NISM Series X-A Ch.18: Key Regulations — 235 Practice Questions

Q: If agreed by the client, Investment Advisers (IAs) may charge fees in advance, but such advance shall not exceed fees for a period of:

One year. The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q: Regarding client-level segregation of advisory and distribution activities, what is true for an individual investment adviser?

They are prohibited from providing distribution services.. The text states: 'An individual investment adviser shall not provide distribution services.' It further clarifies that 'The family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser and no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.'

Q: An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred or the fee collected during the financial year exceeds three crore rupees, whichever is earlier. For how long is this in-principle registration valid to assist in the transition?

3 months. The text specifies: 'the in-principle registration shall be valid for a period of three months to assist in the transition from registration as individual investment adviser to non-individual investment adviser'

Q: When an investment adviser uses Artificial Intelligence (AI) tools for servicing clients, who is solely responsible for the security, confidentiality, and integrity of client data and the investment advice based on AI output?

The investment adviser.. As per 18.6.7, 'An investment adviser who uses Artificial Intelligence tools... shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.'

Q: An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds:

300. The text states, 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time... shall apply for grant of in-principle registration as non-individual investment adviser.'

Q: An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time or the fee collected during the financial year exceeds:

Three crore rupees. The text specifies: 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier shall – (i) apply for grant of in-principle registration as non-individual investment adviser'

Q: What is the maximum number of clients a part-time investment adviser is permitted to have at any point of time?

75 clients. The text states: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time'

Multiple Choice Questions (210)

Q1 MCQ · 1 mark EasyFees: Advance Payment Limit

If agreed by the client, Investment Advisers (IAs) may charge fees in advance, but such advance shall not exceed fees for a period of:

ASix months

✓One year

CTwo years

DThree years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q2 MCQ · 1 mark MediumClient Segregation

Regarding client-level segregation of advisory and distribution activities, what is true for an individual investment adviser?

AThey can provide distribution services only to accredited investors.

✓They are prohibited from providing distribution services.

CTheir family members can provide distribution services to their advised clients.

DThey can advise clients who are receiving distribution services from their family members, with disclosure.

💡 The text states: 'An individual investment adviser shall not provide distribution services.' It further clarifies that 'The family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser and no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.'

Q3 MCQ · 1 mark MediumTransition of Individual Investment Advisers

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred or the fee collected during the financial year exceeds three crore rupees, whichever is earlier. For how long is this in-principle registration valid to assist in the transition?

A1 month

✓3 months

C6 months

D1 year

💡 The text specifies: 'the in-principle registration shall be valid for a period of three months to assist in the transition from registration as individual investment adviser to non-individual investment adviser'.

Q4 MCQ · 1 mark MediumAI Tool Usage Responsibility

When an investment adviser uses Artificial Intelligence (AI) tools for servicing clients, who is solely responsible for the security, confidentiality, and integrity of client data and the investment advice based on AI output?

AThe AI tool vendor.

BThe client, after acknowledging the risks of AI.

✓The investment adviser.

DA third-party auditor appointed to oversee AI usage.

💡 As per 18.6.7, 'An investment adviser who uses Artificial Intelligence tools... shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.'

Q5 MCQ · 1 mark EasyGeneral Provisions - Individual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds:

A100

B200

✓300

D500

💡 The text states, 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time... shall apply for grant of in-principle registration as non-individual investment adviser.'

Q6 MCQ · 1 mark MediumClient Level Segregation of Advisory and Distribution Activities

Which of the following statements is true regarding the segregation of advisory and distribution activities for a non-individual investment adviser?

AA non-individual investment adviser is not permitted to engage in distribution services under any circumstances.

BThe same client can be offered both advisory and distribution services by different departments within the non-individual entity's group.

✓A non-individual investment adviser must have client-level segregation at the group level for investment advisory and distribution services.

DAdvisory clients of a non-individual investment adviser's group must also pay a distributor consideration.

💡 The text states: 'A non-individual investment adviser shall have client level segregation at group level for investment advisory and distribution services.' It further clarifies that 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.' and 'A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.' (p. 350)

Q7 MCQ · 1 mark MediumIndividual IA Transition Thresholds

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time or the fee collected during the financial year exceeds:

AOne crore rupees

BTwo crore rupees

✓Three crore rupees

DFive crore rupees

💡 The text specifies: 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier shall – (i) apply for grant of in-principle registration as non-individual investment adviser'.

Q8 MCQ · 1 mark EasyPart-time IA Client Limit

What is the maximum number of clients a part-time investment adviser is permitted to have at any point of time?

A50 clients

✓75 clients

C100 clients

D150 clients

💡 The text states: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time'.

Q9 MCQ · 1 mark MediumInvestment Adviser Obligations - Own Account Transactions

According to SEBI regulations, an investment adviser shall not enter into transactions on its own account which are contrary to its advice given to clients for a specific period. What is this period, and what is the exception?

A7 days; exception if revised assessment given 12 hours in advance.

✓15 days; exception if revised assessment given 24 hours in advance.

C30 days; no exception permitted.

D15 days; exception if client approval is obtained.

💡 The text states: 'An investment advisor shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.'

Q10 MCQ · 1 mark HardRecord Maintenance for Investment Advisers

An investment adviser is required to maintain various records. Which of the following statements regarding record maintenance is INCORRECT?

AAll records must be maintained for a minimum period of five years.

BRecords of communication, including emails and call recordings, with clients must be maintained.

CRationale for arriving at investment advice must be duly signed and dated.

✓An investment adviser is not required to maintain records of suitability assessment if the advice is oral.

💡 The text lists 'Suitability assessment of the advice being provided' as a required record. It also states 'Investment advice provided, whether written or oral' must be maintained. Therefore, suitability assessment records are required regardless of whether the advice is oral or written, making option D incorrect.

Q11 MCQ · 1 mark HardRisk Profiling Tools

When using tools like surveys or questionnaires for risk profiling, an investment adviser must ensure certain conditions are met regarding the questions asked. Which of the following is NOT a required condition?

AThe questionnaire should not be vague or use double negatives.

BThe language used in the questionnaire should not be complex.

CThe questionnaire should not be structured in a way that it contains leading questions.

✓The questionnaire must guarantee an accurate risk appetite score without any limitations.

💡 The text states, 'Where such tools are used for risk profiling, the investment adviser must ensure that the tools are fit for the purpose and any limitations have been identified and mitigated.' It does not state that the tools must guarantee an accurate score without any limitations; rather, it acknowledges that limitations exist and must be mitigated. Options A, B, and C are explicitly mentioned as requirements for the questionnaire.

Q12 MCQ · 1 mark MediumGeneral Obligations

An investment adviser provides advice to a client. For what period is the investment adviser restricted from entering into transactions on its own account that are contrary to this advice?

A7 days

✓15 days

C30 days

D60 days

💡 The text states, 'An investment advisor shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice.'

Q13 MCQ · 1 mark EasyAdvance Fee Limit

If agreed by the client, an Investment Adviser (IA) may charge fees in advance. However, such advance fees shall not exceed fees for a period of how many years?

ASix months

✓One year

CTwo years

DThree years

💡 If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.

Q14 MCQ · 1 mark EasyGeneral Obligations - Remuneration

An investment adviser acts in a fiduciary capacity towards its clients and must disclose all conflicts of interests as and when they arise. Which of the following is also a general obligation regarding remuneration?

AAn investment adviser may receive remuneration from product issuers if disclosed to the client.

✓An investment adviser shall only receive consideration from the client being advised, in respect of the underlying products or securities for which advice is provided.

CAn investment adviser can receive compensation from both the client and the product issuer, provided both parties are aware.

DAn investment adviser can receive remuneration from any person, as long as it does not influence the advice.

💡 The text states: 'An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.'

Q15 MCQ · 1 mark HardClient Segregation - Advisory and Distribution

Which of the following statements regarding client-level segregation of advisory and distribution activities is INCORRECT?

AAn individual investment adviser is prohibited from providing distribution services.

BA non-individual investment adviser must ensure that the same client does not receive both advisory and distribution services from within its group.

✓An individual investment adviser may provide advice to a client who is receiving distribution services from their family members, provided it is disclosed.

DThe family of an individual investment adviser cannot provide distribution services to clients advised by that individual investment adviser.

💡 Option C is incorrect. The text explicitly states, 'no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.' This means an individual IA cannot advise such a client, regardless of disclosure. Options A, B, and D are all directly stated or implied correctly in the text.

Q16 MCQ · 1 mark MediumDeposit

With which entity must an investment adviser maintain the specified deposit, marked as a lien?

ASEBI directly

BAny commercial bank

✓A scheduled bank marked as lien in favor of a SEBI-recognized body

DA nationalized bank without a lien

💡 The text states: 'The deposit shall be maintained with a scheduled bank marked as lien in favor of a body or body corporate recognized by SEBI for the purpose of administration and supervision of investment advisers in accordance with stipulated regulations.'

Q17 MCQ · 1 mark MediumIndividual to Non-Individual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients or fee collected during the financial year exceeds which of the following thresholds, whichever is earlier?

A200 clients or ₹2 crore fee

✓300 clients or ₹3 crore fee

C500 clients or ₹5 crore fee

D150 clients or ₹1.5 crore fee

Q18 MCQ · 1 mark HardGeneral Obligations - Self-Transactions

An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. Under what condition can this rule be overridden?

AIf the client provides a written waiver.

✓If the investment adviser is of the opinion that the situation has changed and gives revised assessment to the client at least 24 hours in advance of the transaction.

CIf the transaction involves a different asset class than the advised one.

DIf the investment adviser obtains prior approval from SEBI.

💡 The proviso states: 'Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.'

Q19 MCQ · 1 mark MediumCompliance Officer

If a non-individual investment adviser appoints an independent professional (e.g., a member of ICAI) for monitoring compliance, who is ultimately responsible for monitoring the compliance in respect of SEBI requirements?

AThe independent professional.

✓The Principal Officer of the investment adviser.

CThe Board of Directors of the investment adviser.

DSEBI directly through its recognized body.

💡 The text states: '(2) Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI or the body or body corporate recognized under regulation 14 of these regulations to the effect that the principal officer shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by SEBI.'

Q20 MCQ · 1 mark EasyGeneral Obligations

As per SEBI regulations, an investment adviser is prohibited from receiving consideration by way of remuneration or compensation or in any other form from which of the following sources in respect of the underlying products or securities for which advice is provided?

AThe client being advised.

✓Any person other than the client being advised.

CA SEBI-recognized body corporate.

DA scheduled bank maintaining the deposit.

Q21 MCQ · 1 mark HardAppointment of Compliance Officer

A non-individual investment adviser must appoint a compliance officer. Alternatively, if an independent professional is appointed for monitoring compliance, who is responsible for submitting an undertaking to SEBI stating responsibility for monitoring compliance?

AThe independent professional themselves

✓The Principal Officer

CThe Chairman of the Board

DThe Chief Financial Officer

💡 The text states: 'Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI... to the effect that the principal officer shall be responsible for monitoring the compliance'.

Q22 MCQ · 1 mark EasyRecord Maintenance

For how long must an investment adviser maintain records such as Know Your Client (KYC) records and suitability assessments?

AOne year

BThree years

✓Five years

DTen years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q23 MCQ · 1 mark MediumIndividual IA Transition

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain threshold OR the fee collected during the financial year exceeds a certain amount, whichever is earlier. What are these thresholds?

A200 clients or fee collected exceeds one crore rupees

✓300 clients or fee collected exceeds three crore rupees

C500 clients or fee collected exceeds five crore rupees

D100 clients or fee collected exceeds two crore rupees

💡 The text states: 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier shall – (i) apply for grant of in-principle registration as non-individual investment adviser'.

Q24 MCQ · 1 mark EasyPart-time IA Client Limit

What is the maximum number of clients a part-time investment adviser is permitted to have at any point of time?

A50

✓75

C100

D150

💡 The number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.

Q25 MCQ · 1 mark MediumRecord Maintenance

For how long is an investment adviser required to maintain records related to Know Your Client (KYC), risk profiling, and suitability assessment of the advice provided, in physical or electronic format?

AA minimum period of three years

✓A minimum period of five years

CA minimum period of seven years

DA minimum period of ten years

💡 Under section 18.6.12 'Record Maintenance', the text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years: Know Your Client records of the client; Risk profiling and risk assessment of the client; Suitability assessment of the advice being provided;'.

Q26 MCQ · 1 mark MediumGeneral Obligations - Self-Account Transactions

An investment adviser is prohibited from entering into transactions on their own account which are contrary to their advice given to clients for a specific period. What is this period, unless a revised assessment is provided to the client at least 24 hours in advance?

A7 days

B10 days

✓15 days

D30 days

Q27 MCQ · 1 mark HardClient Level Segregation of Advisory and Distribution Activities

According to the regulations, which of the following scenarios concerning client-level segregation of advisory and distribution activities is permissible?

AAn individual investment adviser provides both investment advice and distribution services to the same client.

BA client receives investment advice from an individual investment adviser, and simultaneously receives distribution services from a family member of that same investment adviser.

✓A non-individual investment adviser offers both advisory and distribution services to different clients within the same group, ensuring no single client receives both services.

DA non-individual investment adviser collects an advisory fee from a client and also receives distributor consideration from the same client at the group level.

💡 Option A is impermissible because 'An individual investment adviser shall not provide distribution services.' Option B is impermissible because 'The family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser and no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.' Option C is permissible because 'A non-individual investment adviser shall have client level segregation at group level for investment advisory and distribution services' and 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.' This option correctly describes segregation at the client level. Option D is impermissible because 'A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q28 MCQ · 1 mark HardRegistration Transition

An individual investment adviser's number of clients exceeds three hundred. What is the immediate next step for this individual investment adviser as per the regulations?

ASurrender their individual investment adviser registration immediately.

✓Apply for grant of in-principle registration as a non-individual investment adviser.

CInform SEBI within 7 working days, but no further action is required until the fee collected exceeds three crore rupees.

DReduce the number of clients below three hundred within three months.

Q29 MCQ · 1 mark MediumFees

An Investment Adviser (IA) can charge fees in advance from a client. What is the maximum period for which such advance fees can be collected, if agreed by the client?

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q30 MCQ · 1 mark MediumRisk Profiling Tools

When an investment adviser uses questionnaires for risk profiling, which of the following practices is explicitly advised AGAINST in the regulations?

AEnsuring the tools are fit for purpose.

BIdentifying and mitigating any limitations of the tools.

✓Structuring the questionnaire with leading questions to guide client responses.

DEnsuring questions are fair, clear, and not misleading.

💡 As per 18.6.9, risk profiling tools section, it should be ensured that 'questionnaire is not structured in a way that it contains leading questions.' The other options are advised practices.

Q31 MCQ · 1 mark EasyDeposit

With which entity must an investment adviser maintain the specified deposit, marked as lien?

AReserve Bank of India

BAny commercial bank

✓A scheduled bank, marked as lien in favor of a body or body corporate recognized by SEBI

DThe client's bank account

Q32 MCQ · 1 mark HardIndividual to Non-Individual Investment Adviser Transition

An individual registered as an investment adviser reaches 350 clients. What is the immediate regulatory requirement for this individual?

AThe individual must immediately cease operations as an investment adviser.

✓The individual must apply for grant of in-principle registration as a non-individual investment adviser, valid for three months.

CThe individual must pay an increased registration fee to continue as an individual investment adviser.

DThe individual must transfer all clients exceeding 300 to another registered investment adviser.

💡 The text specifies: 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time... shall – (i) apply for grant of in-principle registration as non-individual investment adviser; (ii) the in-principle registration shall be valid for a period of three months to assist in the transition from registration as individual investment adviser to non-individual investment adviser;' (p. 344).

Q33 MCQ · 1 mark MediumDisclosures to Clients

If an investment adviser provides advisory services for products or services which are outside the purview of SEBI, what specific disclosure must be made to the client?

AThat the adviser holds a special license for providing advice on non-SEBI regulated products.

BThat the client will likely receive higher returns due to less regulatory oversight on such products.

✓That such products/services are outside SEBI's regulatory purview and no recourse from SEBI is available for grievances.

DThat SEBI will still mediate disputes, but cannot enforce decisions related to such products.

💡 The text states: 'An investment adviser who provides advisory services in respect of products or services which are outside the purview of SEBI, shall disclose to the client that such products or services and his advisory services in respect of such products or services are outside the regulatory purview of SEBI and no recourse from SEBI shall be available to such clients for any grievance arising therefrom.'

Q34 MCQ · 1 mark EasyGeneral Obligations - Conflicts of Interest

In respect of the underlying products or securities for which advice is provided, an investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from which of the following?

AThe client being advised

✓Any person other than the client being advised

CA SEBI-recognized body

DA scheduled bank

💡 Under 'General Obligations', the text states: 'An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.'

Q35 MCQ · 1 mark MediumSegregation of Activities

Which of the following statements is true regarding client-level segregation of advisory and distribution activities for an individual investment adviser?

AAn individual investment adviser may provide distribution services to clients if a separate agreement is signed.

BThe family of an individual investment adviser may provide distribution services to clients advised by the individual investment adviser.

✓An individual investment adviser cannot provide distribution services.

DAn individual investment adviser can advise clients who are receiving distribution services from other family members, provided it is disclosed.

💡 The text explicitly states: 'An individual investment adviser shall not provide distribution services'.

Q36 MCQ · 1 mark EasyIndividual Investment Adviser Obligations

Under SEBI regulations, an individual registered as an investment adviser whose number of clients exceeds three hundred at any point of time, or the fee collected during the financial year exceeds three crore rupees, whichever is earlier, shall:

AImmediately cease all investment advisory activities.

✓Apply for grant of in-principle registration as a non-individual investment adviser.

CRefund all fees collected in excess of three crore rupees to clients.

DAppoint a compliance officer within one month.

💡 As per the text, 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier shall – (i) apply for grant of in-principle registration as non-individual investment adviser'.

Q37 MCQ · 1 mark EasyGeneral Obligations - Naming Conventions

An individual registered as an investment adviser must use which specific term in all their correspondences with clients?

✓Investment Adviser

BRegistered Investment Adviser

CCertified Investment Adviser

DFinancial Adviser

💡 As per the regulations, individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients. For part-time advisers, the term is ‘part-time investment adviser’.

Q38 MCQ · 1 mark MediumFees - Applicability of Provisions

The fee-related provisions, such as fee limit, modes of payment, refund of fees, advance fee, and breakage fees, are applicable only to specific types of clients. For which client types do these provisions apply?

AAll clients, including accredited investors.

BOnly corporate clients and partnerships.

✓Individual and Hindu Undivided Family (HUF) clients, provided they are not accredited investors.

DOnly accredited investors, regardless of their entity type.

💡 The fee related provisions such as fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).

Q39 MCQ · 1 mark MediumDisclosures for Non-SEBI Products

If an investment adviser provides advisory services for products or services that are outside the purview of SEBI, what specific disclosure must be made to the client?

AThat the adviser holds a special license for non-SEBI products.

✓That such products/services and the advisory services related to them are outside SEBI's regulatory purview, and no recourse from SEBI is available.

CThat the client needs to sign an additional waiver acknowledging higher risk.

DThat SEBI has delegated oversight of these products to another regulatory body.

💡 As per 18.6.11, 'An investment adviser who provides advisory services in respect of products or services which are outside the purview of SEBI, shall disclose to the client that such products or services and his advisory services in respect of such products or services are outside the regulatory purview of SEBI and no recourse from SEBI shall be available to such clients for any grievance arising therefrom.'

Q40 MCQ · 1 mark MediumIndividual to Non-Individual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain threshold, or their fee collected during the financial year exceeds a certain amount, whichever is earlier. What are these thresholds?

A200 clients or ₹2 crore

✓300 clients or ₹3 crore

C150 clients or ₹1 crore

D500 clients or ₹5 crore

💡 Individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier, shall apply for grant of in-principle registration as non-individual investment adviser.

Q41 MCQ · 1 mark HardRisk Profiling Tools

When using questionnaires for risk profiling, which of the following practices is NOT permitted for an investment adviser?

AEnsuring questions are fair, clear, and not misleading.

✓Structuring the questionnaire to contain leading questions to guide client responses.

CIdentifying and mitigating any limitations of the risk profiling tools used.

DAvoiding vague language or double negatives in the questions.

💡 The text states that questionnaires 'should ensure that: (i) questionnaire is not vague or use double negatives or in a complex language that the client may not understand; (ii) questionnaire is not structured in a way that it contains leading questions.' Therefore, structuring with leading questions is NOT permitted.

Q42 MCQ · 1 mark MediumGeneral Obligations of Investment Advisers

An investment adviser provides advice to a client on a particular security. According to the regulations, what is the restriction on the investment adviser entering into transactions on its own account which is contrary to this advice?

AThe investment adviser can enter into such transactions immediately, provided the client is informed.

BThe investment adviser must not enter into such transactions for a period of 7 days from the day of advice.

✓The investment adviser must not enter into such transactions for a period of 15 days from the day of advice, unless a revised assessment is given to the client at least 24 hours in advance.

DThe investment adviser is permanently prohibited from entering into such transactions on its own account.

Q43 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser gives advice to a client. For how long is the adviser restricted from entering into transactions on their own account that are contrary to this advice, unless a revised assessment is provided?

A7 days

B10 days

✓15 days

D30 days

💡 An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice.

Q44 MCQ · 1 mark MediumFees Applicability

The fee-related provisions, such as fee limit, modes of payment, refund, advance fee, and breakage fees, are applicable only to which of the following client categories?

AAll clients, including accredited investors

BOnly accredited investors

✓Individual and Hindu Undivided Family (HUF) clients who are not accredited investors

DNon-individual clients

💡 The text specifies: 'The fee related provisions such as fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).'

Q45 MCQ · 1 mark EasyDeposit

An investment adviser is required to maintain a deposit with a scheduled bank. In whose favor must this deposit be marked as a lien?

AThe client of the investment adviser.

BThe Reserve Bank of India (RBI).

✓A body or body corporate recognized by SEBI for administration and supervision of investment advisers.

DThe Investment Adviser's own holding company.

Q46 MCQ · 1 mark EasyGeneral Obligations

An investment adviser acts in what capacity towards its clients?

AAgent

BPrincipal

✓Fiduciary

DBroker

💡 The text states: 'An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.'

Q47 MCQ · 1 mark MediumOwn Account Transactions

An investment adviser is prohibited from entering into transactions on its own account that are contrary to advice given to clients for a specific period. What is this initial restriction period?

ASeven days from the day of such advice

BTen days from the day of such advice

✓Fifteen days from the day of such advice

DThirty days from the day of such advice

Q48 MCQ · 1 mark MediumRisk Profiling

When an investment adviser uses questionnaires for risk profiling, which of the following practices is specifically advised AGAINST in the text?

AEnsuring the tools are fit for purpose.

BIdentifying and mitigating any limitations of the tools.

✓Structuring the questionnaire to contain leading questions.

DEnsuring questions are fair, clear, and not misleading.

💡 The text states that questionnaires should 'ensure that: (i) questionnaire is not vague or use double negatives or in a complex language that the client may not understand; (ii) questionnaire is not structured in a way that it contains leading questions.' Therefore, structuring with leading questions is advised against.

Q49 MCQ · 1 mark EasyRecord Maintenance

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client (KYC) details, risk profiling, suitability assessments, and client agreements?

A2 years

B3 years

✓5 years

D10 years

💡 The text explicitly states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q50 MCQ · 1 mark EasyRecord Retention Period

For what minimum period is an investment adviser required to maintain records such as Know Your Client (KYC) records, risk profiling, and suitability assessments?

ATwo years

BThree years

✓Five years

DTen years

💡 An investment adviser is required to maintain the specified records in physical or electronic format for a minimum period of five years.

Q51 MCQ · 1 mark HardSegregation of Activities

For a non-individual investment adviser, what is the regulation regarding client-level segregation of advisory and distribution activities within its group?

AThe same client can be offered both advisory and distribution services, provided separate fees are charged.

✓A client can either be an advisory client (where no distributor consideration is received at the group level) or a distribution services client (where no advisory fee is collected from the client at the group level).

CNon-individual IAs are exempt from client-level segregation, as long as they disclose potential conflicts.

DOnly individual investment advisers are subject to client-level segregation rules.

💡 The text states, 'A non-individual investment adviser shall have client level segregation at group level for investment advisory and distribution services. Explanation. — (i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q52 MCQ · 1 mark EasyNaming Conventions and Client Limits

According to SEBI regulations, an individual registered as an investment adviser must use which term in all correspondences with clients?

AFinancial Planner

BWealth Manager

✓Investment Adviser

DPortfolio Manager

💡 The text states: 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q53 MCQ · 1 mark EasyRecord Maintenance

What is the minimum period for which an investment adviser is required to maintain records in physical or electronic format?

ATwo years

BThree years

✓Five years

DTen years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q54 MCQ · 1 mark HardClient Level Segregation

According to the client-level segregation rules for a non-individual investment adviser's 'group', which of the following statements is TRUE?

AA client can receive both advisory and distribution services simultaneously from different entities within the same group, as long as fees are segregated.

✓The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.

CAdvisory clients may also receive distributor consideration from the group, provided it is disclosed to them.

DDistribution services clients can pay an advisory fee to the group, provided the services are distinct and separate.

💡 The 'Explanation' section clarifies: '(i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.' and '(ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q55 MCQ · 1 mark EasyPart-time IA Client Limit

What is the maximum number of clients a part-time investment adviser can have at any point of time?

A50

✓75

C100

D150

💡 The text specifies: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q56 MCQ · 1 mark MediumDeposit Maintenance

With which entity must an investment adviser maintain the required deposit, marked as a lien?

AReserve Bank of India

BSecurities and Exchange Board of India (SEBI)

✓A scheduled bank

DAny commercial bank

💡 The text specifies: 'The deposit shall be maintained with a scheduled bank marked as lien in favor of a body or body corporate recognized by SEBI for the purpose of administration and supervision of investment advisers'.

Q57 MCQ · 1 mark EasyDeposit Maintenance

For what primary purpose is the deposit maintained by an investment adviser available for utilization?

ATo cover operational expenses of the investment adviser.

BTo provide a safety net for clients in case of investment losses.

✓To pay dues emanating from arbitration and conciliation proceedings under the Online Dispute Resolution Mechanism.

DTo fund SEBI's regulatory activities.

💡 The text states: 'Provided that such deposit shall be available for utilization in case the investment adviser fails to pay dues emanating out of arbitration and conciliation proceedings, if any, under the Online Dispute Resolution Mechanism or such other mechanism as may be specified by SEBI.'

Q58 MCQ · 1 mark EasyGeneral Obligations - Fiduciary Duty

In its relationship with clients, an investment adviser is primarily required to act in what capacity?

AAgent capacity

BPrincipal capacity

✓Fiduciary capacity

DBroker capacity

💡 An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.

Q59 MCQ · 1 mark EasyClient Limits for Investment Advisers

What is the maximum number of clients a part-time investment adviser can have at any point of time?

A100 clients

✓75 clients

C300 clients

DUnlimited clients

💡 The text states: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q60 MCQ · 1 mark HardClient Level Segregation

Which of the following statements is TRUE regarding client level segregation of advisory and distribution activities for a non-individual investment adviser?

AThe same client can be offered both advisory and distribution services within the group, provided fees are disclosed separately.

✓A client can either be an advisory client (no distributor consideration at group level) or a distribution services client (no advisory fee collected at group level).

CClient level segregation is only required for individual investment advisers, not non-individual entities.

DA non-individual investment adviser's family members are prohibited from providing distribution services to its advisory clients.

💡 The explanation under section 18.6.15 states: '(i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q61 MCQ · 1 mark MediumIndividual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time OR the fee collected during the financial year exceeds which amount, whichever is earlier?

AOne crore rupees

BTwo crore rupees

✓Three crore rupees

DFive crore rupees

Q62 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of how many days from the day of such advice?

A7 days

B10 days

✓15 days

D30 days

Q63 MCQ · 1 mark EasyClient Limits

What is the maximum number of clients a part-time investment adviser can have at any point of time?

A100

✓75

C300

D50

💡 The text states, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q64 MCQ · 1 mark MediumFees

If agreed by the client, for what maximum period can Investment Advisers and Research Analysts charge fees in advance?

AThree months

BSix months

✓One year

DTwo years

💡 The text mentions: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q65 MCQ · 1 mark EasyNaming Convention

According to SEBI regulations, what term must individuals registered as investment advisers use in all their correspondences with clients?

AFinancial Planner

BWealth Manager

✓Investment Adviser

DPortfolio Manager

💡 The text states: 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q66 MCQ · 1 mark MediumRisk Profiling - Information Gathering

Which of the following information is NOT explicitly mentioned as necessary for an investment adviser to obtain from a client for the purpose of giving investment advice, according to the text?

AAge and investment objective

BInvestment horizon and income details

CExisting assets and liabilities

✓Educational qualifications and marital status

💡 The text lists: 'age, investment objective, investment horizon, income details, existing assets and liabilities and risk appetite and liability/borrowing details.' Educational qualifications and marital status are not explicitly listed.

Q67 MCQ · 1 mark EasyNaming Convention

What term must individuals registered as investment advisers use in all their correspondences with clients?

AFinancial Adviser

BWealth Manager

✓Investment Adviser

DPortfolio Manager

💡 The text states: 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q68 MCQ · 1 mark MediumFees

Which of the following statements about fees charged by an Investment Adviser (IA) is correct?

AIAs can charge advance fees for a maximum period of two years if the client agrees.

BAll fee-related provisions, including advance fee limits, apply universally to all types of clients.

✓Fee-related provisions such as advance fee limits are applicable only to individual and HUF clients who are not accredited investors.

DIAs are prohibited from charging any form of advance fees from clients.

💡 The text states, 'The fee related provisions such as fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).' Option A is incorrect as advance fees cannot exceed one year. Option B is incorrect as fee provisions are not universal. Option D is incorrect as advance fees are allowed if agreed, up to one year.

Q69 MCQ · 1 mark MediumGeneral Obligations - AI Tools

When an investment adviser uses Artificial Intelligence tools for servicing clients, who is solely responsible for the security, confidentiality, and integrity of client data, and the investment advice based on AI tool output?

AThe AI tool provider

BThe client

✓The investment adviser

DSEBI

💡 The text states: 'An investment adviser who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.'

Q70 MCQ · 1 mark MediumIndividual to Non-Individual IA Transition

An individual investment adviser is required to apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time OR if the fee collected during the financial year exceeds what amount?

AOne crore rupees

BTwo crore rupees

✓Three crore rupees

DFive crore rupees

💡 The text states, 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier shall – (i) apply for grant of in-principle registration as non-individual investment adviser'.

Q71 MCQ · 1 mark EasyRecord Maintenance

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client records, risk profiling, and suitability assessments?

AThree years

✓Five years

CSeven years

DTen years

💡 The text explicitly states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years' (p. 348).

Q72 MCQ · 1 mark HardGeneral Obligations

Under what specific condition can an investment adviser enter into a transaction on its own account that is contrary to advice given to clients, within the usual 15-day restricted period?

AThe investment adviser can never enter into a transaction contrary to client advice.

BThe investment adviser can do so after 24 hours, without any further action.

✓If the situation has changed, the investment adviser may do so after giving a revised assessment to the client at least 24 hours in advance of entering the transaction.

DThe investment adviser can do so after 15 days, without any restrictions.

Q73 MCQ · 1 mark MediumTransition to Non-Individual IA

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain limit OR the fee collected during the financial year exceeds a specific amount. What are these thresholds?

A100 clients or fee exceeds one crore rupees

B200 clients or fee exceeds two crore rupees

✓300 clients or fee exceeds three crore rupees

D500 clients or fee exceeds five crore rupees

Q74 MCQ · 1 mark EasyNaming Conventions

What term must individuals registered as investment advisers use in all their correspondences with clients?

AFinancial Adviser

BWealth Manager

✓Investment Adviser

DPortfolio Manager

💡 As per the text, 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q75 MCQ · 1 mark HardRisk Profiling Tools

When using risk profiling tools such as questionnaires, which of the following is NOT a requirement for the investment adviser to ensure regarding the questions or descriptions used?

AThe questionnaire must avoid vague language or double negatives.

✓The questionnaire should be structured to contain leading questions to guide the client.

CThe language used in the questionnaire should not be complex, ensuring client understanding.

DThe tools are fit for purpose and any limitations have been identified and mitigated.

💡 The text explicitly states that questionnaires 'should ensure that: (ii) questionnaire is not structured in a way that it contains leading questions.' Therefore, structuring it to contain leading questions is contrary to the requirement.

Q76 MCQ · 1 mark MediumIndividual IA Transition to Non-Individual IA

An individual investment adviser is required to apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain limit OR their fee collected during the financial year exceeds a certain amount. What are these thresholds?

A200 clients or 2 crore rupees

✓300 clients or 3 crore rupees

C150 clients or 1 crore rupees

D500 clients or 5 crore rupees

Q77 MCQ · 1 mark MediumFees & Record Maintenance

Which of the following statements regarding an Investment Adviser's obligations for fees and record keeping is TRUE?

AAn Investment Adviser can charge advance fees for an unlimited period, provided the client agrees.

BFee-related provisions such as fee limit and refund of fees are applicable to all clients, including accredited investors.

✓Investment advice, whether written or oral, must be recorded and preserved for a minimum period of five years.

DAn Investment Adviser is not required to maintain records of communication like emails and call recordings.

💡 The text under 'Record Maintenance' states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years: ... Investment advice provided, whether written or oral'. Option A is false because advance fees shall not exceed one year. Option B is false because fee-related provisions are applicable only to individual and HUF clients who are not accredited investors. Option D is false as 'Records of communication including emails, call recordings etc. with all clients including prospective clients' must be maintained.

Q78 MCQ · 1 mark EasyRecord Maintenance

For how long is an investment adviser required to maintain Know Your Client (KYC) records of a client?

A2 years

B3 years

✓5 years

D10 years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years: Know Your Client records of the client'.

Q79 MCQ · 1 mark EasyRecord Maintenance

For what minimum period is an investment adviser required to maintain Know Your Client (KYC) records of the client?

AThree years

✓Five years

CSeven years

DTen years

💡 The text specifies: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years: Know Your Client records of the client;'.

Q80 MCQ · 1 mark HardClient Level Segregation

Which of the following statements accurately describes the client-level segregation requirements for investment advisory and distribution activities?

AAn individual investment adviser is permitted to provide distribution services to their clients as long as it is disclosed.

BA non-individual investment adviser may offer both advisory and distribution services to the same client within its group, provided separate fees are charged.

CThe family of an individual investment adviser may provide distribution services to the client advised by the individual investment adviser, with client consent.

✓A client cannot be offered both advisory and distribution services within the group of a non-individual entity, meaning they are either an advisory client or a distribution services client at the group level.

💡 The 'Explanation' section under 18.6.15 clearly states: '(i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.' Options A, B, and C contradict other specific prohibitions mentioned in the same section.

Q81 MCQ · 1 mark MediumRecord Maintenance Period

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client (KYC) records, risk profiling, and suitability assessments?

AThree years

✓Five years

CSeven years

DTen years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q82 MCQ · 1 mark MediumGeneral Obligations - AI Tools

AThe AI tool developer

BThe client, as they agree to the use of AI tools

✓The investment adviser

DA third-party auditor appointed by SEBI

💡 The text states: 'An investment adviser who uses Artificial Intelligence tools... shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.'

Q83 MCQ · 1 mark MediumFees

An Investment Adviser (IA) can charge fees in advance from a client. What is the maximum period for which such advance fees can be collected, if agreed by the client?

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q84 MCQ · 1 mark HardFees

The fee-related provisions, such as fee limit, modes of payment, refund of fees, advance fee, and breakage fees, are applicable only to which specific client categories?

AAll clients, including accredited investors.

✓Individual and Hindu Undivided Family (HUF) clients who are not accredited investors.

CCorporate clients and trusts only.

DAccredited investors only.

💡 The text states: 'The fee related provisions such as fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).'

Q85 MCQ · 1 mark EasyRecord Maintenance

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client records, risk profiling, suitability assessments, and copies of agreements with clients?

A3 years

✓5 years

C7 years

D10 years

💡 The text specifies: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q86 MCQ · 1 mark MediumIndividual to Non-Individual IA Transition

An individual investment adviser is required to apply for grant of in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain limit or the fee collected during the financial year exceeds a certain amount, whichever is earlier. What are these thresholds?

A100 clients or ₹1 crore fee

B200 clients or ₹2 crore fee

✓300 clients or ₹3 crore fee

D500 clients or ₹5 crore fee

Q87 MCQ · 1 mark EasyRecord Maintenance

For what minimum period is an investment adviser required to maintain records such as Know Your Client (KYC) documents, risk profiling, and suitability assessments?

ATwo years

BThree years

✓Five years

DTen years

💡 The text states, 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q88 MCQ · 1 mark HardGeneral Obligations - Own Account Transactions

An investment adviser gives advice to a client. When can the investment adviser enter into a transaction on its own account that is contrary to this advice?

AImmediately, if the market situation changes.

BAfter a period of fifteen days from the day of such advice, without any further action.

✓Within fifteen days, if the situation has changed, after giving a revised assessment to the client at least 24 hours in advance.

DNever, as it is strictly prohibited to enter into contrary transactions.

Q89 MCQ · 1 mark HardAppointment of Compliance Officer

If a non-individual investment adviser appoints an *independent professional* (instead of a dedicated compliance officer) for monitoring compliance, what additional requirement must be met?

AThe independent professional must have at least 10 years of experience in regulatory compliance.

BThe independent professional must be a member of a global professional body recognized by SEBI.

✓The principal officer must submit an undertaking to SEBI, taking responsibility for monitoring compliance.

DThe independent professional must hold a Ph.D. in finance or a related field.

💡 The text specifies: 'Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI or the body or body corporate recognized under regulation 14 of these regulations to the effect that the principal officer shall be responsible for monitoring the compliance'.

Q90 MCQ · 1 mark HardClient Level Segregation of Activities

Which of the following statements is TRUE regarding the segregation of advisory and distribution activities as per SEBI regulations for investment advisers?

AAn individual investment adviser is permitted to provide distribution services to their clients as long as conflicts of interest are disclosed.

BA non-individual investment adviser can offer both advisory and distribution services to the same client within the same group, provided clear segregation is maintained.

CThe family of an individual investment adviser may provide distribution services to clients advised by that individual investment adviser, but the IA cannot advise clients receiving distribution from other family members.

✓For a non-individual investment adviser, the same client cannot be offered both advisory and distribution services within the group, meaning a client is either an advisory client or a distribution services client.

💡 Option A is false: 'An individual investment adviser shall not provide distribution services.' Option B is false: The explanation clearly states 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.' Option C is false because 'The family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser'. Option D accurately reflects the text: 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q91 MCQ · 1 mark MediumGeneral Obligations - Third Party Remuneration

As per general obligations, an investment adviser shall not receive any consideration by way of remuneration or compensation from any person other than:

AThe issuer of the underlying products.

✓The client being advised.

CA registered broker-dealer.

DA mutual fund distributor.

Q92 MCQ · 1 mark EasyFees

If agreed by the client, an Investment Adviser (IA) may charge fees in advance, but such advance shall not exceed fees for a period of:

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q93 MCQ · 1 mark MediumGeneral Obligations - Self-Transactions

An investment adviser is generally prohibited from entering into transactions on its own account which are contrary to its advice given to clients for a specific period. What is this period, and under what condition can this prohibition be overridden?

A7 days; if the client provides written consent.

✓15 days; if the investment adviser provides a revised assessment to the client at least 24 hours in advance.

C30 days; if SEBI grants a special exemption.

D60 days; if the market conditions change significantly.

Q94 MCQ · 1 mark MediumCompliance Officer Appointment

A non-individual investment adviser must appoint a compliance officer. Alternatively, they can appoint an independent professional who is a member of specific institutes. Which of the following is an additional mandatory requirement for such an independent professional?

AMust have at least 10 years of experience in compliance.

✓Must hold a relevant certification from NISM as specified by SEBI.

CMust be a lawyer specializing in financial regulations.

DMust be approved by the Principal Officer of the investment adviser without any further SEBI requirement.

💡 A non-individual investment adviser can appoint an independent professional who is a member of specified institutes (CA, CS, CMA) 'provided such a professional holds a relevant certification from NISM, as may be specified by SEBI'.

Q95 MCQ · 1 mark MediumIndividual IA Transition

A200 clients or 2 crore rupees.

✓300 clients or 3 crore rupees.

C150 clients or 1.5 crore rupees.

D400 clients or 4 crore rupees.

Q96 MCQ · 1 mark EasyPart-time IA Client Limits

What is the maximum number of clients a part-time investment adviser shall have at any point of time?

A50

✓75

C100

D150

💡 The text explicitly states: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q97 MCQ · 1 mark EasyRecord Maintenance

For how long is an investment adviser required to maintain records, such as Know Your Client records and suitability assessments, in physical or electronic format?

AMinimum period of three years

✓Minimum period of five years

CMinimum period of seven years

DMinimum period of ten years

💡 The text clearly states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years:'.

Q98 MCQ · 1 mark MediumAppointment of Compliance Officer

For a non-individual investment adviser, if an independent professional (e.g., a member of ICAI) is appointed for monitoring compliance instead of a dedicated compliance officer, who is responsible for submitting an undertaking to SEBI regarding compliance monitoring?

AThe independent professional.

BThe Chief Executive Officer of the non-individual investment adviser.

✓The Principal Officer of the non-individual investment adviser.

DThe Board of Directors of the non-individual investment adviser.

Q99 MCQ · 1 mark EasyPart-time IA Client Limit

What is the maximum number of clients a part-time investment adviser is permitted to have at any point of time?

A50 clients

✓75 clients

C100 clients

D150 clients

💡 The number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.

Q100 MCQ · 1 mark EasyClient Limits

What is the maximum number of clients a part-time investment adviser is permitted to have in total at any point of time?

A50

✓75

C100

D300

💡 The text states, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q101 MCQ · 1 mark EasyClient Limits

What is the maximum number of clients a part-time investment adviser can have in total at any point of time?

A50 clients

✓75 clients

C100 clients

D300 clients

💡 According to the text, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q102 MCQ · 1 mark EasyNaming Convention

According to SEBI regulations, which term must an individual registered as an investment adviser use in all correspondences with clients?

AFinancial Planner

BWealth Manager

✓Investment Adviser

DPortfolio Manager

💡 The text states: 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q103 MCQ · 1 mark EasyIndividual Investment Adviser Regulations

As per SEBI regulations, what is the maximum number of clients a part-time investment adviser can have at any point of time?

A50

✓75

C100

D300

💡 The text states: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.' (p. 344)

Q104 MCQ · 1 mark EasyRecord Maintenance

For how long must an investment adviser maintain records such as Know Your Client (KYC) documents, risk profiling, and suitability assessments?

AMinimum period of three years

✓Minimum period of five years

CMinimum period of seven years

DMinimum period of ten years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q105 MCQ · 1 mark EasyInvestment Adviser Fees

If agreed by the client, an Investment Adviser (IA) may charge fees in advance. However, such advance shall not exceed fees for a period of:

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q106 MCQ · 1 mark MediumIndividual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds what threshold?

AOne hundred

BTwo hundred

✓Three hundred

DFive hundred

Q107 MCQ · 1 mark MediumGeneral Obligations - AI Tools

AThe AI tool developer

BThe client, after acknowledging the use of AI

✓The investment adviser

DA third-party auditor appointed by SEBI

💡 An investment adviser who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.

Q108 MCQ · 1 mark MediumDisclosures to Clients

An Investment Adviser recommends an investment product to a client that falls outside the purview of SEBI. Which of the following is a mandatory disclosure in this scenario?

AThe adviser must provide an indemnity bond to cover any losses.

✓The adviser must disclose that such products and advisory services are outside SEBI's regulatory purview and no recourse from SEBI is available.

CThe adviser must obtain a no-objection certificate from SEBI before recommending such products.

DThe adviser must guarantee a minimum return on such products.

💡 An investment adviser who provides advisory services in respect of products or services which are outside the purview of SEBI, shall disclose to the client that such products or services and his advisory services in respect of such products or services are outside the regulatory purview of SEBI and no recourse from SEBI shall be available to such clients for any grievance arising therefrom.

Q109 MCQ · 1 mark HardGeneral Obligations: Own Account Transactions

An investment adviser provides advice to a client. For what period from the day of such advice is the investment adviser prohibited from entering into transactions on its own account that are contrary to this advice, unless a revised assessment is given to the client at least 24 hours in advance?

A7 days

B10 days

✓15 days

D30 days

Q110 MCQ · 1 mark MediumIndividual to Non-Individual Transition

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain limit or the fee collected during the financial year exceeds a certain amount, whichever is earlier. What are these thresholds?

A200 clients OR 2 crore rupees fee

✓300 clients OR 3 crore rupees fee

C250 clients OR 2.5 crore rupees fee

D400 clients OR 4 crore rupees fee

Q111 MCQ · 1 mark MediumGeneral Obligations

From whom is an investment adviser permitted to receive consideration (remuneration or compensation) in respect of the underlying products or securities for which advice is provided?

✓Only from the client being advised.

BFrom the client or the issuer of the products/securities.

CFrom the client or the distributor of the products/securities.

DFrom any person, provided conflicts of interest are disclosed.

💡 The text explicitly states: 'An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.'

Q112 MCQ · 1 mark HardGeneral Obligations - Own Account Transactions

An investment adviser has given advice to clients. Under what circumstances can the investment adviser enter into a transaction on its own account that is contrary to this advice, within the usual restricted period?

AAn investment adviser can never enter into a transaction contrary to client advice on its own account.

✓An investment adviser may enter into such a transaction if they believe the situation has changed, after giving a revised assessment to the client at least 24 hours in advance.

CAn investment adviser can do so after 15 days, without any further notice.

DAn investment adviser can do so immediately if they obtain written consent from all affected clients.

Q113 MCQ · 1 mark HardAppointment of Compliance Officer

Which of the following statements is TRUE regarding the appointment of a compliance officer for a non-individual investment adviser?

AA non-individual investment adviser must always appoint a dedicated compliance officer and cannot use an independent professional.

✓An independent professional who is a member of ICAI/ICSI/ICoAI may be appointed, provided they hold a relevant NISM certification.

CIf an independent professional is appointed, the client is responsible for monitoring compliance.

DThe appointment of a compliance officer is optional for non-individual investment advisers.

💡 According to section 18.6.13 (1)(ii), a non-individual investment adviser may appoint 'an independent professional who is a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India or member of any other professional body as may be specified by SEBI, provided such a professional holds a relevant certification from NISM.'

Q114 MCQ · 1 mark EasyGeneral Requirements

What is the maximum number of clients a part-time investment adviser can have in total at any point of time?

A50

✓75

C100

D300

💡 The text states, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q115 MCQ · 1 mark MediumIndividual to Non-Individual Transition

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds a certain limit or the fee collected during the financial year exceeds a specific amount, whichever is earlier. What are these thresholds?

A200 clients or ₹2 crore fee

B250 clients or ₹2.5 crore fee

✓300 clients or ₹3 crore fee

D350 clients or ₹3.5 crore fee

Q116 MCQ · 1 mark EasyIndividual IA Client Limits

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds what threshold at any point in time?

A100

B200

✓300

D500

💡 As per the regulations, individuals registered as investment advisers shall apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier.

Q117 MCQ · 1 mark MediumDeposit Maintenance

For what specific purpose shall the deposit maintained by an investment adviser with a scheduled bank be available?

ATo cover operational expenses of the investment adviser.

✓To be utilized in case the investment adviser fails to pay dues emanating out of arbitration and conciliation proceedings.

CTo provide a guarantee against client investment losses.

DTo fund marketing and promotional activities.

Q118 MCQ · 1 mark MediumFees

In the context of fees charged by an Investment Adviser, for which type of clients do fee-related provisions such as fee limit, modes of payment, refund, advance fee, and breakage fees apply?

AAll clients, including accredited investors.

BIndividual and Hindu Undivided Family (HUF) clients who are accredited investors.

✓Individual and Hindu Undivided Family (HUF) clients, provided these clients are not accredited investors.

DCorporate clients only.

Q119 MCQ · 1 mark MediumIndividual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their client count or fee collection exceeds which of the following thresholds?

A100 clients or 1 crore rupees

B200 clients or 2 crore rupees

✓300 clients or 3 crore rupees

D500 clients or 5 crore rupees

Q120 MCQ · 1 mark EasyDeposit

With which entity must an investment adviser maintain the specified deposit, marked as a lien in favor of a SEBI recognized body?

AAny commercial bank.

✓A scheduled bank.

CReserve Bank of India.

DA cooperative bank.

Q121 MCQ · 1 mark EasyIndividual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds what limit, or if the fee collected during the financial year exceeds what amount, whichever is earlier?

A100 clients or one crore rupees

B200 clients or two crore rupees

✓300 clients or three crore rupees

D500 clients or five crore rupees

💡 As per the regulations, individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier, shall apply for grant of in-principle registration as non-individual investment adviser.

Q122 MCQ · 1 mark HardCompliance Officer

If a non-individual investment adviser appoints an independent professional (e.g., a member of ICAI) instead of a dedicated compliance officer for monitoring compliance, who is ultimately responsible for monitoring compliance in respect of SEBI requirements?

AThe independent professional

✓The Principal Officer of the investment adviser

CSEBI itself

DThe NISM certified professional

💡 The text states: 'Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI...to the effect that the principal officer shall be responsible for monitoring the compliance'.

Q123 MCQ · 1 mark MediumIndividual to Non-Individual IA Transition

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time OR if the fee collected during the financial year exceeds what amount, whichever is earlier?

AOne crore rupees

BTwo crore rupees

✓Three crore rupees

DFive crore rupees

Q124 MCQ · 1 mark MediumFees

If agreed by the client, what is the maximum period for which an Investment Adviser (IA) can charge fees in advance?

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q125 MCQ · 1 mark MediumOwn Account Transactions

An investment adviser has provided advice to a client. For how many days from the day of such advice is the investment adviser generally prohibited from entering into transactions on its own account which are contrary to that advice?

A7 days

B10 days

✓15 days

D30 days

Q126 MCQ · 1 mark EasyInvestment Adviser Client Limits

What is the maximum number of clients a part-time investment adviser can have at any point of time?

A50

✓75

C100

D300

💡 According to the text, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q127 MCQ · 1 mark EasyInvestment Adviser Deposit

For what primary purpose is the deposit maintained by an investment adviser available for utilization?

ATo cover operational expenses of the investment adviser.

✓To pay dues emanating from arbitration and conciliation proceedings.

CTo provide loans to clients for investment purposes.

DTo invest in SEBI-approved securities to generate returns.

Q128 MCQ · 1 mark EasyIA Naming Conventions

What term must individuals registered as investment advisers use in all their correspondences with their clients?

AFinancial Advisor

BWealth Manager

✓Investment Adviser

DPortfolio Consultant

💡 The text states: 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q129 MCQ · 1 mark MediumGeneral Obligations

An investment adviser is prohibited from entering into transactions on its own account that are contrary to the advice given to clients for a specific period. What is this period?

A7 days

✓15 days

C30 days

D60 days

Q130 MCQ · 1 mark MediumSegregation of Activities

Regarding client-level segregation of advisory and distribution activities for a non-individual investment adviser, which statement is true?

AThe same client can be offered both advisory and distribution services within the group, provided fees are clearly separated.

✓A client can only be an advisory client where no distributor consideration is received at the group level OR a distribution services client where no advisory fee is collected at the group level.

CNon-individual investment advisers are exempt from client-level segregation rules.

DClient-level segregation applies only to individual investment advisers, not non-individual entities.

💡 The text states under 'Explanation' for non-individual IA segregation: '(i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q131 MCQ · 1 mark MediumFees and Advance Payments

Regarding fees charged by an Investment Adviser, which of the following statements is correct?

AAn Investment Adviser cannot charge fees in advance under any circumstances.

BAn Investment Adviser can charge advance fees, but such advance shall not exceed fees for a period of six months.

CThe fee-related provisions, including advance fee limits, apply to all types of clients, including accredited investors.

✓If agreed by the client, an Investment Adviser may charge fees in advance, not exceeding fees for a period of one year, and specific fee provisions apply only to individual and HUF clients who are not accredited investors.

💡 The text states, 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.' It also specifies, 'The fee related provisions such as fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).'

Q132 MCQ · 1 mark HardGeneral Obligations - Personal Transactions

An investment adviser is generally prohibited from entering into transactions on their own account that are contrary to advice given to clients for a period of fifteen days. Under what specific condition can an investment adviser make such a transaction within this restricted period?

AAn investment adviser can never enter into such a transaction, regardless of circumstances.

BOnly if the client provides explicit written consent for the specific transaction.

✓If the investment adviser is of the opinion that the situation has changed, and provides a revised assessment to the client at least 24 hours in advance of the transaction.

DAfter a period of 7 days has passed from the original advice, without any further notification to the client.

💡 An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days. However, if the investment adviser is of the opinion that the situation has changed during this period, they may enter into such a transaction after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.

Q133 MCQ · 1 mark HardClient Level Segregation of Advisory and Distribution Activities

Which of the following statements is TRUE regarding the segregation of advisory and distribution activities for an Investment Adviser?

AAn individual investment adviser can provide distribution services to clients, provided it is disclosed.

BA non-individual investment adviser can offer both advisory and distribution services to the same client within its group, as long as fees are clearly separated.

✓If a client receives distribution services from family members of an individual investment adviser, that individual investment adviser is prohibited from providing advice to that client.

DA part-time investment adviser is exempt from client-level segregation rules and can offer both advisory and distribution services to the same client.

💡 As per the text, 'no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.' Option A is false because an individual IA shall not provide distribution services. Option B is false because 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.' Option D is not supported by the text; part-time IAs are still individual IAs and subject to those rules.

Q134 MCQ · 1 mark EasyRecord Maintenance Period

For what minimum period is an investment adviser required to maintain records such as Know Your Client (KYC) records, risk profiling, suitability assessments, and investment advice provided?

A2 years

B3 years

✓5 years

D10 years

💡 An investment adviser is required to maintain records in physical or electronic format for a minimum period of five years.

Q135 MCQ · 1 mark EasyDeposit Maintenance

With which entity must an investment adviser maintain the specified deposit, marked as a lien in favor of a SEBI-recognized body?

AA co-operative bank

✓A scheduled bank

CA non-banking financial company (NBFC)

DA regional rural bank

Q136 MCQ · 1 mark MediumRecord Maintenance

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client (KYC) documents, risk profiling, and suitability assessments?

AThree years

✓Five years

CSeven years

DTen years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q137 MCQ · 1 mark EasyRecord Maintenance

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client (KYC) details, risk profiling, and suitability assessments?

AA minimum of two years

BA minimum of three years

✓A minimum of five years

DA minimum of ten years

💡 An investment adviser is required to maintain records, including Know Your Client records, risk profiling and risk assessment, and suitability assessment, for a minimum period of five years in physical or electronic format.

Q138 MCQ · 1 mark MediumCompliance Audit

An investment adviser must conduct a yearly audit for compliance with regulatory requirements. From which of the following professional bodies must the member conducting this audit belong?

AInstitute of Actuaries of India

✓Institute of Chartered Accountants of India

CIndian Institute of Banking & Finance

DNational Institute of Securities Markets (NISM)

💡 The text states: 'The adviser must conduct yearly audit in respect of compliance with regulatory requirements from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India'.

Q139 MCQ · 1 mark HardRecord Maintenance

For how long is an investment adviser required to maintain Know Your Client records, risk profiling, and suitability assessment records, among others, in physical or electronic format?

AThree years

✓Five years

CSeven years

DTen years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q140 MCQ · 1 mark EasyClient Limits

What is the maximum number of clients a part-time investment adviser is permitted to have at any point of time?

A50

✓75

C100

D300

💡 As per the text, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q141 MCQ · 1 mark HardClient Level Segregation of Activities

Which of the following is TRUE regarding client level segregation of advisory and distribution activities?

AAn individual investment adviser is permitted to provide distribution services to their clients.

BA client can receive both advisory and distribution services from the same non-individual entity's group, provided separate fees are charged.

CThe family members of an individual investment adviser are allowed to provide distribution services to the clients advised by that individual IA.

✓For a non-individual investment adviser, the same client cannot be offered both advisory and distribution services within the group.

💡 The text states that an individual investment adviser shall not provide distribution services, and their family shall not provide distribution services to clients advised by them. For non-individual investment advisers, the explanation explicitly states that 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.'

Q142 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser provides advice to a client. What is the rule regarding the investment adviser entering into a transaction on their own account that is contrary to this advice?

AThe investment adviser can enter into a contrary transaction on their own account immediately after giving the advice to the client.

BThe investment adviser must wait for a period of 30 days before entering into any contrary transaction on their own account.

✓The investment adviser shall not enter into a contrary transaction on their own account for fifteen days, but can do so within this period if a revised assessment is given to the client at least 24 hours in advance.

DThe investment adviser can never enter into a transaction on their own account that is contrary to the advice given to clients.

💡 An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days. However, if the situation changes within these fifteen days, the investment adviser may enter into such a transaction after giving a revised assessment to the client at least 24 hours in advance.

Q143 MCQ · 1 mark MediumDeposit Maintenance

Where must an investment adviser maintain the deposit as specified by SEBI?

AWith SEBI directly, marked as lien in their favor.

BWith a public sector bank, without a lien.

✓With a scheduled bank, marked as lien in favor of a body recognized by SEBI.

DIn a current account with any commercial bank.

Q144 MCQ · 1 mark MediumIA's Own Account Transactions

An investment adviser is generally prohibited from entering into transactions on its own account that are contrary to its advice given to clients for a specific period. What is this period?

A7 days

✓15 days

C30 days

D60 days

💡 An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice.

Q145 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser is generally prohibited from entering into transactions on its own account that are contrary to its advice given to clients for a period of fifteen days. Under what condition can this restriction be relaxed?

AThe investment adviser may enter into such a transaction immediately if the client provides written consent.

BThe investment adviser may enter into such a transaction after 30 days from the day of such advice, without any further notification.

✓The investment adviser may enter into such a transaction within the restricted period if the situation has changed, after giving a revised assessment to the client at least 24 hours in advance.

DThe investment adviser may enter into such a transaction if it involves a different security than the one advised to the client.

Q146 MCQ · 1 mark EasyInvestment Adviser Client Limits

What is the maximum number of clients a part-time investment adviser can have at any point in time?

A50

✓75

C100

D300

💡 The text states: 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q147 MCQ · 1 mark EasyRecord Maintenance

For a minimum period of how many years is an investment adviser required to maintain records in physical or electronic format?

ATwo years

BThree years

✓Five years

DTen years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q148 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser gives advice to a client. For how long is the investment adviser restricted from entering into transactions on its own account that are contrary to this advice, unless a revised assessment is provided?

A7 days

B10 days

✓15 days

D30 days

💡 An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. If the situation changes, a revised assessment must be given to the client at least 24 hours in advance of entering into such a transaction.

Q149 MCQ · 1 mark EasyIndividual IA Transition Thresholds

An individual registered as an investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time OR the fee collected during the financial year exceeds which amount?

AOne crore rupees

BTwo crore rupees

✓Three crore rupees

DFive crore rupees

💡 As per the regulations, an individual investment adviser must apply for in-principle registration as a non-individual investment adviser if the fee collected during the financial year exceeds three crore rupees, or if the number of clients exceeds three hundred, whichever is earlier.

Q150 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser gives advice to a client. When can the investment adviser enter into transactions on their own account that are contrary to this advice?

AImmediately, as long as the client is informed.

✓After a period of fifteen days from the day of such advice, unless a revised assessment is given to the client at least 24 hours in advance.

COnly after 30 days, irrespective of any change in situation.

DNever, if the transaction is contrary to the advice given to a client.

Q151 MCQ · 1 mark HardClient Level Segregation of Activities

In the context of client level segregation of advisory and distribution activities for a non-individual investment adviser, which statement is TRUE?

AThe same client can be offered both advisory and distribution services by different departments within the same group.

BA client can receive advisory services from the group and also pay distributor consideration to the group for other products.

✓A client can either be an advisory client, where no distributor consideration is received at the group level, or a distribution services client, where no advisory fee is collected from the client at the group level.

DNon-individual investment advisers are exempt from client level segregation, unlike individual investment advisers.

💡 The explanation for non-individual IA segregation states: '(i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q152 MCQ · 1 mark MediumRisk Profiling Tools

When an investment adviser uses questionnaires for risk profiling clients, which of the following is a mandatory requirement?

AThe questionnaire must contain leading questions to guide the client towards suitable options.

BThe questionnaire should be structured using complex language to test the client's financial literacy.

✓The investment adviser must ensure the tools are fit for purpose and any limitations have been identified and mitigated.

DThe questionnaire may use double negatives to ensure comprehensive understanding of risk tolerance.

💡 The investment adviser must ensure that the tools are fit for the purpose and any limitations have been identified and mitigated. The text explicitly states that questionnaires should not be vague, use double negatives, use complex language, or be structured in a way that it contains leading questions.

Q153 MCQ · 1 mark MediumFees

If agreed by the client, an Investment Adviser (IA) may charge fees in advance. What is the maximum period for which such advance fees can be collected?

ASix months

✓One year

CTwo years

DThree months

💡 The text states, 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q154 MCQ · 1 mark MediumFees

The fee-related provisions, such as fee limit, modes of payment, refund, and advance fees, are specifically applicable to which type of clients?

AAll clients, including accredited investors.

BOnly individual and Hindu Undivided Family (HUF) clients who are also accredited investors.

✓Only individual and Hindu Undivided Family (HUF) clients, provided these clients are not accredited investors.

DOnly non-individual clients.

Q155 MCQ · 1 mark MediumClient Level Segregation

In the context of client level segregation for a non-individual investment adviser, what does the 'Explanation' clarify regarding a single client?

AA client can receive both advisory and distribution services from different entities within the group.

BA client can receive both advisory and distribution services from the same entity within the group, provided fees are segregated.

✓The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.

DAdvisory fees can be collected from a client even if they are receiving distribution services, as long as it's disclosed.

💡 Explanation (i) explicitly states: 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.'

Q156 MCQ · 1 mark EasyIndividual IA Transition Thresholds

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients or fees collected exceed which of the following thresholds?

ANumber of clients exceeds 200 at any point or fees collected exceed 2 crore rupees.

✓Number of clients exceeds 300 at any point or fees collected exceed 3 crore rupees.

CNumber of clients exceeds 250 at any point or fees collected exceed 2.5 crore rupees.

DNumber of clients exceeds 350 at any point or fees collected exceed 3.5 crore rupees.

💡 As per the regulations, an individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier.

Q157 MCQ · 1 mark MediumRecord Maintenance Period

What is the minimum period for which an investment adviser is required to maintain records such as Know Your Client (KYC) records, risk profiling, and suitability assessment?

ATwo years

BThree years

✓Five years

DSeven years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q158 MCQ · 1 mark HardClient Level Segregation of Advisory and Distribution Activities

A non-individual investment adviser operates within a 'group'. According to SEBI regulations, which of the following statements correctly describes the client-level segregation requirement for such a group?

AThe same client can be offered both advisory and distribution services by different entities within the group, provided there is a clear disclosure.

BA client can receive advisory services from one entity in the group and distribution services from another entity within the same group, as long as separate fees are charged.

DThe 'group' is defined as any two entities that share common directors, irrespective of their ownership structure.

💡 The explanation for client level segregation states: '(i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.' Option D is incorrect as the text provides a specific definition of 'Group' later on.

Q159 MCQ · 1 mark MediumFees

The fee-related provisions such as fee limit, modes of payment, refund, advance fee, and breakage fees are applicable only to which type of clients?

AAll clients, including accredited investors.

✓Individual and Hindu Undivided Family (HUF) clients who are not accredited investors.

COnly accredited investors.

DOnly non-individual clients.

💡 The text specifies: 'The fee related provisions... shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).'

Q160 MCQ · 1 mark MediumGeneral Obligations - AI Tools

If an investment adviser uses Artificial Intelligence tools for servicing clients, who is solely responsible for the security, confidentiality, integrity of client data, and compliance with any law for the time being in force?

AThe Artificial Intelligence tool provider.

BSEBI, as the regulating body.

✓The investment adviser.

DThe client, for providing the data.

💡 The text clearly states: 'An investment adviser who uses Artificial Intelligence tools... shall be solely responsible for the security, confidentiality, integrity of the client data... and compliance with any law for the time being in force.'

Q161 MCQ · 1 mark HardCompliance Officer Appointment

Which of the following independent professionals can be appointed by a non-individual investment adviser for monitoring compliance, provided such a professional holds a relevant NISM certification?

✓A member of the Institute of Chartered Accountants of India.

BA member of the Bar Council of India.

CA licensed Stock Broker.

DA certified Financial Risk Manager.

💡 The text specifies that a non-individual investment adviser can appoint 'an independent professional who is a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India or member of any other professional body as may be specified by SEBI, provided such a professional holds a relevant certification from NISM'. Option A is directly from this list.

Q162 MCQ · 1 mark MediumGeneral Obligations: Remuneration

An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from which of the following, in respect of the underlying products or securities for which advice is provided?

AThe client being advised, without prior written consent.

✓Any person other than the client being advised.

CAssociated entities or group companies.

DMutual fund houses or asset management companies, if disclosed.

💡 The text clearly states: 'An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.'

Q163 MCQ · 1 mark EasyPart-time Investment Adviser Client Limit

What is the maximum number of clients a part-time investment adviser is permitted to have in total at any point of time?

A50

✓75

C100

D300

💡 The text states, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q164 MCQ · 1 mark MediumGeneral Obligations / AI Tools

AThe AI tool vendor.

BThe client.

✓The investment adviser.

DSEBI.

Q165 MCQ · 1 mark HardCompliance Officer

For a non-individual investment adviser, which of the following is true regarding the appointment of a compliance officer?

AOnly a dedicated compliance officer can be appointed, who must be a member of ICSI.

✓An independent professional, who is a member of ICAI, ICSI, or ICWA and holds a relevant NISM certification, can be appointed, but the Principal Officer must submit an undertaking to SEBI taking responsibility for monitoring compliance.

CThe Principal Officer automatically serves as the compliance officer, provided they have 5 years of experience.

DA compliance officer must be appointed, and they must have a legal background.

💡 The text states, 'A non-individual investment adviser shall appoint either: (i) a compliance officer; or (ii) an independent professional who is a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India or member of any other professional body as may be specified by SEBI, provided such a professional holds a relevant certification from NISM...' and '(2) Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI... to the effect that the principal officer shall be responsible for monitoring the compliance...'

Q166 MCQ · 1 mark MediumClient Level Segregation

Which of the following statements is true regarding an individual investment adviser's involvement with distribution services?

AAn individual investment adviser may provide distribution services to their clients.

BAn individual investment adviser's family members may provide distribution services to the clients advised by the individual investment adviser.

✓An individual investment adviser shall not provide distribution services.

DAn individual investment adviser can advise clients who are receiving distribution services from their family members, provided it is disclosed.

💡 The text clearly states: 'An individual investment adviser shall not provide distribution services.' It also adds restrictions on family members providing distribution services to the IA's clients, and the IA advising clients receiving distribution from family.

Q167 MCQ · 1 mark HardGeneral Obligations - Own Account Transactions

An investment adviser is generally prohibited from entering into transactions on its own account contrary to advice given to clients for a period of fifteen days. Under what specific condition can the investment adviser enter into such a transaction within this 15-day period?

AIf the client provides written consent for the transaction.

✓If the investment adviser is of the opinion that the situation has changed and gives the client revised assessment at least 24 hours in advance.

CIf the transaction is for a different asset class than the one advised to the client.

DIf the investment adviser obtains prior approval from SEBI for the transaction.

💡 The text states: 'Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.'

Q168 MCQ · 1 mark EasyRecord Maintenance

For how long must an investment adviser maintain records in physical or electronic format?

A1 year

B3 years

✓5 years

D10 years

💡 The text explicitly states, 'All records shall be maintained either in physical or electronic form and preserved for a minimum period of five years.'

Q169 MCQ · 1 mark HardCompliance Officer Appointment

A non-individual investment adviser must appoint either a compliance officer or an independent professional. If an independent professional is appointed for monitoring compliance, who is ultimately responsible for monitoring compliance in respect of SEBI requirements?

AThe independent professional

✓The Principal Officer of the investment adviser, by submitting an undertaking to SEBI

CThe CEO of the investment adviser

DSEBI directly

Q170 MCQ · 1 mark MediumGeneral Obligations

Which of the following actions is an investment adviser explicitly PROHIBITED from doing under general obligations?

ADisclosing conflicts of interest to clients.

BMaintaining an arms-length relationship between advisory and other activities.

CReceiving remuneration from a client for investment advice.

✓Receiving consideration by way of remuneration from a third party for underlying products for which advice is provided to a client.

Q171 MCQ · 1 mark HardGeneral Obligations - Own Account Transactions

A7 days; if the IA provides a revised assessment to the client 12 hours in advance.

B10 days; if the IA provides a revised assessment to the client 24 hours in advance.

✓15 days; if the IA provides a revised assessment to the client 24 hours in advance.

D30 days; if the IA provides a revised assessment to the client 48 hours in advance.

💡 The text specifies: 'An investment advisor shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.'

Q172 MCQ · 1 mark EasyGeneral Obligations

An investment adviser is required to act in what capacity towards its clients?

AAgent capacity

BPrincipal capacity

✓Fiduciary capacity

DBroker capacity

💡 The text states: 'An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.'

Q173 MCQ · 1 mark MediumRisk Profiling

Which of the following is NOT explicitly mentioned as a required aspect to assess a client's risk in the risk assessment process?

AAssessing a client’s capacity for absorbing loss.

BIdentifying whether a client is unwilling or unable to accept the risk of loss of capital.

CAppropriately interpreting client responses to questions and not attributing inappropriate weight to certain answers.

✓Determining the client's preferred investment products.

💡 The text lists the following aspects for risk assessment: '1. Assessing a client’s capacity for absorbing loss; 2. Identifying whether client is unwilling or unable to accept the risk of loss of capital; 3. Appropriately interpreting client responses to questions and not attributing inappropriate weight to certain answers.' Determining the client's preferred investment products is not explicitly listed as an assessment aspect.

Q174 MCQ · 1 mark MediumRecord Maintenance

For how long is an investment adviser required to maintain records such as Know Your Client (KYC) records, risk profiling, suitability assessments, and client agreements?

AA minimum period of two years

BA minimum period of three years

✓A minimum period of five years

DA minimum period of seven years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q175 MCQ · 1 mark EasyGeneral Obligations - Fees

As per SEBI regulations, an investment adviser is prohibited from receiving consideration by way of remuneration or compensation from which of the following sources?

AFrom the client being advised, for investment advice.

BFrom an accredited investor client, for investment advice.

✓From any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.

DFrom a Hindu Undivided Family (HUF) client, for investment advice.

Q176 MCQ · 1 mark EasyIndividual IA Client Limits

What is the maximum number of clients a part-time investment adviser can have at any point in time?

A100

B150

✓75

D50

💡 The text states, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q177 MCQ · 1 mark EasyNaming Conventions

According to SEBI regulations, what term must individuals registered as part-time investment advisers use in all their correspondences with clients?

AInvestment Adviser

✓Part-time Investment Adviser

CAssociate Investment Adviser

DProvisional Investment Adviser

💡 The text states: 'Provided that part-time investment adviser registered under these regulations shall use the term ‘part-time investment adviser’ in all their correspondences with their clients.'

Q178 MCQ · 1 mark HardCompliance Officer Appointment

If a non-individual investment adviser appoints an independent professional (e.g., a member of ICAI) to monitor compliance, what additional requirement must be fulfilled regarding responsibility?

AThe independent professional must also be a SEBI-registered Investment Adviser.

BThe independent professional must submit an undertaking to SEBI taking full responsibility.

✓The Principal Officer shall submit an undertaking to SEBI stating they are responsible for monitoring compliance.

DA joint undertaking must be submitted by both the independent professional and the Principal Officer.

💡 The text states: 'Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI or the body or body corporate recognized under regulation 14 of these regulations to the effect that the principal officer shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by SEBI.'

Q179 MCQ · 1 mark MediumIndividual IA Transition

An individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients or fee collected crosses specific thresholds. What are these thresholds?

A200 clients or fee exceeding one crore rupees

✓300 clients or fee exceeding three crore rupees

C150 clients or fee exceeding two crore rupees

D250 clients or fee exceeding five crore rupees

Q180 MCQ · 1 mark HardTransition from Individual to Non-Individual IA

An individual investment adviser has reached a threshold requiring them to transition to a non-individual investment adviser. What is the validity period for the in-principle registration granted for this transition?

AOne month

✓Three months

CSix months

DOne year

💡 As per 18.6.5, point (ii) under the client/fee threshold, 'the in-principle registration shall be valid for a period of three months to assist in the transition from registration as individual investment adviser to non-individual investment adviser.'

Q181 MCQ · 1 mark MediumDeposit

What is the primary purpose for which the deposit maintained by an investment adviser with a scheduled bank, marked as a lien, is available for utilization?

ATo cover operational expenses of the investment adviser.

BTo provide short-term loans to clients in emergency situations.

✓To be utilized in case the investment adviser fails to pay dues emanating out of arbitration and conciliation proceedings.

DTo pay annual fees to SEBI for registration renewal.

💡 The text states, 'Provided that such deposit shall be available for utilization in case the investment adviser fails to pay dues emanating out of arbitration and conciliation proceedings, if any, under the Online Dispute Resolution Mechanism or such other mechanism as may be specified by SEBI.'

Q182 MCQ · 1 mark MediumSegregation of Advisory and Distribution

Which of the following statements is TRUE regarding the segregation of advisory and distribution activities for an individual investment adviser?

AAn individual investment adviser is permitted to provide distribution services to clients, provided they disclose this fact.

BThe family of an individual investment adviser may provide distribution services to the IA's clients, but the IA cannot provide advice to those clients.

✓An individual investment adviser shall not provide distribution services.

DClient-level segregation at the group level is required for individual investment advisers.

💡 As per 18.6.15, 'An individual investment adviser shall not provide distribution services.'

Q183 MCQ · 1 mark HardCompliance Officer Appointment

Which of the following statements is TRUE regarding the appointment of a compliance officer for a non-individual investment adviser?

AA non-individual investment adviser must always appoint a full-time compliance officer.

BAn independent professional can be appointed as a compliance officer only if they are a member of the Institute of Chartered Accountants of India.

✓If an independent professional is appointed for monitoring compliance, the principal officer must submit an undertaking to SEBI assuming responsibility for compliance.

DThe appointed compliance officer is solely responsible for all regulatory compliance, relieving the principal officer of any liability.

💡 A non-individual investment adviser can appoint either a compliance officer OR an independent professional who is a member of ICAI, ICSI, or ICWAI, or a member of any other professional body as specified by SEBI, provided such a professional holds a relevant NISM certification. If an independent professional is appointed, the principal officer shall submit an undertaking to SEBI or the recognized body to the effect that the principal officer shall be responsible for monitoring the compliance.

Q184 MCQ · 1 mark HardIndividual to Non-Individual IA Transition

Under which of the following conditions is an individual investment adviser required to apply for grant of in-principle registration as a non-individual investment adviser?

AWhen the number of clients exceeds 500 at any point of time.

BWhen the fee collected during the financial year exceeds two crore rupees.

✓When the number of clients exceeds three hundred at any point of time OR the fee collected during the financial year exceeds three crore rupees, whichever is earlier.

DWhen the individual investment adviser has been registered for more than five years.

Q185 MCQ · 1 mark MediumGeneral Obligations

Which of the following best describes an investment adviser's obligation regarding conflicts of interest?

AAn investment adviser must avoid all conflicts of interest and is not required to disclose them if they arise unexpectedly.

✓An investment adviser must act in a fiduciary capacity towards clients and disclose all conflicts of interests as and when they arise.

CConflicts of interest only need to be disclosed if they involve direct financial remuneration from a third party.

DAn investment adviser can receive compensation from third parties for products advised, as long as it's disclosed to the client.

💡 The text states, 'An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.' It also states, 'An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.'

Q186 MCQ · 1 mark HardGeneral Obligations

An investment adviser provides advice to a client. Under normal circumstances, for what period is the investment adviser prohibited from entering into transactions on its own account that are contrary to this advice?

A7 days

B10 days

✓15 days

D30 days

Q187 MCQ · 1 mark EasyFiduciary Duty

An investment adviser is required to act in what capacity towards its clients?

AAdvisory capacity

✓Fiduciary capacity

CConsultative capacity

DRepresentative capacity

💡 The text states: 'An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise'.

Q188 MCQ · 1 mark MediumIndividual to Non-Individual Transition

An individual investment adviser is required to apply for in-principle registration as a non-individual investment adviser if which of the following conditions is met?

ANumber of clients exceeds 200 at any point of time.

BFee collected during the financial year exceeds two crore rupees.

✓Number of clients exceeds three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier.

DNumber of clients exceeds three hundred at any point of time AND the fee collected during the financial year exceeds three crore rupees.

Q189 MCQ · 1 mark EasyNaming Conventions

As per SEBI regulations, what term must individuals registered as investment advisers use in all their correspondences with clients?

A'Financial Planner'

✓'Investment Adviser'

C'Wealth Manager'

D'Registered Adviser'

💡 The text specifies, 'individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients'.

Q190 MCQ · 1 mark MediumGeneral Obligations - Own Account Transactions

An investment adviser provides advice to a client. Under what condition can the investment adviser enter into a transaction on its own account that is contrary to this advice within 15 days?

AOnly if the client provides written consent.

BOnly after the 15-day period has elapsed.

✓If the situation has changed, after providing a revised assessment to the client at least 24 hours in advance.

DIf the transaction value is below a certain threshold specified by SEBI.

💡 The text states, 'Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.'

Q191 MCQ · 1 mark HardFees and Segregation

Which of the following statements is TRUE regarding an Investment Adviser's obligations concerning fees and client segregation?

AInvestment Advisers (IAs) can charge fees in advance for a period not exceeding two years, provided the client agrees.

BA part-time investment adviser is permitted to have a maximum of 100 clients at any point in time.

✓The fee-related provisions, such as fee limit and refund policies, are applicable only to individual and Hindu Undivided Family (HUF) clients who are not accredited investors.

DAn individual investment adviser may provide distribution services to clients, provided these services are clearly segregated from advisory activities.

💡 Option A is false: 'such advance shall not exceed fees for a period of one year.' Option B is false: 'the number of clients of a part-time investment adviser shall not exceed seventy-five'. Option C is true: 'The fee related provisions such as fee limit, modes of payment of fees, refund of fees, advance fee, breakage fees shall only be applicable in case of their individual and Hindu Undivided Family (HUF) clients (provided these clients are not accredited investors).' Option D is false: 'An individual investment adviser shall not provide distribution services.'

Q192 MCQ · 1 mark MediumCompliance Officer Appointment

A non-individual investment adviser can appoint an independent professional as a compliance officer. This professional must be a member of one of the specified institutes and also hold a relevant certification from which body?

AIRDAI

BRBI

✓NISM

DPFRDA

💡 The text states: 'an independent professional who is a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India or member of any other professional body as may be specified by SEBI, provided such a professional holds a relevant certification from NISM, as may be specified by SEBI'.

Q193 MCQ · 1 mark EasyRecord Maintenance

For what minimum period are investment advisers required to maintain client records in physical or electronic format?

A3 years

✓5 years

C7 years

D10 years

💡 The text states: 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years'.

Q194 MCQ · 1 mark MediumFees

What is the maximum period for which an Investment Adviser (IA) can charge fees in advance, if agreed by the client?

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q195 MCQ · 1 mark MediumAI Tools Responsibility

In case an investment adviser uses Artificial Intelligence tools for servicing clients, who is solely responsible for the security, confidentiality, and integrity of client data and the investment advice based on AI output?

AThe AI tool provider

BSEBI

✓The investment adviser

DThe client

Q196 MCQ · 1 mark MediumSegregation of Advisory and Distribution Activities

Which of the following accurately describes the client-level segregation requirement for a non-individual investment adviser engaged in both advisory and distribution services?

AThe same client can receive both advisory and distribution services from the group, provided the fees are separate.

✓A client can either be an advisory client (no distributor consideration received) or a distribution services client (no advisory fee collected) at the group level.

CNon-individual investment advisers are not allowed to engage in distribution services at all.

DClient-level segregation is only required for individual investment advisers, not non-individual entities.

💡 The text states: 'A non-individual investment adviser shall have client level segregation at group level for investment advisory and distribution services. Explanation. — (i) The same client cannot be offered both advisory and distribution services within the group of the non-individual entity. (ii) A client can either be an advisory client where no distributor consideration is received at the group level or distribution services client where no advisory fee is collected from the client at the group level.'

Q197 MCQ · 1 mark EasyFees

What is the maximum period for which an investment adviser may charge fees in advance, if agreed by the client?

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.'

Q198 MCQ · 1 mark HardCompliance Officer Appointment

A non-individual investment adviser decides to appoint an independent professional for monitoring compliance instead of a dedicated compliance officer. Which of the following statements is true regarding this arrangement?

AThe independent professional must be a member of the Institute of Chartered Accountants of India and does not require any NISM certification.

✓The Principal Officer of the investment adviser must submit an undertaking to SEBI, taking responsibility for monitoring compliance.

CThe independent professional can be a member of any professional body, provided they hold a relevant SEBI-specified certification.

DThis option is only available for individual investment advisers, not non-individual ones.

💡 As per 18.6.13 (2), 'Where independent professional referred to above is appointed for monitoring compliance, the principal officer shall submit an undertaking to SEBI or the body or body corporate recognized under regulation 14 of these regulations to the effect that the principal officer shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by SEBI.'

Q199 MCQ · 1 mark MediumRecord Maintenance

Which of the following statements regarding record maintenance by an investment adviser is INCORRECT?

ARecords must be maintained for a minimum period of five years.

BInvestment advice provided, whether written or oral, must be recorded.

CElectronic records requiring a signature must be digitally signed.

✓The yearly audit for compliance with regulatory requirements can be conducted by any practicing chartered accountant, irrespective of their institute membership.

💡 The text states that the adviser must conduct a yearly audit 'from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India'. Option D is incorrect because it implies 'any practicing chartered accountant' is sufficient, while the text specifies membership of particular institutes.

Q200 MCQ · 1 mark HardGeneral Obligations - Own Account Transactions

An investment adviser has provided investment advice to a client. Under normal circumstances, for how many days must the investment adviser refrain from entering into transactions on its own account that are contrary to this advice?

A7 days

B10 days

✓15 days

D30 days

Q201 MCQ · 1 mark EasyRecord Maintenance Period

For how long is an investment adviser required to maintain records such as Know Your Client (KYC) records, risk profiling, and suitability assessments?

AA minimum period of two years.

BA minimum period of three years.

✓A minimum period of five years.

DA minimum period of seven years.

💡 An investment adviser is required to maintain records in physical or electronic format for a minimum period of five years.

Q202 MCQ · 1 mark MediumClient Level Segregation: Individual IA

Regarding client-level segregation of advisory and distribution activities, what is true for an individual investment adviser?

AThey may provide distribution services if clearly segregated from advisory services.

✓They shall not provide distribution services at all.

CThey can provide distribution services to clients not advised by them.

DTheir family members can provide distribution services to clients advised by the individual IA, with disclosure.

💡 The text explicitly states: 'An individual investment adviser shall not provide distribution services.'

Q203 MCQ · 1 mark MediumFees - Advance Payment

If agreed by the client, for what maximum period can an Investment Adviser (IA) or Research Analyst (RA) charge fees in advance?

AThree months

BSix months

CNine months

✓One year

💡 If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year.

Q204 MCQ · 1 mark EasyInvestment Adviser Classification

What is the maximum number of clients a part-time investment adviser can have at any point of time?

A50

✓75

C100

D300

💡 As per the text, 'the number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.'

Q205 MCQ · 1 mark EasyGeneral Obligations

An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of which of the following?

AMarketing activities

BAdministrative services

✓Underlying products or securities for which advice is provided

DResearch reports publication

💡 The text specifies: 'An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.'

Q206 MCQ · 1 mark EasyDeposit Maintenance

An investment adviser is required to maintain a deposit with a scheduled bank. In whose favor must this deposit be marked as lien?

AThe client of the investment adviser

BThe Reserve Bank of India (RBI)

✓A body or body corporate recognized by SEBI for administration and supervision of investment advisers

DThe Investment Adviser's professional indemnity insurer

💡 The deposit shall be maintained with a scheduled bank marked as lien in favor of a body or body corporate recognized by SEBI for the purpose of administration and supervision of investment advisers in accordance with stipulated regulations.

Q207 MCQ · 1 mark MediumRisk Profiling Information

Which of the following pieces of information is NOT explicitly required to be obtained from a client by an investment adviser for the purpose of giving investment advice, as per the text?

AAge and investment objective

BInvestment horizon and income details

CExisting assets and liabilities

✓Client's social media activity

💡 The text lists information such as 'age, investment objective, investment horizon, income details, existing assets and liabilities and risk appetite and liability/borrowing details'. Client's social media activity is not mentioned.

Q208 MCQ · 1 mark MediumAppointment of Compliance Officer

A non-individual investment adviser must appoint a compliance officer or an independent professional. If an independent professional (e.g., a member of ICAI) is appointed for monitoring compliance, who is ultimately responsible for monitoring compliance in respect of SEBI requirements?

AThe independent professional

✓The Principal Officer of the investment adviser

CSEBI itself

DThe client

Q209 MCQ · 1 mark HardGeneral Obligations - Self-Transactions

An investment adviser gives advice to clients. Under what condition may the investment adviser enter into a transaction on its own account that is contrary to its advice given to clients within the usual restricted period?

AThe investment adviser can always enter into such transactions without any restrictions.

BThe investment adviser can enter into such a transaction after 30 days from the day of such advice.

✓The investment adviser may enter into such a transaction if the situation has changed, after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.

DThe investment adviser can enter into such a transaction if approved by SEBI.

Q210 MCQ · 1 mark MediumFees

In case an investment adviser charges fees in advance from a client, what is the maximum period for which such advance fees can be collected?

AThree months

BSix months

✓One year

DTwo years

💡 The text states: 'If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year'.

Case-Based Questions (5 sets)

Case 1 Case-Based · 1 mark each Key Regulations for Investment Advisers

Mr. Raj Sharma, a SEBI-registered individual investment adviser, has been diligently serving his clients for the past seven years. He primarily advises salaried individuals and Hindu Undivided Families (HUF) on their investment portfolios, focusing on long-term wealth creation. Currently, Mr. Sharma has 280 active clients. His total fee collection for the last financial year amounted to ₹2.5 crore. He charges his clients an annual advisory fee, typically collected in advance for the upcoming year. Recently, Mr. Sharma started exploring the use of an Artificial Intelligence-powered tool to assist with preliminary risk profiling and portfolio analysis, though all final advice is personally reviewed and approved by him. His sister, Ms. Priya Sharma, works as a mutual fund distributor and occasionally refers clients to Mr. Sharma. However, Mr. Sharma ensures that he does not advise any client who receives distribution services from Ms. Priya, and vice-versa, to avoid conflicts. Mr. Sharma is considering expanding his operations and is aware of the regulatory requirements that come with growth. He also ensures that he maintains proper records and regularly updates client information. Last month, he advised a client, Mr. Kapoor, to invest in a specific mid-cap equity fund. Two days later, based on new market insights, Mr. Sharma considered investing a substantial amount of his own personal funds in the same mid-cap equity fund.

Easy Sub-question 1

If Mr. Raj Sharma were registered as a 'part-time investment adviser', what would be the maximum number of clients he could serve at any point in time?

A100 clients

B200 clients

✓75 clients

D300 clients

💡 The number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time.

Easy Sub-question 2

What term must Mr. Raj Sharma, as an individual investment adviser, use in all his correspondences with clients?

AFinancial Planner

BWealth Manager

✓Investment Adviser

DRegistered Adviser

💡 As per the regulations, individuals registered as investment advisers shall use the term 'investment adviser' in all their correspondences with their clients.

Hard Sub-question 3

Two days after advising Mr. Kapoor to invest in a specific mid-cap equity fund, Mr. Raj Sharma wants to invest a substantial amount of his own personal funds in the same fund. Under what condition can Mr. Sharma proceed with his own investment without violating SEBI regulations?

AHe can invest immediately as long as he believes it's a good investment for himself.

BHe must wait for at least fifteen days from the day of giving advice to Mr. Kapoor.

✓He can invest before the fifteen-day period if he provides a revised assessment to Mr. Kapoor at least 24 hours in advance of his own transaction.

DHe must obtain prior written consent from Mr. Kapoor before making his own investment.

💡 An investment adviser shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. However, during this period, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.

Medium Sub-question 4

Regarding the relationship between Mr. Raj Sharma and his sister, Ms. Priya Sharma, who is a mutual fund distributor, which of the following practices is explicitly allowed under SEBI regulations for individual investment advisers?

AMr. Raj Sharma can advise clients who receive distribution services from Ms. Priya, provided he discloses the relationship.

BMs. Priya can provide distribution services to clients advised by Mr. Raj Sharma.

CMr. Raj Sharma can refer clients to Ms. Priya for distribution services if the client requests it.

✓Mr. Raj Sharma must not advise any client who receives distribution services from Ms. Priya, and Ms. Priya must not provide distribution services to clients advised by Mr. Raj Sharma.

💡 As per the client-level segregation rules, the family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser and no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.

Medium Sub-question 5

Considering his current client count and fee collection, what regulatory action will Mr. Raj Sharma be required to undertake if his client count increases to 305 or his fee collection reaches ₹3.1 crore during the current financial year, whichever happens first?

AHe must immediately surrender his individual IA registration.

✓He must apply for grant of in-principle registration as a non-individual IA.

CHe must appoint a compliance officer within 30 days.

DHe must cease providing advisory services until he reduces his client count.

💡 The regulations state that individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier, shall apply for grant of in-principle registration as non-individual investment adviser.

Case 2 Case-Based · 1 mark each Key Regulations for Investment Advisers

Mr. Rajeev Sharma, a 45-year-old individual registered investment adviser (IA), has been operating his practice, "Sharma Wealth Solutions," for the past seven years. He primarily serves salaried professionals and small business owners. Currently, Mr. Sharma has 280 active clients, and his total fee collection for the last financial year was ₹2.5 crores. He anticipates his client count to reach 310 within the next three months and his fee collection to exceed ₹3 crores by the end of the current financial year. His wife, Mrs. Priya Sharma, works as a mutual fund distributor and operates independently under a separate entity. Recently, Mr. Sharma onboarded a new client, Mr. Anil Kapoor, whom Mrs. Sharma has been providing mutual fund distribution services for the past two years. Mr. Sharma usually communicates with his clients via email and maintains all client records digitally, ensuring they are digitally signed where required. He often gives investment advice orally during meetings, but always follows up with a summary email. He uses a proprietary questionnaire for risk profiling, which he developed himself based on industry best practices.

Hard Sub-question 1

Mr. Sharma uses a proprietary questionnaire for risk profiling. Which of the following is NOT a mandatory requirement for such a tool or the process, as per SEBI regulations?

AThe questionnaire must be fair, clear, and not misleading.

BThe risk profile of the client must be communicated to the client after assessment.

CThe tool must ensure that it does not contain leading questions.

✓The tool must be approved by SEBI before its implementation.

💡 Section 18.6.9 (Risk Profiling) outlines requirements for risk profiling tools, stating they must be fit for purpose, fair, clear, not misleading, and avoid vague, double negatives, or leading questions. It also requires the risk profile to be communicated to the client. However, the text does not mention any requirement for the risk profiling tool itself to be approved by SEBI prior to its implementation by the IA.

Medium Sub-question 2

Based on the current scenario and anticipated growth, which of the following triggers will most likely require Mr. Rajeev Sharma to apply for in-principle registration as a non-individual investment adviser first?

AWhen his client count exceeds 280.

BWhen his fee collected exceeds ₹2.5 crores.

✓When his client count exceeds 300.

DWhen his fee collected exceeds ₹3 crores.

💡 As per Section 18.6.5, an individual investment adviser must apply for in-principle registration as a non-individual investment adviser if their number of clients exceeds three hundred at any point of time OR the fee collected during the financial year exceeds three crore rupees, whichever is earlier. Mr. Sharma anticipates his client count to reach 310 within three months, which is earlier than his fee collection exceeding ₹3 crores by the end of the current financial year. Therefore, exceeding 300 clients will be the first trigger.

Easy Sub-question 3

For how long must Mr. Rajeev Sharma maintain the Know Your Client (KYC) records of his clients, as per SEBI regulations?

A2 years

B3 years

✓5 years

D10 years

💡 Section 18.6.12 states that an investment adviser is required to maintain Know Your Client records and other specified records for a minimum period of five years.

Medium Sub-question 4

Considering Mrs. Priya Sharma provides mutual fund distribution services to Mr. Anil Kapoor, what is Mr. Rajeev Sharma's obligation regarding providing investment advice to Mr. Anil Kapoor?

AHe can advise Mr. Anil Kapoor, but must disclose his wife's distribution relationship.

BHe can advise Mr. Anil Kapoor, as they operate under separate entities.

✓He cannot provide investment advice to Mr. Anil Kapoor.

DHe can advise Mr. Anil Kapoor only if Mrs. Sharma stops providing distribution services to him.

💡 Section 18.6.15 on Client level segregation of advisory and distribution activities explicitly states: 'no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.'

Easy Sub-question 5

Which of the following terms must Mr. Rajeev Sharma use in all his correspondences with his clients, as per SEBI regulations?

ASharma Wealth Solutions

BIndividual Investment Adviser

CRegistered Investment Adviser

✓Investment Adviser

💡 As per the regulations (Section 18.6.5), individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients.

Case 3 Case-Based · 1 mark each Key Regulations for Investment Advisers

Mr. Rajeev Sharma, a registered individual investment adviser, has been successfully operating his advisory practice for the past five years. He currently serves 280 individual clients and 15 HUF clients. His total fee collection for the current financial year has reached INR 2.8 crore. Mr. Sharma prides himself on personalized advice and uses a proprietary online questionnaire for initial risk profiling. His sister, Ms. Priya Sharma, works as a mutual fund distributor and often refers potential clients to Mr. Sharma, though she ensures there's no overlap in their service offerings to the same client. Recently, Mr. Sharma started exploring the use of an Artificial Intelligence (AI) tool to assist in generating initial portfolio recommendations, though he always reviews and customizes them before presenting to clients.

Medium Sub-question 1

Mr. Rajeev Sharma's sister, Ms. Priya Sharma, is a mutual fund distributor. What specific regulatory restriction applies to Mr. Sharma and his family members regarding advisory and distribution services?

AMr. Sharma can advise clients who receive distribution services from his sister, provided he discloses the family relationship.

BMr. Sharma's sister can provide distribution services to clients advised by Mr. Sharma, as long as she does not charge advisory fees.

✓Mr. Sharma, as an individual investment adviser, cannot provide distribution services, and his family cannot provide distribution services to clients he advises, nor can he advise clients receiving distribution from his family.

DThe segregation rules apply only to non-individual investment advisers, so Mr. Sharma and his sister have no specific restrictions.

💡 As per the regulations (18.6.15 Client level segregation of advisory and distribution activities), an individual investment adviser shall not provide distribution services. Furthermore, the family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser and no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.

Medium Sub-question 2

Based on his current client count and fee collection, which regulatory threshold is Mr. Rajeev Sharma approaching that would require him to apply for in-principle registration as a non-individual investment adviser?

✓Exceeding 300 clients

BExceeding INR 3 crore in fees

CBoth exceeding 300 clients and exceeding INR 3 crore in fees simultaneously

DNeither threshold is currently met, so no action is required yet.

💡 Mr. Sharma currently serves 280 (individual) + 15 (HUF) = 295 clients. The threshold for individual investment advisers to apply for in-principle registration as non-individual investment adviser is when the number of clients exceeds three hundred at any point of time OR the fee collected during the financial year exceeds three crore rupees, whichever is earlier. While his fee (INR 2.8 crore) is below INR 3 crore, his client count (295) is very close to 300, thus approaching the client count threshold.

Easy Sub-question 3

Mr. Sharma is exploring the use of an Artificial Intelligence (AI) tool for initial portfolio recommendations. Who bears the sole responsibility for the security, confidentiality, integrity of client data, and the investment advice based on the AI tool's output?

AThe AI tool provider

BSEBI, as the regulator of investment advisers

✓Mr. Rajeev Sharma, the investment adviser

DThe client, as they agree to the use of AI

💡 As per the regulations (18.6.7 General Obligations, last bullet point), an investment adviser who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.

Hard Sub-question 4

Mr. Sharma uses a proprietary online questionnaire for initial risk profiling. Which of the following statements correctly describes the regulatory requirements for such a tool and the maintenance period for the risk profiling records?

AThe questionnaire must be vague to allow for broader interpretation, and records must be kept for 3 years.

✓The questionnaire must be fair, clear, not misleading, and avoid leading questions, and risk profiling records must be maintained for a minimum of five years.

CThe questionnaire can use double negatives for comprehensive assessment, and records must be kept until the client relationship ends.

DThe questionnaire's limitations do not need to be identified, and records can be discarded after the advice is implemented.

💡 As per 18.6.9 Risk Profiling, where tools are used for risk profiling, the investment adviser must ensure that the tools are fit for the purpose and any limitations have been identified and mitigated. The questionnaire must be fair, clear, not misleading, and should ensure that it is not vague or uses double negatives or is in complex language, and is not structured with leading questions. Additionally, as per 18.6.12 Record Maintenance, risk profiling and risk assessment records of the client must be maintained for a minimum period of five years.

Easy Sub-question 5

What term is Mr. Rajeev Sharma, as a registered individual investment adviser, mandated to use in all his correspondences with his clients?

AFinancial Planner

BWealth Manager

✓Investment Adviser

DPortfolio Manager

💡 As per the regulations (18.6.5 Naming conventions), individuals registered as investment advisers shall use the term ‘investment adviser’ in all their correspondences with their clients.

Case 4 Case-Based · 1 mark each Key Regulations for Investment Advisers

Ms. Radha Sharma, a 38-year-old SEBI-registered individual Investment Adviser (IA), has been operating successfully for the past five years. She started with a modest client base and has steadily grown her practice. Currently, she manages the portfolios of 280 clients, and her advisory fees collected during the last financial year amounted to ₹2.80 crore. Radha is known for her meticulous approach to financial planning and client communication. She uses a proprietary questionnaire for risk profiling and maintains all client records digitally. Recently, Radha advised a client, Mr. Anil Kapoor, to invest in a specific mid-cap equity fund based on his aggressive risk profile and long-term goals. Two days after providing this advice, Radha noticed a significant market correction affecting mid-cap stocks. She believes the situation has changed, making the fund less attractive temporarily for new investments, but hasn't yet communicated this revised assessment to Mr. Kapoor. She is also considering investing in the same fund herself, but at a lower price point post-correction. Radha's brother, Mr. Suresh Sharma, works as a mutual fund distributor. Radha is also planning to expand her operations and anticipates crossing the 300-client threshold within the next three months and expects her annual fees to exceed ₹3 crore by the end of the current financial year. She is aware that this growth might trigger certain regulatory requirements, and she is also contemplating forming a non-individual entity that could potentially involve her brother.

Hard Sub-question 1

Radha is contemplating forming a non-individual entity that might include her brother, Mr. Suresh Sharma, who is a mutual fund distributor. If this non-individual entity (or its group) provides both investment advisory and distribution services, what is the critical regulatory requirement for handling existing and new clients?

✓The non-individual entity must ensure that no client receives both advisory and distribution services from within its group.

BThe non-individual entity must disclose the dual role to all clients and obtain their consent.

CAdvisory clients must be offered a discount on distribution services, and vice-versa.

DThe non-individual entity can provide both services to the same client, provided there is a clear Chinese wall.

💡 As per Section 18.6.15 'Client level segregation of advisory and distribution activities' for a non-individual investment adviser, 'The same client cannot be offered both advisory and distribution services within the group of the non-individual entity.' This means a client can either be an advisory client or a distribution services client, but not both from the same group.

Medium Sub-question 2

Ms. Radha Sharma maintains all her client records digitally, including Know Your Client (KYC) records, risk profiling, suitability assessments, and investment advice. For how long must these records be preserved, and what annual compliance activity is required for her operations?

A3 years, with a quarterly internal audit.

✓5 years, with a yearly audit by a member of ICAI, ICSI, or ICMAI.

C7 years, with a biennial audit by an independent auditor.

DIndefinitely, with no specific audit requirement mentioned.

💡 Section 18.6.12 'Record Maintenance' states, 'An investment adviser is required to maintain the following records in physical or electronic format for a minimum period of five years.' It also mandates, 'The adviser must conduct yearly audit in respect of compliance with regulatory requirements from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India and submit a report of the same as may be specified by SEBI.'

Medium Sub-question 3

Ms. Radha Sharma currently has 280 clients and collected ₹2.80 crore in fees last financial year. She anticipates crossing 300 clients or ₹3 crore in fees soon. What is the regulatory implication once she crosses either of these thresholds, and what is the first step she must take?

AShe must immediately register as a part-time investment adviser.

✓She must apply for grant of in-principle registration as a non-individual investment adviser.

CShe must inform SEBI and cease taking new clients until she reduces her client count.

DShe must convert her individual registration to a broker-dealer registration.

💡 As per Section 18.6.5, 'individuals registered as investment advisers whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier shall – (i) apply for grant of in-principle registration as non-individual investment adviser'.

Easy Sub-question 4

In what primary capacity is Ms. Radha Sharma, as an Investment Adviser, obligated to act towards her clients according to SEBI regulations?

AAs an agent representing the financial product manufacturers.

BAs a trustee holding clients' assets.

✓In a fiduciary capacity, prioritizing clients' interests.

DAs a consultant providing general financial information.

💡 As per Section 18.6.7 General Obligations, 'An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.' This means prioritizing the client's interests above all else.

Medium Sub-question 5

Two days after advising Mr. Anil Kapoor to invest in a mid-cap fund, Radha noticed a market correction and is considering investing in the same fund herself at a lower price. She believes the situation has changed but hasn't communicated a revised assessment to Mr. Kapoor. What specific action must Radha take BEFORE she can invest in the fund on her own account?

AShe must wait for the 15-day period to expire from the original advice date.

BShe can invest immediately as long as it's at a lower price than advised to the client.

✓She must give Mr. Kapoor a revised assessment of the market situation at least 24 hours in advance of her own transaction.

DShe must obtain written permission from Mr. Kapoor before transacting on her own account.

💡 Section 18.6.7 states, 'An investment advisor shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice. Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.' Radha's intent to buy at a lower price after a correction, when her advice to the client was to invest, would be 'contrary' to the initial advice without a revised assessment.

Case 5 Case-Based · 1 mark each Key Regulations for Investment Advisers

Mr. Raj Sharma, a 35-year-old certified financial planner, recently registered as an individual investment adviser (IA) with SEBI. He started his practice eight months ago and has been diligently building his client base. Currently, he advises 250 individual and HUF clients, charging an annual fee of INR 15,000 per client. His projected fee collection for the current financial year is INR 37,50,000. Mr. Sharma is known for his personalized advice and maintains an "arms-length relationship" between his advisory services and a small, independent financial literacy workshop business he also runs. His wife, Mrs. Priya Sharma, works as a mutual fund distributor and has recently started offering her services to some of Mr. Raj Sharma's existing advisory clients, with their consent. Mr. Sharma has also been contemplating the use of Artificial Intelligence tools to assist in generating initial risk profiles for his new clients, although he plans to personally review and finalize each profile. He is meticulous about maintaining records and ensuring compliance with all regulatory requirements.

Easy Sub-question 1

Mr. Raj Sharma is meticulous about maintaining records. For how long is he required to maintain records such as Know Your Client (KYC) documents, risk profiling, and suitability assessments, either in physical or electronic format?

A3 years

✓5 years

C7 years

D10 years

💡 An investment adviser is required to maintain the specified records in physical or electronic format for a minimum period of five years. (Refer to section 18.6.12, page 348).

Easy Sub-question 2

Based on the provided information, at what client count threshold would Mr. Raj Sharma, as an individual investment adviser, be required to apply for in-principle registration as a non-individual investment adviser?

A75 clients

B150 clients

✓300 clients

D500 clients

💡 As per the regulations, individuals registered as investment advisers whose number of clients exceed three hundred at any point of time shall apply for grant of in-principle registration as a non-individual investment adviser. (Refer to section 18.6.5, page 344).

Easy Sub-question 3

Given Mr. Raj Sharma's projected fee collection of INR 37,50,000 for the current financial year, what is the fee threshold that, if exceeded, would trigger his requirement to apply for in-principle registration as a non-individual investment adviser?

AINR 50 lakh

BINR 1 crore

✓INR 3 crore

DINR 5 crore

💡 As per the regulations, individuals registered as investment advisers whose fee collected during the financial year exceeds three crore rupees shall apply for grant of in-principle registration as a non-individual investment adviser. (Refer to section 18.6.5, page 344).

Medium Sub-question 4

Mr. Raj Sharma is contemplating using Artificial Intelligence tools for initial risk profiling. According to the regulations, what is his primary responsibility concerning the use of such tools?

AHe is only responsible for ensuring the AI tool's output is reviewed manually.

BThe AI tool provider is solely responsible for the security and confidentiality of client data.

✓He is solely responsible for the security, confidentiality, integrity of client data, use of information, investment advice based on AI output, and compliance with laws.

DHe needs to disclose the use of AI tools but bears no other specific responsibility for its output.

💡 The regulations state: 'An investment adviser who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force.' (Refer to section 18.6.7, page 346).

Hard Sub-question 5

Mr. Raj Sharma's wife, Mrs. Priya Sharma, a mutual fund distributor, has started offering her services to some of Mr. Raj Sharma's existing advisory clients. Considering the regulations, what is the correct stance on this practice?

AIt is permissible as long as the clients provide their consent to receive distribution services from family members.

✓It is strictly prohibited for an individual investment adviser's family to provide distribution services to the IA's clients.

CIt is allowed if Mr. Raj Sharma discloses this arrangement to his clients and maintains an arms-length relationship.

DIt is only allowed if Mrs. Priya Sharma is also a registered investment adviser.

💡 The regulations explicitly state: 'The family of an individual investment adviser shall not provide distribution services to the client advised by the individual investment adviser and no individual investment adviser shall provide advice to a client who is receiving distribution services from other family members.' (Refer to section 18.6.15, page 350).

About this content: These practice questions are based on the NISM-Series-X-A: Investment Adviser (Level 1) Certification Examination Workbook published by the National Institute of Securities Markets (NISM), Mumbai. NISM is a SEBI-established institution. Questions cover Key Regulations with verified answers and explanations. BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI. Last updated: July 08, 2026.

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Ch.18: Key Regulations

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