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NISM-VA Mutual Fund Distributor Question Bank

Published on Thursday, May 23, 2024
We’re preparing a comprehensive question bank for the NISM-VA Mutual Fund Distributor exam. It will cover all key areas of the syllabus with a variety of question types. This resource will be invaluable for your exam preparation.




1. As per SEBI regulations, a mutual fund scheme should have at least ________ investors.?

  • a) 10
  • b) 15
  • c) 20
  • d) 25

Answer: c) As per SEBI, a Mutual Fund Scheme/Plan shall have a minimum of 20 investors and no single investor shall account for more than 25 percent of the corpus of the Scheme/Plan(s).

2. Mutual fund units issued against purchase transactions would be subject to levy of stamp duty at ______ of the amount invested.

  • a) 0.5%
  • b) 0.05%
  • c) 0.005%
  • d) 0.01%

Answer: c) With effect from July 1, 2020, mutual fund units issued against purchase transactions (whether through lump-sum investments or SIP or STP or switch-ins or dividend reinvestment) would be subject to levy of stamp duty @ 0.005% of the amount invested.

3. To whom does the profits or losses made by the mutual fund belong?

  • a) The investors
  • b) The Asset Management Company
  • c) Fund Managers
  • d) Trustees

Answer: a) The money received from investors is invested by the mutual fund scheme in a portfolio of securities as per the stated investment objective. Profits or losses, as the case might be, belong to the investors or unitholders. No other entity involved in the mutual fund in any capacity participates in the scheme’s profits or losses. They are all paid a fee or commission for the contributions they make to launching and operating the schemes.

4. What action has to be taken before deleting a default bank account from the registered bank account in a mutual fund folio?

  • a) A new folio will have to be opened with the same joint holding as the new default account
  • b) Another account has to be designated as the default bank account
  • c) All the nominees of the mutual fund scheme have to sign on the change form irrespective of the mode of holding
  • d) All of the above

Answer: b) If the default bank account is being deleted from the list of registered accounts, then before that, another account has to be designated as the default bank account.

5. The Asset Management Companies have to disclose the Total Expense Ratios (TER) of the various schemes on their websites on a ______ basis.

  • a) Daily
  • b) Weekly
  • c) Monthly
  • d) Annual

Answer: a) One of the important factors that impacts the scheme’s NAV is the Total Expense Ratio (TER), charged to the scheme. Though, the same is very tightly regulated through SEBI regulations, the investor should know about the scheme expense ratio. SEBI has mandated that the Asset Management Companies (AMCs) should prominently disclose on a daily basis, the Total expense ratio (scheme-wise, date-wise) of all schemes on their website. The same must also be published on AMFI website.

6. Segregated portfolio means _________?

  • a)a portfolio which is kept aside for a ‘rainy day’ or contingency fund
  • b) a portfolio which is created out of debt or money market securities affected by a credit event
  • c) a portfolio which is left after removing poor credit quality papers
  • d) All of the above

Answer: b) a portfolio which is created out of debt or money market securities affected by a credit event

7. Identify the TRUE statement.

  • a)While calculating scheme returns for an investor, if there is an entry load, then the initial value of the Net Asset Value (NAV) is taken as NAV minus Entry Load
  • b) While calculating scheme returns for an investor, if there is an exit load, then the later value of the Net Asset Value (NAV) is taken as NAV minus Exit Load

Answer: b) “While calculating scheme returns for an investor, if there is an exit load, then the later value of the Net Asset Value (NAV) is taken as NAV minus Exit Load”

8.For how long is the trail commission paid to the mutual fund distributor?

  • a)For the first one year only
  • b) For the first three years only
  • c) For the first ten years only
  • d) Till the money is held in the fund

Answer: b) For the first three years only

9. What is negative Alpha?

  • a)It is indicative of outperformance by the fund manager
  • b) It is indicative of under-performance by the fund manager
  • c) It is indicative of over-hedging by the fund manager
  • d) It is indicative of under-hedging by the fund manager

Answer: b) A negative Alpha is indicative of under-performance by the fund manager.

10. An investor in India is investing in US Dollar based funds. He/She will benefit when ______

  • a)The US Dollar becomes weaker
  • b) The US Dollar becomes stronger
  • c) The US Dollar reamins steady
  • d) None of these

Answer: b) If the investor invests in the US, and the US Dollar becomes stronger during the period of his investment, he/she will benefit.

11. What is asset allocation?

  • a)Deciding which and how many mutual fund schemes to invest in
  • b) Finalizing which mutual fund schemes would deliver the highest returns in future
  • c) Deciding how to invest money across various asset categories in line with one’s risk profile, financial objectives and current situation
  • c) Deciding which asset category would outperform the others and investing in it

Answer: c)Asset Allocation is a process of allocating money across various asset categories in line with a stated objective. The basic meaning of asset allocation is to allocate an investor’s money across asset categories in order to achieve same objective.

12. Business model, experience and proficiency in the business is a compulsory criteria for empanelment and review of which of the following category of mutual fund distributors?

  • a)Institutional distributors who have points of presence in more than 10 locations
  • b) Individual distributors who have points of presence in more than 10 locations
  • c) Distributors who have received commission of over Rs. 1 Crore p.a. across industry
  • d) All of the above

Answer: c) : SEBI has mandated AMCs to put in place a due diligence process to regulate distributors with respect to 'Business model, experience and proficiency

13. Equity Linked Savings Schemes (ELSS) are eligible for deduction under Section 80C of the Income Tax Act. However, such schemes have a lock-in period of how many years from the date of investment?

  • a) 3 years from the date of allotment of each individual unit
  • b) 3 years from the date of original investment even in case of subsequent purchases
  • c) 5 years from the date of allotment of each individual unit
  • d) If tax exemption is NOT availed, there will not be any lock-in period

Answer: a) The lock-in period for an ELSS fund is 3 years from the date of allotment of each individual unit. So even for a SIP investment, each SIP will have a lock-in for 3 years.

14. Return from a fund is 9%, and the risk-free rate is 5%. The standard deviation is 3, and Beta is 1.6. What will be the NUMERATOR for calculating the Sharpe ratio?

  • a) 3
  • b) 6
  • c) 1.6
  • d) 4

Answer: d) The numerator for calculating the Sharpe ratio is the difference between the return earned and the risk-free return. In this case: Numerator = Return Earned - Risk-free Return = 9 - 5 = 4.

15. Which document will an investor look at if they want to know the fundamental attributes of a mutual fund scheme?

  • a) Key Information Memorandum (KIM)
  • b) Addendum
  • c) Scheme Information Document (SID)
  • d) Statement of Additional Information (SAI)

Answer: c) The Scheme Information Document (SID) is a detailed document prepared by the Asset Management Company (AMC) about a particular scheme. It contains information about investment objectives, policies, asset allocation, fees, liquidity provisions, risk factors, and other essential details.

16. Identify the FALSE statement:

A. The best strategy in selecting a mutual fund scheme is that based on its past performance

B. When the mutual fund distributor understands the needs of his investor, one can ignore the investment objective of the mutual fund schemes.

  • a) Only A is false
  • b) Only B is false
  • c) Both A and B are false
  • d) None of these

Answer: c) Both A and B are false.

17. The employees of institutions that are into the distribution of mutual funds need to clear the _______ and obtain an Employee Unique Identification Number (EUIN) from AMFI.

  • a) SEBI - VA Mutual Fund Distributors Certification Examination
  • b) SEBI - VB Mutual Fund Distributors Certification Examination
  • c) AMFI - VA Mutual Fund Distributors Certification Examination
  • d) NISM - VA Mutual Fund Distributors Certification Examination
  • e) None of these

Answer: d) Institutions that are into the distribution of mutual funds need to register with AMFI. The employees of these institutions need to clear the NISM Series V-A: Mutual Fund Distributors Certification Examination and obtain an Employee Unique Identification Number (EUIN) from AMFI.

18. The heads of expenses that can be charged to a mutual fund scheme by the AMC is specified by SEBI - State whether True or False?

  • a) True
  • b) False

Answer: a) The statement is True. SEBI specifies the heads of expenses that can be charged to a mutual fund scheme by the Asset Management Company (AMC), including advisory fees, fund manager fees, legal fees, operational costs, and more.

19. A _______ determines the interest rate sensitivity of a bond fund.

  • a) Average Maturity
  • b) Asset Under Management
  • c) Credit Quality
  • d) Expense Ratio
  • e) None of these

Answer: a) Interest rate sensitivity is determined by the average maturity of the bond fund. Generally, longer maturity assets are more sensitive to changes in interest rates.

20. Monthly Income Plans (MIPs) have no exposure to Equity - State True or False?

  • a) True
  • b) False

Answer: b) False. MIPs do have exposure to equities, typically around 70% to 80% of their portfolio, along with debt instruments.

21. When a NRI applies for mutual fund units, he also has to provide ________ along with other information while filling the application form.

  • a) Current overseas address
  • b) Passport details
  • c) Investments made in the last one year
  • d) Countries of residence in the last one year
  • e) None of these

Answer: a) In case of NRI investors, an overseas address must also be provided along with other information.

22. By what percentage is the Securities Transaction Tax (STT) levied on re-purchase of units (by the mutual fund) of equity-oriented schemes (delivery based)?

  • a) 1%
  • b) 0.25%
  • c) NIL
  • d) 0.001%
  • e) None of these

Answer: d) The STT rate for equity-oriented mutual funds at the time of redemption is 0.001% of the transaction value.

23. Mutual funds have to follow the regulations of Reserve Bank of India (RBI) for investments in _______ .

  • a) Securities market
  • b) Gold
  • c) Money market
  • d) Commodity market
  • e) None of these

Answer: c)gulates the money market and foreign exchange market in the country. Therefore, mutual funds need to comply with RBI’s regulations regarding investment in the money market, investments outside the country etc.

24 Which of these form a part of the 'Fit and Proper' criteria for eligible distributors that an AMC should check before empaneling a distributor?

  • a)Aquate controls to delink sales functions from customer risk and investment objective evaluation
  • b) The eligible distributor should have strict internal controls to limit investors' exposure to an asset class or fund house
  • c) The eligible distributor should have the requisite Employee to Customer ratio as prescribed by SEBI
  • d) All of the above
  • e) None of these

Answer: a) At the time of empaneling distributors, mutual funds/AMCs undertake a due diligence process to satisfy fit and proper criteria, including adequate controls to delink sales functions from customer risk and investment objective evaluation.

25 What is the full form of AGNI ?

  • a)AMFI Guidelines for New issues and Investments
  • b) AMFI Guidelines and Norms for Intermediaries
  • c) AMFI Guidelines for New Investors
  • d) AMFI Guidelines for Nominations and Investments
  • e) None of these

Answer: b) At the time of empaneling distributors, mutual funds/AMCs undertake a due diligence process to satisfy fit and proper criteria, including adequate controls to delink sales functions from customer risk and investment objective evaluation.

1. In case the units are pledged, the unit holder

  • a) can sell the units after the lockin period
  • b) cannot sell the units
  • c) cannot sell but can switch the units to another scheme
  • d) cannot do additional purchase

Answer: B) Once units are pledged, the Unit-holder/s cannot sell or switch-out the pledged units, until the pledgee gives a written no-objection to release the pledge.



26. On final settlement, the buyer/holder of the option will recognize the favorable difference received from the seller/writer as ______ in the profit and loss account.

  • A) Income
  • B) Expense
  • C) Loan
  • D) Amortization
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