📊 NISM Series X-AChapter 18 of 20⚖ 10 marks weightageCase-Based ✓
Ch.18: Key Regulations
Practice questions for NISM-Series-X-A: Investment Adviser (Level 1) Certification Examination
(mandated by SEBI under the Investment Advisers Regulations, 2013).
Chapter 18 carries 10 out of 150 marks
in the final examination. The exam has 90 MCQs + 9 case-based sets (5 sub-questions each, mixed 1-mark
and 2-mark weighting), 180-minute duration, 60% passing score, and 25% negative marking on the marks
of each wrong answer.
51
MCQ
1
Case Sets
55
Total Qs
10
Exam Marks
60%
Pass Score
−25%
Neg. Marking
What You Will Learn in This Chapter
Understand the SEBI (Investment Advisers) Regulations, 2013 in depth
Know registration, compliance and code of conduct requirements for IAs
Understand permitted fee structures and disclosure norms
Key Terms:SEBI IA Regulationsregistration requirementscode of conductfee-only advisoryfiduciary dutycompliance officer
Chapter 18 in 10 minutes: key regulations
Chapter 18 is the rulebook for investment advisers. Most X-A questions come from the SEBI (Investment Advisers) Regulations, 2013: who must register, qualifications, client limits, fees, the 15-day rule, segregation from distribution, records and penalties. A few questions test other laws (SCRA, PFUTP, insider trading, PMLA, FEMA, Contract Act, NI Act, IBC, FATCA).
1. The market laws in one line each
SCRA 1956: the Central Government controls recognition of exchanges, securities contracts and listing.
SEBI Act 1992: protects investors and develops and regulates the market; registers intermediaries, including IAs.
PFUTP 2003: fraud covers misrepresentation, concealment, false promises and reckless statements, with or without any gain.
Intermediaries Regs 2008: best advice, high standards, advance notice before raising fees, confidentiality, no exaggeration.
Insider Trading Regs 2015: an insider is a connected person or anyone with access to unpublished price sensitive information.
2. IA Regulations: the numbers
Rule
Detail
Registration validity
Until suspended or cancelled
Individual IA limit
More than 300 clients or ₹3 crore fees a year → move to non-individual (3-month in-principle window)
Part-time IA
Maximum 75 clients; use the term "part-time investment adviser"
Own-account trading
Not against own advice for 15 days, unless a revised view goes to clients 24 hours earlier
Advance fees
Up to one year, if the client agrees
Records
At least 5 years; annual audit by a CA, CS or CMA
Complaint data
Published by the 7th of the next month
Penalty (Sec 15EB)
At least ₹1 lakh; ₹1 lakh a day while it continues; maximum ₹1 crore
Supervisor
BSE Administration & Supervision Ltd
3. Who must register, and who is exempt
Anyone giving advice for a fee, including part-timers and anyone holding out as an adviser, must register. Advice through widely available media and trading calls is not "investment advice". Exempt: general market comments, IRDAI-registered insurance agents and PFRDA pension advisers (advice on their own products only), MF distributors giving incidental advice, lawyers, CAs, CSs and actuaries giving incidental advice, and fund managers. Advice to clients outside India is exempt, but not advice to NRIs or PIOs.
Qualifications: a relevant finance degree or two-year PG diploma, NISM's one-year PG programme, or a CFA Charter for the individual or principal officer. Associated persons need a graduate degree. All need valid NISM certification at all times.
4. Duties to clients
Act as a fiduciary; take pay only from the client; disclose conflicts, own holdings and disciplinary history.
Risk profile first, using clear questionnaires with no leading questions or double negatives; share and update the profile.
Suitability: documented process, and complex products only where they fit the client.
Disclose when a product is outside SEBI's purview, and disclose any use of AI. The adviser is solely responsible for AI-based advice.
Segregation: an individual IA cannot distribute, and nor can their family to the same clients. Non-individuals segregate at client level across the group. Implementation only through direct plans, with no commission or fee.
5. Other laws
PMLA 2002: keep transaction records for 5 years, and identity records for 5 years after the relationship ends. FEMA: foreign portfolio investment is under 10% of a listed company; 10% or more is FDI. Contract Act 1872: a contract is an agreement enforceable by law. Guardian and Wards Act 1890: a minor is under 18. NI Act 1881: promissory notes, bills of exchange and cheques. IBC 2016: covers companies, LLPs, firms and individuals. FATCA/CRS: reporting on foreign tax residents, with self-certifications uploaded to KRAs from July 2024.
Summary written by BullWiser from the NISM Series X-A workbook (March 2026 edition), Chapter 18. Always refer to the current NISM workbook and SEBI circulars before your exam.
Multiple Choice Questions (51)
Q1MCQ · 1 markMediumSCRA
Under the Securities Contracts (Regulation) Act, 1956, the Central Government regulates which areas?
ABank lending rates
BIncome tax on capital gains
CRecognition of stock exchanges, securities contracts and listing
DMutual fund NAV calculation
Q2MCQ · 1 markEasySEBI Act
What are the core purposes of the SEBI Act, 1992?
ASet interest rates
BCollect income tax
CRegulate insurance companies
DProtect investors and develop and regulate the securities market
Q3MCQ · 1 markMediumSEBI Act
Which of these intermediaries does SEBI register and regulate under the SEBI Act?
AInvestment advisers and portfolio managers
BInsurance agents
CPension fund managers under PFRDA
DNon-banking deposit takers
Q4MCQ · 1 markMediumPFUTP
Under SEBI's fraud regulations (PFUTP, 2003), does it matter whether the wrongdoer actually gained from the act?
AYes; the gain must exceed ₹1 lakh
BNo; fraud can exist with or without any wrongful gain or loss avoided
CYes; there must be a proven gain
DOnly if a loss is caused to SEBI
Q5MCQ · 1 markMediumPFUTP
Which of these counts as fraud under the PFUTP Regulations?
AAn honest forecast that turns out wrong
BA promise made with no intention of keeping it
CDisclosing a conflict of interest
DAdvice based on a documented risk profile
Q6MCQ · 1 markMediumIntermediaries code
Under the Intermediaries Regulations' code of conduct, what must an intermediary do before raising its fees?
ANothing; fees can change any time
BGet SEBI approval for each increase
CRefund all past fees
DGive clients proper advance notice
Q7MCQ · 1 markEasyInsider trading
Who is an insider under SEBI's Insider Trading Regulations, 2015?
AA connected person, or anyone who has or can access unpublished price sensitive information
BAnyone who owns shares
COnly company directors
DOnly employees of stock exchanges
Q8MCQ · 1 markMediumIA definitions
Who is included in 'family of client' under the IA Regulations?
AOnly the client's spouse
BAny person living at the same address
CThe individual client, dependent spouse, dependent children and dependent parents
DAll relatives up to cousins
Q9MCQ · 1 markHardIA definitions
Which of these is NOT investment advice for the purposes of the IA Regulations?
AAdvice given through a newspaper or TV channel widely available to the public
BPersonal advice on which stocks a client should buy
CFinancial planning for a client for a fee
DAdvice on a client's portfolio sent by email
Q10MCQ · 1 markMediumIA definitions
What is 'assets under advice'?
AThe client's bank balance
BThe total NAV of securities on which the adviser has given advice, whoever implements it
CThe adviser's own net worth
DOnly assets the adviser executes for the client
Q11MCQ · 1 markMediumRegistration
How long is an investment adviser's SEBI registration certificate valid?
AOne year
BThree years
CUntil it is suspended or cancelled by SEBI
DFive years
Q12MCQ · 1 markMediumRegistration
How must a bank offer investment advisory services?
AOnly through insurance agents
BDirectly from any branch without approval
CBanks cannot offer advice
DWith RBI permission, through a subsidiary or a separately identifiable department
Q13MCQ · 1 markMediumExemptions
Which of these is exempt from IA registration?
AAn insurance agent advising only on insurance products, registered with IRDAI
BA firm giving paid advice to NRIs
CA blogger charging fees for personalised stock advice
DAn unregistered person running a paid tips group
Q14MCQ · 1 markHardExemptions
A person gives paid investment advice to NRIs living abroad. Do they need IA registration?
ANo; advice to clients outside India is always exempt
BNo; only resident clients count
CYes; advice to NRIs and PIOs falls under the IA Regulations
DOnly if fees exceed ₹1 crore
Q15MCQ · 1 markMediumQualifications
Which qualification can make an individual eligible to register as an investment adviser?
AAny graduate degree in arts
BA diploma of six months in any subject
CClass 12 pass
DA CFA Charter
Q16MCQ · 1 markMediumQualifications
What minimum qualification is required for persons associated with investment advice?
AA CA qualification
BA graduate degree in any discipline
CA postgraduate degree in finance
DNo qualification
Q17MCQ · 1 markMediumCertification
What must an adviser do before their NISM certification expires?
AStop advising for one year
BApply to SEBI for an extension
CObtain a fresh relevant NISM certification to stay compliant
DNothing; certification lasts for life
Q18MCQ · 1 markMediumConditions
What term must a part-time investment adviser use in correspondence with clients?
A'Part-time investment adviser'
B'Wealth manager'
C'Financial consultant'
D'Investment adviser' only
Q19MCQ · 1 markHardConditions
An individual IA's clients exceed 300 or fees in a year exceed ₹3 crore, whichever is earlier. What must they do?
ASwitch to distribution
BApply for in-principle registration as a non-individual IA
CPay a penalty and continue
DStop taking new clients permanently
Q20MCQ · 1 markMediumConditions
What is the maximum number of clients a part-time investment adviser may have at any time?
A150
B300
C50
D75
Q21MCQ · 1 markMediumDeposit
Where is an investment adviser's deposit kept?
AIn the adviser's own demat account
BWith a scheduled bank, marked as lien in favour of the body recognised to administer IAs
CWith SEBI directly in cash
DWith the client
Q22MCQ · 1 markEasyGeneral obligations
In what capacity must an investment adviser act towards clients?
AFiduciary
BAs a seller
CAs a lender
DAs a guarantor
Q23MCQ · 1 markMediumGeneral obligations
From whom may an investment adviser receive payment for advice?
AAny third party, if disclosed
BBoth the client and the AMC
CThe product manufacturer
DOnly the client being advised
Q24MCQ · 1 markHardGeneral obligations
An adviser recommends selling a stock to clients. For how long may the adviser not buy it on their own account?
A30 days with no exception
B7 days with no exception
C15 days, unless a revised view is given to clients at least 24 hours before trading
DThere is no restriction
Q25MCQ · 1 markMediumGeneral obligations
An adviser uses AI tools to generate advice. Who is responsible for the advice and client data?
ASEBI
BThe adviser alone
CThe client
DThe AI software vendor
Q26MCQ · 1 markMediumGeneral obligations
What is required if control of an investment adviser changes?
APrior approval from SEBI
BOnly a notice to clients afterwards
CA newspaper advertisement only
DNothing
Q27MCQ · 1 markMediumFees
If the client agrees, up to how much fee may an IA collect in advance?
ANo advance fees are allowed
BFees for up to three years
CFees for up to five years
DFees for up to one year
Q28MCQ · 1 markMediumRisk profiling
Which information must an adviser collect for risk profiling?
AOnly the client's PAN
BOnly the client's preferred stocks
CAge, objectives, horizon, income, assets, liabilities and risk appetite
DOnly past trading profits
Q29MCQ · 1 markHardRisk profiling
Which feature should a risk-profiling questionnaire avoid?
AQuestions about loss tolerance
BQuestions about income
CQuestions about the investment horizon
DLeading questions, double negatives and vague or complex wording
Q30MCQ · 1 markMediumSuitability
Before recommending a complex product, what must the adviser reasonably assess?
AOnly that it has high past returns
BOnly that the AMC is large
CThat its structure and risk-reward suit the client's experience, knowledge, objectives, risk appetite and loss capacity
DOnly that the client asked for it
Q31MCQ · 1 markMediumDisclosures
An adviser advises on a product outside SEBI's purview. What must they disclose?
AThat the product and advice are outside SEBI's regulation and SEBI recourse is not available
BNothing extra
COnly the product's past returns
DOnly their fee
Q32MCQ · 1 markMediumRecords
For how long must an investment adviser keep records such as KYC, risk profiles and advice rationale?
ATen years
BAt least five years
CThree years
DOne year
Q33MCQ · 1 markMediumRecords
Who may conduct the annual compliance audit of an investment adviser?
AA member of ICAI, ICSI or the Institute of Cost Accountants of India
BThe adviser's own employee
CAny graduate
DA client of the adviser
Q34MCQ · 1 markMediumCompliance officer
Whom may a non-individual IA appoint to monitor compliance?
ANo one is needed
BThe largest client
CAny sales employee
DA compliance officer, or an independent CA, CS or CMA professional with the relevant NISM certification
Q35MCQ · 1 markMediumSegregation
Which statement about advisory and distribution under the IA Regulations is correct?
ADistribution is allowed to the same client by the adviser's spouse
BAn individual IA can distribute if fees are disclosed
CAn individual IA cannot provide distribution services
DAdvisory and distribution are always combined
Q36MCQ · 1 markHardImplementation
On what terms may an IA offer implementation services to advisory clients?
AThrough regular plans earning commission
BOnly through direct plans or products, with no consideration at group or family level
CFor an extra implementation fee
DOnly for clients with over ₹1 crore
Q37MCQ · 1 markMediumCode of conduct
Under the IA code of conduct, what should an adviser do when a conflict of interest cannot be avoided?
ADisclose it and ensure the client is treated fairly
BRefuse all clients
CCharge a higher fee
DHide it to avoid confusing the client
Q38MCQ · 1 markMediumCode of conduct
In a body corporate registered as an IA, who bears primary responsibility for standards of conduct?
AThe newest employee
BThe clients
CThe auditors
DSenior management
Q39MCQ · 1 markMediumInvestor charter
By which date must IAs publish the previous month's complaint data on their website and app?
AOnce a year in April
BThe 30th of the following month
CThe 7th of the following month
DThe 1st of the same month
Q40MCQ · 1 markEasyInvestor charter
Which is a 'don't' for investors under the IA investor charter?
APaying fees through banking channels
BSharing trading, demat or bank login details with the adviser
CVerifying the adviser's SEBI registration
DInsisting on risk profiling before advice
Q41MCQ · 1 markHardPenalty
What is the penalty under Section 15EB of the SEBI Act for an investment adviser's non-compliance?
AAt least ₹1 lakh, up to ₹1 lakh a day while it continues, capped at ₹1 crore
BNo monetary penalty, only warning
CAt least ₹25 crore
DA flat ₹10,000
Q42MCQ · 1 markMediumAdministration
Which body has been recognised to administer and supervise investment advisers?
AAMFI
BRBI
CNSDL
DBSE Administration & Supervision Limited
Q43MCQ · 1 markMediumPMLA
Under PMLA, for how long must reporting entities keep records of transactions?
AOne year
BTen years
CFive years from the date of the transaction
DThree years
Q44MCQ · 1 markMediumPMLA
Which activity can make a person guilty of money laundering under PMLA?
AHolding shares in demat form
BConcealing, possessing, using or projecting proceeds of crime as untainted
CPaying taxes late
DInvesting through an SIP
Q45MCQ · 1 markMediumFEMA
Under FEMA rules, foreign portfolio investment in a listed Indian company is an investment of:
AMore than 50% of equity
BAny amount in unlisted companies
CExactly 25% of equity
DLess than 10% of post-issue paid-up equity on a fully diluted basis
Q46MCQ · 1 markEasyContract Act
How does the Indian Contract Act, 1872 define a contract?
AA payment made through a bank
BAn agreement enforceable by law
CA document signed by SEBI
DAny promise made orally
Q47MCQ · 1 markMediumGuardian and Wards Act
Under the Indian Majority Act and the Guardian and Wards Act, who is a minor?
AA person below 18 years of age
BA person below 21 years
CA person below 16 years
DA person without a PAN
Q48MCQ · 1 markMediumNegotiable Instruments
Which instruments are 'negotiable instruments' under Section 13 of the NI Act, 1881?
AFixed deposit receipts
BShares and bonds
CPromissory notes, bills of exchange and cheques payable to order or bearer
DInsurance policies
Q49MCQ · 1 markMediumIBC
Which of these does the Insolvency and Bankruptcy Code, 2016 cover?
AOnly government departments
BOnly banks
CCompanies, LLPs, partnership firms and individuals
DOnly listed companies
Q50MCQ · 1 markMediumFATCA/CRS
What is FATCA designed to do?
ARegulate mutual fund NAVs
BHelp the US obtain information on accounts held by US persons abroad
CCollect Indian GST
DSet RBI policy rates
Q51MCQ · 1 markMediumCase lessons
What was the key lesson from SEBI's action against entities giving paid tips without registration?
AAnyone giving paid advice must be SEBI-registered; investors lose regulatory remedies with unregistered advisers
BRegistration is optional for small firms
CFree trials are always allowed
DTips via SMS are not advice
Want more practice? These 51 questions cover the whole chapter. Take a free full-length X-A mock in the real exam pattern to test every chapter together. Start free X-A mock exam →
Case-Based Questions (1 set)
Case 1Case-Based · 2 marks eachIA compliance situations
Rohan is a SEBI-registered individual investment adviser with 280 clients and fee income of ₹2.6 crore this year. His wife is an AMFI-registered mutual fund distributor. A new client asks Rohan to also execute his mutual fund investments through regular plans so that his wife can earn the commission. Separately, Rohan advised clients last week to sell shares of Company X, and he now wants to buy the stock for himself because the company announced a big order yesterday.
Medium Sub-question 1
Can Rohan's wife act as the distributor for this client?
AYes, because she is separately registered
BNo; family of an individual IA cannot distribute to clients the IA advises
CYes, if the commission is disclosed
DYes, if the client signs a waiver
Medium Sub-question 2
If Rohan offers to implement the advice himself, how must he do it?
AThrough regular plans to earn commission
BHe cannot implement at all
CThrough any plan, charging a 1% fee
DOnly through direct plans, without any commission or implementation fee
Hard Sub-question 3
Can Rohan buy Company X shares now, within 15 days of advising clients to sell?
AYes, freely, since the news is public
BNo, under no circumstances
COnly after sharing his revised view with clients at least 24 hours before trading
DYes, if he buys through his wife's account
Medium Sub-question 4
If Rohan's clients cross 300 next month, what must he do?
AApply for in-principle registration as a non-individual IA
BStop all advisory work
CNothing until fees cross ₹5 crore
DConvert to a part-time IA
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: .
Ready to Test Yourself Under Exam Conditions?
Full 180-minute mock exam with all 20 chapters, mixed-weight case-based questions, negative marking, and NISM-accurate 60% pass threshold.