager has the
flexibility to choose the investment portfolio within the scheme's objectives. Index Funds, ETFs, and
FoFs typically follow a passive strategy, tracking a specific index or investing in other funds.

7 The difference between the sale price and the NAV of a mutual fund
scheme is known as:
* (a) Exit load

* (b) Entry load

* (c) Expense ratio

* (d) None of the above

20
8 The following are the features of an interval fund, EXCEPT
* (a) It combines the features of both open-ended and close-ended schemes

* (b) It is open for purchase and redemption on a continuous basis

* (c) It has specified transaction periods when investors can buy or sell units

* (d) Its units are listed on a stock exchange

9 The document that provides statutory information about the mutual fund
or AMC offering the scheme is called:
* (a) Scheme Information Document (SID)

* (b) Statement of Additional Information (SAI)

* (c) Key Information Memorandum (KIM)

* (d) Fund Fact Sheet

10 The following are the rights of unitholders, EXCEPT

* (a) Right to beneficial ownership of the scheme's assets

* (b) Right to change the fund manager

* (c) Right to inspect key documents like the Trust Deed and Investment Management Agreement

* (d) Right to appoint nominees

11 The process of transferring the units of a deceased unitholder to the

nominee or legal heir is known as:
* (a) Nomination

* (b) Transmission

* (c) Dematerialization

* (d) Repurchase

21
12 The standard warning that must be included in all mutual fund
advertisements is:
* (a) "Mutual fund investments are subject to market risks. Please read the offer document
carefully before investing."

* (b) "Past performance may or may not be sustained in the future."

* (c) "Mutual funds are not guaranteed or assured return products."

* (d) "Investors should consult their financial advisors if in doubt about the suitability of the
product."

13 As per SEBI regulations, the maximum expense ratio that can be charged
to an open-ended equity-oriented scheme with assets under management
(AUM) of Rs. 1000 crores is:
* (a) 1.00%

* (b) 1.75%

* (c) 2.00%

* (d) 2.25%

Answers and Explanations:

7* Answer: (b) Entry load

Explanation: Entry load was the difference between the sale price and the NAV, charged to investors
at the time of purchase. However, SEBI has banned entry loads, so the sale price is now equal to the
NAV.

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8 * Answer: (b) It is open for purchase and redemption on a continuous basis

Explanation: Interval funds are open for purchase and redemption only during pre-specified intervals,
not on a continuous basis like open-ended funds.

9 * Answer: (b) Statement of Additional Information (SAI)

Explanation: The SAI contains statutory information about the mutual fund or AMC offering the
scheme, including details about the sponsor, trustees, AMC, key personnel, and other relevant
information.

10 * Answer: (b) Right to change the fund manager

Explanation: Unitholders do not have the right to directly change the fund manager. The AMC
appoints the fund manager, and unitholders can express their concerns through the grievance
redressal mechanism or by choosing to exit the scheme.

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11 * Answer: (b) Transmission

Explanation: Transmission is the process of transferring the units of a deceased unitholder to the
nominee or legal heir.

12* Answer: (a) "Mutual fund investments are subject to market risks. Please read the offer
document carefully before investing."

Explanation: This is the standard warning mandated by SEBI to be included in all mutual fund
advertisements.

13 * Answer: (b) 1.75%

*Explanation: As per SEBI regulations, the maximum TER for an open-ended equity-oriented scheme
with AUM between Rs. 500 crores and Rs. 750 crores is 1.75%.

24
 NISM Series V-A: Mini Mock Test (Part 11)

1 * The scheme that invests in a portfolio that mirrors a specific market index
is known as:
* (a) Sectoral fund

* (b) Index fund

* (c) Thematic fund

* (d) Focused fund

2 * The risk that arises due to the possibility of a borrower defaulting on their
debt obligations is called:
* (a) Inflation risk

* (b) Liquidity risk

* (c) Credit risk

* (d) Market risk

3 * The measure that indicates how much the scheme's return varies
compared to its own past average return is:
* (a) Beta

* (b) Standard deviation

* (c) Sharpe ratio

* (d) Tracking error

4* The difference between the NAV and the repurchase price of a mutual
fund unit is known as:
* (a) Entry load

* (b) Exit load

* (c) Expense ratio

* (d) Transaction charge

25
 5* The following are the examples of recurring expenses in a mutual fund
scheme, EXCEPT:
* (a) Investment management and advisory fees

* (b) Registrar and transfer agent fees

* (c) Audit fees

* (d) New Fund Offer (NFO) expenses

6 * The scheme that provides investors the benefit of deduction under

Section 80C of the Income Tax Act is:
* (a) Equity Linked Savings Scheme (ELSS)

* (b) Liquid Fund

* (c) Gilt Fund

* (d) Arbitrage Fund

7 * The facility that allows investors to invest a fixed amount at regular

intervals in a mutual fund scheme is called:
* (a) Systematic Withdrawal Plan (SWP)

* (b) Systematic Transfer Plan (STP)

* (c) Systematic Investment Plan (SIP)

* (d) Dividend Reinvestment Plan

8* The process of transferring units to the person entitled to receive them in

the event of the death of the unitholder is known as:
* (a) Nomination

* (b) Transmission

* (c) Dematerialization

* (d) Repurchase

26
 9* The following investors are exempt from providing PAN for mutual fund
investments, EXCEPT:
* (a) Investors residing in the state of Sikkim

* (b) Investments up to ₹50,000 per investor per year per mutual fund

* (c) Non-Resident Indians (NRIs)

* (d) Transactions undertaken on behalf of the Central/State government

10 * The web-based centralized grievance redress system of SEBI is called:

* (a) SCORES

* (b) AMFI

* (c) KRA

* (d) NSDL

Answers and Explanations:

1 * Answer: (b) Index fund

Explanation: An index fund is designed to mirror the performance of a specific market index. It
invests in the same securities that constitute the index, in the same proportion, resulting in a
passively managed portfolio.

2* Answer: (c) Credit risk

Explanation: Credit risk is the risk that a borrower (issuer of a debt security) may default on their
interest or principal payments.

27
3* Answer: (b) Standard deviation

Explanation: Standard deviation measures the dispersion or volatility of a fund's returns around its
average return. A higher standard deviation indicates greater fluctuation in returns and, therefore,
higher risk.

4 * Answer: (b) Exit load

Explanation: Exit load is a fee charged by some mutual funds when investors redeem their units
before a specified period. It is calculated as a percentage of the NAV and is deducted from the
redemption proceeds.

5 * Answer: (d) New Fund Offer (NFO) expenses

Explanation: NFO expenses are one-time costs associated with launching a new mutual fund scheme.
Recurring expenses, on the other hand, are ongoing costs incurred to manage the scheme, such as
investment management fees, audit fees, etc.

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6 * Answer: (a) Equity Linked Savings Scheme (ELSS)

Explanation: ELSS offers tax benefits under Section 80C of the Income Tax Act, allowing investors to
claim a deduction on their taxable income up to a certain limit.

7* Answer: (c) Systematic Investment Plan (SIP)

Explanation: SIP allows investors to invest a fixed amount at regular intervals (monthly, quarterly,
etc.) in a mutual fund scheme. It promotes disciplined investing and offers the benefit of rupee cost
averaging.

8* Answer: (b) Transmission

Explanation: Transmission is the process of transferring the ownership of units to the nominee or
legal heir upon the death of the unitholder.

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9* Answer: (c) Non-Resident Indians (NRIs)

Explanation: NRIs are not exempt from providing PAN for mutual fund investments. They need to
comply with KYC norms and provide their PAN details.

10 * Answer: (a) SCORES

Explanation: SCORES (SEBI Complaints Redress System) is the web-based centralized grievance
redress system of SEBI. It allows investors to lodge and track their complaints online.

30