Chapter 9 — All 300 Questions
Q1MediumSystematic Transfer Plan (STP)
When an investor opts for a Systematic Transfer Plan (STP), which type of scheme typically acts as the 'source' scheme?
AAn equity-oriented scheme to a debt-oriented scheme.
✓A liquid or ultra-short duration fund to an equity-oriented fund.
CA balanced advantage fund to a thematic fund.
DA sectoral fund to an international fund.
💡 A Systematic Transfer Plan (STP) is typically used by investors to transfer a fixed amount periodically from one mutual fund scheme (the source) to another (the target). The 'source' scheme is usually a less volatile fund like a liquid or ultra-short duration fund, allowing the investor's capital to grow steadily while gradually transferring amounts into a more volatile 'target' scheme like an equity fund to average out the purchase cost and mitigate market timing risk.
Q2HardTransactions (Dividend Reinvestment)
When an investor opts for the 'dividend reinvestment' option in a mutual fund scheme, what is the implication on the number of units held and the average cost of acquisition?
ANumber of units decreases, average cost remains unchanged.
✓Number of units increases, and the average cost per unit adjusts based on the reinvestment NAV.
CNumber of units increases, average cost per unit automatically decreases.
DNumber of units increases, average cost per unit automatically increases.
💡 In dividend reinvestment, the dividend declared is automatically used to purchase additional units of the same scheme at the prevailing NAV. This increases the total number of units held. The average cost per unit will then adjust based on the NAV at which the new units are allotted relative to the existing average cost.
Q3EasyStatement of Account (SOA) and CAS
What is the primary purpose of a Consolidated Account Statement (CAS) for mutual fund investors?
ATo provide details of all transactions in a single mutual fund scheme.
BTo consolidate all bank account statements for an investor.
✓To provide a single statement showing all investments in mutual funds and dematerialized securities across all AMCs/DPs.
DTo list all investments made through a particular distributor.
💡 A Consolidated Account Statement (CAS) provides a single, comprehensive view of an investor's holdings in mutual funds across all AMCs and dematerialized securities held with depositories (NSDL/CDSL). It helps investors track their entire portfolio conveniently. SEBI mandates the issuance of CAS monthly to investors who have made transactions in a month, or half-yearly if no transactions occurred.
Q4EasyNomination
How many nominees can a mutual fund investor appoint for a single folio?
AOne
BTwo
✓Three
DAny number, subject to AMC approval
💡 As per SEBI (Mutual Funds) Regulations, an investor can appoint a maximum of three nominees for a mutual fund folio. The percentage of allocation for each nominee must also be specified.
Q5HardDormant/Inactive Accounts
What is the implication for an investor whose mutual fund folio becomes 'dormant' due to no transactions for a specified period (e.g., typically 6 months to 1 year, depending on AMC policy)?
AThe units are automatically redeemed, and proceeds are transferred to a liquid scheme.
✓The investor cannot perform any transactions (purchase, redemption, switch) until the folio is reactivated.
CThe AMC starts levying a dormancy fee on the folio until it is reactivated.
DThe folio is closed permanently, and the investor loses their investment.
💡 A 'dormant' or 'inactive' folio means that no financial transactions (other than dividend payouts or SIP/STP/SWP installments) have occurred for a specified period. To prevent fraudulent transactions, AMCs typically restrict further transactions (purchases, redemptions, switches) until the investor reactivates the folio by submitting updated KYC details or performing a specific verification process. Units are not automatically redeemed, nor are dormancy fees generally charged by mutual funds.
Q6MediumTransmission of Units
In the case of transmission of mutual fund units where the nominee is a minor, which of the following documents is additionally required?
AMinor's bank statement
BGuardian's consent letter
CMinor's birth certificate
✓An undertaking from the guardian to furnish KYC documents upon minor attaining majority
💡 For transmission to a minor nominee, along with other standard documents, an undertaking from the guardian to furnish fresh KYC documents and bank account details of the minor upon attaining majority is required. (Ref: AMFI Best Practice Guidelines Circular No. 135/2022-23).
Q7MediumUnclaimed Dividends/Redemption
What happens to unclaimed redemption and dividend amounts after a period of 3 years from the due date?
AThey are transferred to the Investor Education and Protection Fund (IEPF).
BThey are forfeited by the Asset Management Company (AMC).
✓They are deployed in a separate scheme (e.g., a liquid scheme) and continue to earn returns.
DThey are used by the AMC to cover operational expenses.
💡 As per SEBI Circulars (e.g., CIR/IMD/DF&CH/102/2016), unclaimed redemption and dividend amounts are required to be deployed in a separate scheme (such as a liquid scheme) after 3 years and continue to earn returns. Investors can claim these amounts along with the accumulated income. They are not forfeited or used for operational expenses.
Q8EasyKYC and KRA
What is the primary purpose of a KYC Registration Agency (KRA) in the mutual fund industry?
ATo process mutual fund transactions on behalf of investors.
✓To centralize and maintain KYC records of investors across various financial intermediaries.
CTo provide investment advisory services to mutual fund distributors.
DTo regulate the operations of Asset Management Companies (AMCs).
💡 A KRA's primary role is to centralize and maintain KYC records of investors, ensuring a single, standardized KYC verification process across different SEBI-registered intermediaries, including mutual funds.
Q9MediumChange of Bank Details
When an investor submits a request for a change in their registered bank account details, what is a typical safeguard measure implemented by AMCs before the new bank account becomes active for redemption payouts?
AImmediate activation of the new bank details without verification.
✓A mandatory 10-day cooling-off period during which redemptions are not processed to the new account.
CRequiring a physical visit to the AMC office for biometric verification.
DCharging a processing fee for the bank detail change.
💡 To prevent fraudulent changes and protect investors, AMCs typically implement a cooling-off period (often 10 working days) after a request for change in bank account details. During this period, the new bank details are registered, but redemptions are not paid into the new account, allowing time for verification and for the investor to report any unauthorized change.
Q10EasyTypes of Transactions
Which of the following is NOT a common transaction an investor can perform with their mutual fund units?
ASystematic Investment Plan (SIP)
BSwitching units between two different schemes of the same AMC.
✓Taking a loan against mutual fund units.
DRedeeming units partially or fully.
💡 While it is possible to pledge mutual fund units as collateral for a loan from banks/NBFCs, 'taking a loan against mutual fund units' is not a transaction performed with the mutual fund directly. SIP, Switch, and Redemption are common investor-initiated transactions directly with the mutual fund.
Q11HardFATCA/CRS and PoA
When a Power of Attorney (PoA) holder acts on behalf of an investor for mutual fund transactions, whose FATCA/CRS declaration is typically required?
AOnly the investor's FATCA/CRS declaration is required.
BOnly the PoA holder's FATCA/CRS declaration is required.
✓Both the investor's and the PoA holder's FATCA/CRS declarations are required.
DNeither is required, as PoA transactions are exempt.
💡 For transactions executed through a Power of Attorney (PoA), both the investor (principal) and the PoA holder (agent) are required to complete their respective FATCA/CRS declarations. This is because both are involved in the financial transaction and their tax residencies need to be established.
Q12HardConsolidated Account Statement (CAS)
An investor holds mutual fund units in physical form (statement of account) and also has holdings in a dematerialized (demat) account. How frequently will such an investor receive a Consolidated Account Statement (CAS) if there is a transaction in any of their holdings?
AAnnually
BHalf-yearly
✓Monthly
DQuarterly
💡 As per SEBI circulars, investors holding mutual fund units in physical form and also having a demat account will receive a Consolidated Account Statement (CAS) on a monthly basis if there is any transaction (financial or non-financial) in any of their demat accounts or mutual fund folios during that month. If there are no transactions in a month, a CAS will be sent on a half-yearly basis.
Q13MediumRole of R&T Agents
Which of the following is *not* a primary function typically performed by a Registrar and Transfer Agent (R&T Agent) for a mutual fund?
AProcessing purchase and redemption requests
BMaintaining investor records and folios
✓Calculating daily Net Asset Value (NAV)
DDispatching account statements and other communications
💡 The calculation of the daily Net Asset Value (NAV) is primarily the responsibility of the Asset Management Company (AMC) and is verified by the Custodian. R&T agents are responsible for processing transactions, maintaining investor records, dispatching statements, and handling other back-office operations related to unit holder services.
Q14MediumRedemption Process Timelines
What is the stipulated timeline for dispatching redemption proceeds to investors by the Asset Management Company (AMC)?
✓Within 3 business days from the date of redemption request.
BWithin 5 business days from the date of redemption request.
CWithin 7 business days from the date of redemption request.
DWithin 10 business days from the date of redemption request.
💡 SEBI regulations mandate that mutual funds must dispatch redemption proceeds to investors within 3 business days of receiving a valid redemption request. Failure to do so may result in interest payments to the investor.
Q15HardTransmission of Units
In the event of the death of a sole unitholder who has not made a nomination and dies intestate (without a will), which of the following documents is *least likely* to be required for transmission of units to the legal heirs?
ADeath Certificate of the deceased
BAffidavit(s) from Legal Heirs
CIndemnity Bond from Legal Heirs
✓Probate of Will
💡 If a unitholder dies intestate (without a will), a Probate of Will is not applicable as there is no will to be probated. In such cases, the transmission process typically requires a Death Certificate, Affidavit(s) from Legal Heirs, Indemnity Bond, along with a Legal Heir Certificate or Succession Certificate, depending on the value of units.
Q16EasyKYC Requirements
Which of the following is a mandatory requirement for all mutual fund investors, regardless of investment amount, for KYC compliance (with specific exceptions for micro SIPs/small amounts)?
AAadhaar Card
BPassport
✓Permanent Account Number (PAN)
DDriving License
💡 Permanent Account Number (PAN) is a mandatory requirement for all mutual fund investors for KYC compliance, with very limited exceptions for micro SIPs or investments up to ₹50,000 where other identity proofs can be used. However, for most investments, PAN is essential.
Q17EasyTransmission of Units
Which document is essential for the transmission of mutual fund units in case of the demise of a sole unit holder?
APower of Attorney
BDividend warrant
✓Death Certificate
DBank statement of the deceased
💡 For the transmission of mutual fund units from a deceased sole unit holder to the nominee or legal heir, the Death Certificate of the deceased is a mandatory document, along with other documents like the nominee's KYC, bank details, and the transmission request form.
Q18HardApplication Process (FATCA/CRS)
Under FATCA and CRS regulations, what is the primary responsibility of a financial institution (like an AMC) concerning investors identified as 'reportable persons'?
AImmediately redeem their investments and return the funds to them.
✓Report their financial account information to the Indian tax authorities, who then exchange it with relevant foreign tax authorities.
CImpose a higher expense ratio on their investments to cover compliance costs.
DBlock their folio from any further transactions until they prove non-reportable status.
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) require financial institutions to identify 'reportable persons' (based on tax residency outside India) and report their financial account information to the Indian tax authorities (CBDT). CBDT then exchanges this information with the respective foreign tax authorities as per inter-governmental agreements.
Q19EasyConsolidated Account Statement (CAS)
What is the primary purpose of a Consolidated Account Statement (CAS) provided to mutual fund investors?
ATo provide details of all bank accounts linked to the investor's PAN.
✓To consolidate all mutual fund investments across various AMCs and demat holdings into a single statement.
CTo show the tax implications of mutual fund investments.
DTo provide a summary of the investor's portfolio performance compared to market benchmarks.
💡 The Consolidated Account Statement (CAS) provides a single view of all mutual fund holdings (both physical and dematerialized) and demat account holdings across depositories (NSDL and CDSL) for an investor identified by their PAN. This simplifies portfolio tracking. (SEBI Circular CIR/MRD/DP/31/2014 dated November 12, 2014, and subsequent amendments)
Q20MediumAccount Statements - Consolidated Account Statement (CAS)
How often is a Consolidated Account Statement (CAS) dispatched to investors who have holdings in both mutual funds and dematerialized securities?
AAnnually, by April 30th.
BHalf-yearly, by September 30th and March 31st.
✓Monthly, within 10 days of the month-end.
DQuarterly, by the end of each quarter.
💡 As per SEBI regulations, investors holding mutual fund units and demat securities are issued a Consolidated Account Statement (CAS) monthly, typically within 10 days of the month-end, detailing all their holdings and transactions.
Q21EasyPAN Requirement
For which of the following transactions is PAN (Permanent Account Number) NOT mandatory for an individual investor in a mutual fund?
AInvestment in a mutual fund scheme
BRedemption from a mutual fund scheme
COpening a demat account for mutual fund units
✓Investment in schemes for micro-SIPs up to Rs. 50,000 per financial year
💡 SEBI has exempted investments up to Rs. 50,000 per financial year per investor (Micro SIPs) from the requirement of PAN, provided other KYC requirements are met. For all other specified transactions like regular investments, redemptions, and opening demat accounts, PAN is mandatory. (Ref: SEBI/IMD/CIR No. 6/135960/08 dated April 18, 2008 and subsequent clarifications).
Q22HardTransmission of Units to Nominee
In the event of the death of a sole unitholder, which of the following documents is *not* typically required for the transmission of mutual fund units to the nominee?
ADeath certificate of the deceased unitholder
BKYC documents of the nominee
✓A copy of the deceased unitholder's will
DRequest for transmission form signed by the nominee
💡 For transmission of units to a nominee, the nominee receives the units based on the nomination made by the deceased unitholder, not based on a will. A will is relevant for transmission to legal heirs in the absence of a nomination. Therefore, a copy of the will is not required when a valid nomination exists.
Q23MediumSwitch Transactions and Taxation
How is a 'Switch' transaction between two different schemes within the same mutual fund house treated for taxation purposes?
AIt is considered a non-taxable internal transfer.
✓It is treated as a redemption from the source scheme and a fresh purchase in the target scheme.
CIt is taxed only if the total amount exceeds a certain threshold.
DIt is subject to a flat transaction tax.
💡 For taxation purposes, a switch transaction is considered a redemption from the source scheme and a fresh purchase into the target scheme. Therefore, any capital gains arising from the redemption are taxable based on the holding period and nature of the source scheme, and the holding period for the new scheme starts from the date of the switch. (Ref: Income Tax Act, 1961 provisions related to capital gains on mutual funds).
Q24HardFATCA/CRS
An investor fails to submit the FATCA/CRS declaration form along with their mutual fund application. What is the most likely consequence?
✓The application will be rejected outright as incomplete.
BThe application will be processed, but the investor will be restricted from future transactions until the form is submitted.
CThe application will be processed, but the AMC will be required to report the investor's details as 'Undocumented Account' to the tax authorities.
DThe investor's units will be compulsorily redeemed after a specific period if the form is not submitted.
💡 FATCA/CRS declarations are mandatory for all new investors. Failure to provide these details makes the application incomplete and typically leads to its rejection by the AMC, as they cannot onboard an investor without fulfilling these regulatory requirements.
Q25EasyAccount Statements - CAS
What does CAS stand for in the context of mutual fund investor services?
ACurrent Account Statement
✓Consolidated Account Statement
CCentral Account System
DCumulative Asset Statement
💡 CAS stands for Consolidated Account Statement. It is a single statement provided to investors by depositories (CDSL/NSDL) that consolidates all their holdings in mutual funds and securities held in demat form across various AMCs and brokers.
Q26HardPower of Attorney (POA)
Which of the following statements is TRUE regarding the Power of Attorney (POA) for mutual fund transactions?
AA POA holder can change the nominee for the original investor's folio.
BA POA holder can invest in schemes without the original investor's KYC if the POA is registered.
✓A POA holder can typically only execute transactions like purchases, redemptions, and switches, but not update critical investor details like address or bank account without specific authorization.
DA POA granted to a minor is valid for all mutual fund transactions.
💡 A POA holder's authority is generally limited to executing transactions as per the mandate given in the POA. Changing critical details like nomination, address, or bank account often requires specific, explicit authorization in the POA document, or may even be restricted by AMCs/RTAs to prevent misuse, requiring the original investor's signature. A POA cannot change the nominee, as nomination is a personal right of the unitholder. The POA holder also needs to be KYC compliant.
Q27MediumLien/Pledge of Units
What is the primary benefit of a 'Lien' or 'Pledge' facility on mutual fund units?
AIt allows the investor to redeem units without paying exit load.
✓It enables the investor to use their mutual fund units as collateral for obtaining a loan.
CIt provides a guarantee against market volatility for the units.
DIt automatically switches units to a debt fund if the equity market falls.
💡 The lien or pledge facility allows investors to use their mutual fund units as collateral to avail a loan from banks or other financial institutions. The units remain in the investor's name but are marked with a lien in favour of the lender.
Q28HardMinor Investment - Attaining Majority
For an investment made in the name of a minor, what document typically needs to be submitted to the RTA/AMC upon the minor attaining majority, to change the operating status of the folio?
AA fresh KYC application of the guardian.
BA declaration from the guardian stating the minor has attained majority.
✓A request for change of status, along with the major's updated KYC, signature attestation, and bank account details.
DThe folio automatically converts to the major's name without any action.
💡 Upon a minor attaining majority (18 years), the guardian's authority to operate the account ceases. The major must then submit a 'Change of Status' request, along with their updated KYC documents (PAN, address proof), signature attestation from their bank, and their own bank account details. This ensures the account is now operated by the rightful adult owner.
Q29MediumMinor attaining majority
When a minor unit holder attains majority, what is the mandatory action required to continue operating the mutual fund folio?
AThe folio automatically converts to a major's folio upon the minor's 18th birthday.
BThe guardian must submit a request to change the status from minor to major.
✓The erstwhile minor, now major, must submit a fresh KYC application and a request to change the status, along with updated bank details.
DThe AMC sends a notice, and if no action is taken, the folio is frozen until the minor submits a new KYC.
💡 As per SEBI/AMFI guidelines, when a minor unit holder attains majority, the guardian's authority ceases. The erstwhile minor, now major, must complete KYC formalities in their own name and submit a request to change the status of the folio, providing their updated bank account details. Until these formalities are completed, further transactions (especially redemptions) are generally restricted.
Q30EasyKYC Requirements
Which of the following is a mandatory pre-requisite for investing in mutual funds as per SEBI regulations?
AA Demat account
✓A valid Permanent Account Number (PAN)
CA minimum investment of ₹5,000
DA certified financial advisor
💡 As per SEBI regulations, a valid Permanent Account Number (PAN) is a mandatory requirement for completing the Know Your Customer (KYC) process, which is a pre-requisite for investing in mutual funds. Demat accounts are optional for mutual fund investments.
Q31EasyStatement of Account
Which of the following details is *always* required to be prominently displayed on a mutual fund Statement of Account for an investor?
ADistributor's commission earned on the transactions
BDaily NAV of all schemes offered by the AMC
✓Investor's registered bank account number
DPAN number of the fund manager
💡 A mutual fund Statement of Account must prominently display the investor's bank account number registered in the folio to ensure transparency and security, especially for redemption payouts. Distributor's commission, daily NAV of all schemes, or fund manager's PAN are not typically mandatory details on an individual investor's statement of account.
Q32EasyConsolidated Account Statement (CAS)
For investors holding mutual fund units in dematerialized form, how frequently is the Consolidated Account Statement (CAS) dispatched?
AAnnually, if there are no transactions.
BHalf-yearly, regardless of transactions.
✓Monthly, if there is any transaction in the folio during that month.
DQuarterly, if there are no transactions in any of the folios.
💡 As per SEBI circulars, a Consolidated Account Statement (CAS) is dispatched monthly to investors if there is any transaction in any of their mutual fund folios or demat accounts during that month. If there are no transactions during a half-year period, a CAS is sent on a half-yearly basis.
Q33MediumTransaction Processing - Payment Modes
Which of the following payment methods generally ensures the fastest realization of funds for mutual fund purchases, thereby potentially helping in securing the same-day NAV for eligible schemes?
ACheque payment
BDemand Draft
✓RTGS/NEFT
DPost-dated cheques
💡 Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) are electronic payment systems that facilitate near real-time transfer of funds. This ensures quick realization of application money by the AMC/RTA, increasing the chances of receiving the same-day NAV for eligible transactions, unlike cheques or demand drafts which involve clearing cycles.
Q34MediumChange of Investor Details - Bank Account
When an investor requests a change of bank account for redemptions, what is a typical safeguard measure taken by AMCs?
AThe new bank account is immediately updated and activated for all future transactions.
✓The AMC typically sends a confirmation letter to the old bank account address to verify the change.
CA small 'test' transaction is processed to the new account before full activation.
DRedemption proceeds are temporarily held by the AMC for a cooling-off period of 30 days.
💡 To prevent fraud, AMCs often implement a cooling-off period and/or send a confirmation letter to the investor's registered address (often linked to the old bank account) to ensure the change request is genuine before activating the new bank account for redemptions. This is a common security measure.
Q35MediumMinor Nominee
What is the implication if a nominee designated for a mutual fund folio is a minor at the time of nomination?
AThe nomination is invalid until the minor attains majority.
✓An appointee must be specified to receive the units on behalf of the minor nominee.
CThe minor nominee automatically becomes the sole unit holder upon the original investor's death.
DThe units are held in trust by the AMC until the minor attains majority.
💡 If a nominee is a minor, the investor must appoint an 'appointee' (who must be a major) to receive the units on behalf of the minor nominee in the event of the investor's death during the minor's minority. This ensures there is a legal guardian to manage the assets for the minor.
Q36MediumGrievance Redressal Mechanism
If an investor is dissatisfied with the resolution provided by a mutual fund's AMC regarding a grievance, which entity should they approach next for redressal?
AReserve Bank of India (RBI)
BInsurance Regulatory and Development Authority of India (IRDAI)
✓Securities and Exchange Board of India (SEBI) through SCORES.
DMinistry of Finance.
💡 After exhausting the grievance redressal mechanism at the AMC level, investors can escalate their complaints to SEBI through its online grievance redressal system, SCORES (SEBI Complaints Redressal System). (SEBI Master Circular for Mutual Funds, Section III, Grievance Redressal Mechanism)
Q37MediumConsolidated Account Statement (CAS)
For an investor holding mutual fund units only in physical (non-demat) form, what is the minimum frequency for receiving the Consolidated Account Statement (CAS) if there are no transactions during the period?
AMonthly
BQuarterly
✓Half-yearly
DAnnually
💡 As per SEBI circulars (e.g., SEBI/HO/IMD/DF2/CIR/P/2016/89 dated Sep 21, 2016), for investors who do not have a demat account and hold mutual fund units in physical form, the CAS is sent on a half-yearly basis (for periods April-September and October-March) if there are no transactions during that half-year period. If there are transactions, it is sent monthly.
Q38HardUnclaimed Dividends/Redemption Proceeds
What is the maximum period for which dividend or redemption proceeds can remain 'unclaimed' with the mutual fund before being transferred to the Senior Citizen's Welfare Fund (SCWF)?
A3 years
B5 years
✓7 years
D10 years
💡 As per SEBI regulations, unclaimed redemption and dividend amounts, along with the income earned thereon, must be transferred to the Senior Citizen's Welfare Fund (SCWF) if they remain unclaimed for a period of seven years. Until then, the amounts remain invested in a separate bank account or liquid scheme.
Q39HardFATCA/CRS Purpose
The primary objective of collecting FATCA/CRS self-certification from mutual fund investors is to:
ADetermine the investor's eligibility for tax deductions
✓Facilitate information exchange between tax authorities of different countries to combat tax evasion
CVerify the investor's identity for KYC purposes
DAssess the investor's risk profile for investment suitability
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) are international frameworks aimed at combating tax evasion. Financial institutions collect self-certifications to identify and report financial accounts held by foreign tax residents to their respective tax authorities, facilitating information exchange.
Q40EasyChange of Details
Which of the following is typically NOT a mandatory document requirement for changing bank account details in a mutual fund folio?
ACanceled original cheque leaf with pre-printed name of the first holder.
BBank passbook copy with account holder details.
CLatest bank statement copy (not more than 3 months old).
✓Original birth certificate of the first holder.
💡 For changing bank details, documents establishing the new bank account's ownership by the investor (like a cancelled cheque, bank statement, or passbook copy) are typically required. An original birth certificate is not relevant for this process.
Q41MediumNomination for Minors
If a nominee is a minor at the time of nomination, what additional detail must be provided to the mutual fund?
AThe minor's date of birth and a copy of their birth certificate.
✓The name and address of the guardian who will act on behalf of the minor.
CA declaration from the minor, attested by a notary public.
DThe minor's bank account details.
💡 When a minor is nominated, the name and address of the guardian who will represent the minor until they attain majority must be provided to the mutual fund. (NISM Series V-A Study Material, Chapter 9: Investor Services - Nomination for Minor)
Q42MediumTransmission
In the event of the death of a sole unitholder, what is the most critical document required for the transmission of units to the nominee?
AOriginal purchase application form of the deceased.
✓Death certificate of the deceased.
CIncome tax returns of the deceased for the last 3 years.
DProof of identity of the deceased.
💡 The death certificate of the deceased unitholder is the most critical and primary document required to initiate the transmission of units to the rightful claimant(s) (nominee or legal heir) in case of a sole holding.
Q43EasyOther Investor Services - CSCs
What is the primary role of Common Service Centres (CSCs) in the context of mutual fund investments in rural areas?
ATo provide financial advisory services and recommend specific mutual fund schemes.
✓To act as official points of acceptance for mutual fund transactions and facilitate investor services.
CTo manage investment portfolios for rural investors on a commission basis.
DTo offer loans against mutual fund units to rural investors.
💡 Common Service Centres (CSCs) are designated points of acceptance, especially in rural and semi-urban areas, to facilitate mutual fund transactions (subscriptions, redemptions, etc.) and other investor services, thereby improving accessibility for investors.
Q44EasyGrievance Redressal (SCORES)
Which online platform is designated by SEBI for the redressal of investor grievances in the Indian securities market, including mutual funds?
AAMFI Website
✓SCORES
CRBI Portal
DMinistry of Finance Grievance Cell
💡 SCORES (SEBI Complaints Redress System) is an online platform launched by SEBI to help investors lodge and track their complaints against various entities in the securities market, including mutual funds.
Q45MediumPower of Attorney
An investment is made through a Power of Attorney (POA) holder. Which of the following statements is TRUE regarding the bank account for redemption proceeds?
ARedemption proceeds must always be credited to the bank account of the POA holder.
✓Redemption proceeds must always be credited to the bank account of the original investor.
CThe AMC can credit redemption proceeds to either the POA holder's or the investor's account, based on the POA document.
DRedemption proceeds will be held by the AMC until the POA is revoked and the investor provides their own bank details.
💡 As per SEBI regulations and good practices, all redemption proceeds must be credited only to the bank account of the original investor, not the POA holder, to protect the investor's interests and prevent misuse of the POA.
Q46MediumDemat vs. Physical
Holding mutual fund units in dematerialized (demat) form offers which of the following significant advantages?
AGuaranteed higher investment returns compared to physical units
BExemption from capital gains tax on redemptions
✓Consolidated view of all investments (shares, debentures, MFs) in one demat account statement
DDirect voting rights in the Asset Management Company (AMC) management
💡 A key benefit of holding mutual fund units in demat form is the convenience of having all investments, including shares, debentures, and mutual funds, consolidated in a single demat account statement. This simplifies portfolio tracking and management. Other options are not inherent advantages of dematerialization.
Q47EasyKYC Requirements
Which of the following is NOT a mandatory document for completing KYC for an individual investor in a mutual fund?
APAN card
BProof of Address
CProof of Identity
✓Bank account statement (as proof of income)
💡 As per SEBI (KYC Registration Agency) Regulations, 2011 and AMFI guidelines, PAN, Proof of Identity, and Proof of Address are mandatory for KYC. A bank account statement is not a standard mandatory KYC document, although it might be required for specific risk profiling or source of funds verification in certain cases.
Q48MediumThird-Party Payments
Under which of the following circumstances is a third-party payment generally permitted for mutual fund investments?
AInvestment made by an individual on behalf of a friend for convenience.
✓Gift made by a specified relative (e.g., parent, spouse, sibling) to the investor.
CPayment made by a financial advisor on behalf of their client.
DPayment made by a corporate entity on behalf of an unrelated individual.
💡 SEBI regulations generally prohibit third-party payments for mutual fund investments. However, certain exceptions are allowed, including gifts made by specified relatives (such as parents, spouse, siblings) to the investor. Other exceptions include payments by employers on behalf of employees, or corporate funding for employees under specific schemes.
Q49HardKYC Norms and Requirements - FATCA/CRS
For which investors is the FATCA/CRS declaration mandatory during mutual fund investment?
AOnly for Non-Resident Indian (NRI) investors.
BOnly for investors who are U.S. Persons.
✓For all investors, irrespective of their residency status or nationality.
DOnly for investors who hold multiple passports.
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) declarations are mandatory for all investors, including resident Indians, to determine their tax residency status and report financial information to relevant tax authorities globally, if applicable.
Q50HardNomination for Minors
What happens to the nomination made by an investor if the nominee is a minor and attains majority before the death of the unit holder?
AThe nomination automatically becomes void.
✓The nomination remains valid, and the minor, now major, receives the units.
CThe unit holder must re-nominate the individual as an adult.
DThe guardian appointed for the minor nominee automatically becomes the new nominee.
💡 If a minor nominee attains majority before the death of the unit holder, the nomination remains valid, and the individual, now an adult, will be entitled to the units. The nomination does not automatically become void. There is no requirement for re-nomination simply because the minor nominee became a major. The guardian's role ceases once the minor becomes major.
Q51MediumChange in Investor Details (Bank Mandate)
When an investor submits a request for a change in bank mandate for their mutual fund investments, which of the following documents is typically NOT required?
AA cancelled cheque leaf of the new bank account.
BA cancelled cheque leaf of the old bank account (if available).
CA copy of the bank passbook or bank statement of the new account.
✓An attested copy of the investor's latest income tax return.
💡 For a change in bank mandate, documents like a cancelled cheque leaf or a copy of the bank passbook/statement for the new account are standard requirements for verification. A cancelled cheque of the old account may also be requested for additional verification. An attested copy of the investor's latest income tax return is generally not required for this specific service request.
Q52HardUnclaimed Redemptions and Dividends
What is the regulatory requirement for mutual funds regarding unclaimed redemption and dividend amounts?
AThe amounts must be transferred to the Investor Protection Fund after 3 years.
BThe amounts must be invested in a money market or liquid scheme and remain there indefinitely.
✓The amounts must be invested in a money market or liquid scheme for a specified period and then transferred to the Investor Education and Protection Fund (IEPF).
DThe amounts must be forfeited by the AMC if unclaimed for more than 5 years.
💡 SEBI regulations mandate that unclaimed redemption and dividend amounts must be invested by the AMCs in a money market or liquid scheme. If these amounts remain unclaimed for a period of 7 years, they must be transferred to the Investor Education and Protection Fund (IEPF) of the Central Government.
Q53EasyFATCA and CRS Compliance
What is the primary purpose of FATCA and CRS declarations collected from mutual fund investors?
✓To determine the investor's tax residency status outside India.
BTo verify the investor's identity for KYC purposes.
CTo ascertain the investor's suitability for specific schemes.
DTo track the source of funds for anti-money laundering.
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) declarations are collected to identify and report the tax residency status of investors outside India to relevant tax authorities, primarily for combating tax evasion.
Q54MediumGrievance Redressal Mechanism
If an investor is not satisfied with the resolution provided by the AMC for their grievance, what is the next typical step for escalation within the mutual fund industry framework?
AFile a direct complaint with the Reserve Bank of India (RBI).
✓Escalate the complaint to the Association of Mutual Funds in India (AMFI).
CInitiate legal proceedings in a consumer court immediately.
DContact the Ministry of Finance for intervention.
💡 If an investor is not satisfied with the grievance redressal provided by the AMC, they can escalate their complaint to AMFI, which has a grievance redressal mechanism. Further escalation can be made to SEBI through its SCORES platform.
Q55EasyKYC Norms and Requirements
What is the primary purpose of Central KYC (CKYC) as mandated by the Government of India?
ATo consolidate all bank account details of an investor into one record.
✓To enable investors to complete KYC formalities only once across all SEBI-registered intermediaries.
CTo track an investor's investment performance across different asset classes.
DTo provide a centralized platform for processing mutual fund transactions.
💡 CKYC aims to create a uniform KYC record for investors, allowing them to complete KYC formalities only once and use the same KYC identifier across various financial institutions regulated by SEBI, RBI, PFRDA, and IRDAI, thus streamlining the process.
Q56MediumPledging of Units
Under what circumstances can a mutual fund unit holder pledge their units?
AUnits can be pledged only if they are held in physical form.
✓Units can be pledged only if they are held in dematerialized form.
CUnits can be pledged regardless of whether they are in physical or dematerialized form.
DPledging of mutual fund units is not permitted.
💡 Mutual fund units can be pledged, but typically only if they are held in dematerialized (demat) form. This allows for easier and more secure processing of the pledge by the depositories. Physical units are generally not accepted for pledging. Pledging allows investors to take a loan against their mutual fund holdings.
Q57EasyRole of Registrar and Transfer Agents (RTAs)
Which entity is primarily responsible for maintaining investor records, processing mutual fund transactions (like purchases, redemptions, switches), and dispatching account statements?
AAsset Management Company (AMC)
BCustodian
✓Registrar and Transfer Agent (RTA)
DTrustee
💡 The Registrar and Transfer Agent (RTA) is appointed by the AMC to handle all aspects of investor servicing, including maintaining investor records, processing transactions, sending out account statements, and handling requests like change of address or bank details.
Q58MediumApplication Rejection
Apart from incomplete KYC, which of the following is a valid reason for an Asset Management Company (AMC) to reject a mutual fund purchase application?
AThe investor's age is below 25 years.
✓The application is for an amount less than the minimum prescribed by the scheme.
CThe investor already holds units in a different AMC.
DThe investor has provided an email address instead of a physical address.
💡 Each mutual fund scheme specifies a minimum initial investment amount. Applications submitted for an amount less than this prescribed minimum can be rejected by the AMC. The other options are generally not valid reasons for rejection.
Q59EasyApplication Processing
Which of the following is NOT a valid ground for a mutual fund to reject an application for purchase of units?
AApplication form is incomplete.
BPayment instrument does not match the applicant's name.
CApplicant is not KYC compliant.
✓Applicant has previously invested in a different AMC.
💡 Having previously invested in a different AMC is not a valid reason to reject an application. Mutual funds operate independently, and an investor is free to invest across various AMCs. Incomplete forms, third-party payments (unless specific exceptions apply), and non-KYC compliance are valid reasons for rejection.
Q60MediumInvestor Grievance Redressal
An investor has a grievance against a Mutual Fund. What is the correct escalating order of seeking redressal?
ASEBI SCORES → AMC → AMFI
✓AMC → AMFI → SEBI SCORES
CAMFI → SEBI SCORES → AMC
DSEBI SCORES → AMFI → AMC
💡 The correct escalating order for grievance redressal is: first approach the Asset Management Company (AMC), if unresolved, escalate to AMFI (Association of Mutual Funds in India), and finally, if still not resolved, lodge a complaint on SEBI SCORES (SEBI Complaints Redressal System).
Q61MediumChanges in Investor Details
To update bank account details for a mutual fund folio, which of the following documents is typically NOT required by the RTA?
AA cancelled personalized cheque leaf of the new bank account.
BA copy of the bank passbook or statement showing the new account details.
✓A utility bill (e.g., electricity, phone) in the investor's name for the new address.
DA request letter signed by all unitholders in the folio.
💡 While a cancelled personalized cheque or bank statement/passbook and a signed request letter are standard requirements for changing bank details, a utility bill is typically used for address proof, not for bank account changes.
Q62EasyGrievance Redressal - SCORES
Which entity is responsible for maintaining the 'SCORES' (SEBI Complaints Redress System) platform for investor grievance redressal?
AAssociation of Mutual Funds in India (AMFI)
✓Securities and Exchange Board of India (SEBI)
CReserve Bank of India (RBI)
DMinistry of Finance
💡 SCORES (SEBI Complaints Redress System) is an online platform launched by the Securities and Exchange Board of India (SEBI) to help investors lodge and track their complaints against market intermediaries, including mutual funds.
Q63EasyTypes of Transactions - Switch
What is a 'Switch' transaction in mutual funds?
AChanging the nominee for an existing folio.
✓Transferring units from one scheme to another within the same mutual fund house.
CConverting physical units into dematerialized form.
DRedeeming units from one fund and investing the proceeds into a different fund house.
💡 A 'Switch' transaction involves moving an investor's existing units from one scheme to another scheme within the same mutual fund house. It is treated as a redemption from the source scheme and a purchase into the target scheme for tax and exit load purposes.
Q64EasyUnclaimed Dividends/Redemption
What is the minimum period after which unclaimed redemption/dividend amounts in a mutual fund must be compulsorily deployed in a separate scheme or plan?
A3 months
B6 months
C1 year
✓3 years
💡 As per SEBI regulations, any redemption or dividend amounts that remain unclaimed for a period of three years or more must be compulsorily deployed in a separate scheme or plan.
Q65MediumFund Distribution - Commission Disclosure
According to SEBI regulations, how frequently must mutual fund distributors disclose the commissions received from AMCs to their clients?
AAnnually, in the Consolidated Account Statement.
BHalf-yearly, via email or physical statement.
✓Quarterly, via email or physical statement.
DOn a transaction basis, at the time of investment.
💡 SEBI mandates that mutual fund distributors must disclose the commissions received from AMCs to their clients on a quarterly basis, through a statement or email, detailing the commissions earned from the client's investments.
Q66EasyRole of Registrar and Transfer Agents (RTAs)
What is the primary function of a Registrar and Transfer Agent (RTA) in the mutual fund industry?
ATo manage the investment portfolio of the mutual fund scheme.
BTo distribute mutual fund units to investors.
✓To maintain investor records and process transactions like purchases and redemptions.
DTo act as the custodian for the mutual fund's assets.
💡 Registrar and Transfer Agents (RTAs) are primarily responsible for maintaining investor records, processing transactions such as subscriptions, redemptions, switches, and managing dividend payouts, and handling investor communication.
Q67MediumGrievance Redressal Mechanism
After exhausting grievance redressal channels at the AMC and AMFI, where can an investor escalate a complaint regarding a mutual fund?
AReserve Bank of India (RBI)
BMinistry of Finance
✓Securities and Exchange Board of India (SEBI) SCORES
DRegistrar and Transfer Agent (RTA)
💡 The primary regulatory body for mutual funds is SEBI. Investors can lodge complaints with SEBI through its online grievance redressal system, SCORES (SEBI Complaints Redressal System), after first approaching the AMC and AMFI.
Q68EasySIP Services
Most AMCs allow investors to temporarily pause their Systematic Investment Plan (SIP). What is the typical minimum and maximum duration for such a pause?
✓Minimum 1 month, Maximum 6 months.
BMinimum 3 months, Maximum 12 months.
CMinimum 6 months, Maximum 18 months.
DMinimum 1 month, Maximum 3 months.
💡 Many AMCs offer a facility to pause SIPs, typically for a minimum of 1 month and a maximum of 6 months. This allows investors flexibility in managing their cash flows without stopping and restarting the SIP.
Q69HardUnclaimed Dividends and Redemption Proceeds
An investor has received a dividend warrant from a mutual fund, but it remains uncashed for 5 years. What is the current regulatory status of these funds?
AThe funds revert to the Asset Management Company (AMC) as profit.
✓The funds are transferred to the Investor Protection and Education Fund (IPEF) administered by SEBI.
CThe funds are held in a separate account by the RTA indefinitely for the investor.
DThe funds are transferred to the Central Government's Consolidated Fund.
💡 As per SEBI (Mutual Funds) Regulations, 1996, Regulation 58(7), any redemption or dividend amounts that remain unclaimed for more than three years are required to be transferred to the Investor Protection and Education Fund (IPEF) established by SEBI.
Q70MediumPledging of Units
Which of the following statements regarding the pledging of mutual fund units is TRUE?
AAll types of mutual fund units can be pledged, irrespective of their holding form.
✓Only units held in dematerialized form can be pledged.
CPledging of mutual fund units is not permitted as per SEBI regulations.
DUnits held in physical form can be pledged by submitting the original Statement of Account to the lender.
💡 As per SEBI regulations and operational procedures, pledging of mutual fund units is generally permitted only for units held in dematerialized (demat) form. This facilitates the creation of a lien in favour of the lender through the depository system.
Q71MediumInvestor Awareness
AMFI (Association of Mutual Funds in India) is mandated by SEBI to collect a certain percentage of the scheme's assets for investor awareness and education initiatives. What is this percentage?
✓Up to 0.02% of the daily net assets
BUp to 0.05% of the daily net assets
CUp to 0.10% of the daily net assets
DUp to 0.25% of the daily net assets
💡 As per SEBI regulations (circular SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019, and earlier), AMCs are allowed to charge an additional expense of up to 0.02% of the daily net assets of the scheme for investor awareness and education initiatives. This amount is then pooled by AMFI for conducting various awareness programs.
Q72EasyDematerialization of Units
Which of the following describes the dematerialization of mutual fund units?
AConverting physical share certificates into electronic form.
✓Converting mutual fund units held in statement of account form into electronic form in a demat account.
CConverting electronic mutual fund units into physical certificates.
DTransferring mutual fund units from one folio to another.
💡 Dematerialization of mutual fund units refers to the process of converting mutual fund units held in the traditional 'statement of account' (physical or electronic) form into an electronic holding in the investor's demat account, similar to how shares are held.
Q73EasyConsolidated Account Statement (CAS)
How frequently must a Consolidated Account Statement (CAS) be sent to an investor who has mutual fund investments and also holds a demat account, provided there are transaction(s) in any of the folios/demat accounts during the month?
AAnnually
BHalf-yearly
CQuarterly
✓Monthly
💡 As per SEBI regulations, a Consolidated Account Statement (CAS) is generated and sent monthly to investors if there has been any transaction (financial or non-financial) in their mutual fund folios or demat accounts during that month. If there are no transactions, it is sent half-yearly.
Q74MediumPower of Attorney (PoA)
If an investment in a mutual fund is made through a Power of Attorney (PoA) holder, who is considered the primary investor for all legal and tax purposes?
AThe Power of Attorney holder
✓The person granting the Power of Attorney (the principal)
CThe fund house
DThe Registrar and Transfer Agent (RTA)
💡 The person granting the Power of Attorney (the principal) remains the beneficial owner and primary investor. The PoA holder merely acts on behalf of the principal and does not assume ownership or tax liability.
Q75MediumDemat of Mutual Fund Units
What is the primary benefit of holding mutual fund units in dematerialized (demat) form?
AHigher returns on investment.
BExemption from capital gains tax.
✓Consolidation of all financial holdings (shares, mutual funds, etc.) in a single account, reducing paperwork.
DGuaranteed liquidity for all schemes.
💡 The primary benefit of holding mutual fund units in demat form is the consolidation of all financial holdings (shares, bonds, mutual funds) in a single demat account, which simplifies portfolio management, reduces paperwork, and enhances ease of transactions.
Q76EasyNomination Rules
In the case of a joint holding in a mutual fund, who can nominate a beneficiary?
AOnly the first holder can nominate
✓All joint holders must jointly nominate
CAny one of the joint holders can nominate independently
DNomination is not permitted in joint holdings
💡 For joint holdings in mutual funds, all joint holders must jointly nominate a beneficiary. The nomination form must be signed by all holders, and the nominee will receive the units only after the death of all joint holders.
Q77HardMinor's Investment
What happens to the investments of a minor upon attaining majority in a mutual fund folio where the investment was made through a guardian?
AThe folio automatically converts to a major's folio upon the minor's 18th birthday.
BThe minor must submit fresh KYC documents and a new application form to continue the investment as a major.
CThe guardian must redeem the units, and the major can then reinvest in a new folio.
✓The minor needs to provide an application, KYC documents, and proof of age to change the status from minor to major, along with the guardian's signature.
💡 Upon attaining majority, the minor needs to submit an application along with fresh KYC documents in their own name, proof of age, and a joint declaration from the guardian and the erstwhile minor. The guardian's signature is required to confirm the change of status. Until this process is completed, no transactions (other than systematic transactions already registered) are allowed.
Q78MediumApplication Process and FATCA/CRS
When investing in a mutual fund, what specific declaration is typically required from investors regarding their tax residency status?
ADeclaration under Section 80C of the Income Tax Act
✓FATCA/CRS self-certification
CIncome Tax Return (ITR) filing status
DWealth Tax declaration
💡 Investors are required to provide FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) self-certification to declare their tax residency status. This is crucial for financial institutions to comply with international tax information exchange agreements.
Q79MediumChange of Bank Details
When an investor submits a request to change their bank account details for redemption and dividend payouts, which of the following is typically a crucial step to prevent fraudulent changes?
AThe AMC always calls the investor's registered mobile number for verbal confirmation.
BThe request must be accompanied by a cancelled cheque of the *new* bank account.
CThe request must be submitted in person at the AMC branch with original ID proof.
✓The AMC dispatches a confirmation letter to the *old* registered address.
💡 To safeguard against fraudulent changes in bank details, AMCs typically dispatch a confirmation letter to the investor's *old* registered address after processing the change. This allows the investor to verify if they indeed initiated the change. A cancelled cheque of the new account is generally required *with* the request, but the confirmation to the old address is a key security measure.
Q80MediumStatement of Account
An investor receives a Statement of Account (SOA) for their mutual fund investments. Which of the following details is typically NOT found in a regular SOA?
ACurrent NAV of the schemes held.
BTransaction history for the period.
✓Total amount of commissions paid to the distributor for the investor's transactions.
DNumber of units held in each scheme.
💡 A regular Statement of Account provides details about the investor's holdings, transaction history, current NAV, and valuation. However, it does not typically disclose the specific amount of commissions paid to the distributor for the investor's transactions. This information is usually available in a separate trail commission report to the distributor, or could be part of consolidated account statements (CAS) for direct plans or specific disclosures, but not a standard SOA.
Q81MediumKYC and Anti-Money Laundering (AML) - FATCA/CRS
What is the primary purpose of FATCA and CRS declarations collected from mutual fund investors?
ATo track large value transactions for money laundering prevention.
✓To identify and report tax residencies of investors for international tax compliance.
CTo verify the identity of politically exposed persons (PEPs).
DTo ensure compliance with domestic KYC norms.
💡 FATCA (Foreign Account Tax Compliance Act) is a US law to prevent tax evasion by US citizens holding assets abroad. CRS (Common Reporting Standard) is an OECD initiative for automatic exchange of financial account information between participating countries. Both aim to identify the tax residency of investors to facilitate international tax compliance and prevent cross-border tax evasion.
Q82EasyNomination
Who can be a nominee for a mutual fund folio held by an individual?
✓Any person, including a minor.
BOnly a spouse or direct blood relative.
COnly an individual who is a major.
DA maximum of two individuals who are majors.
💡 Any person, including a minor, can be nominated. If the nominee is a minor, the name and address of a guardian of the minor nominee must also be provided.
Q83EasyRedemption Process - Cut-off Timings
An investor submits a redemption request for an equity mutual fund at 4:00 PM on a business day. Assuming the NAV for that day is yet to be declared, what NAV will be applicable for this transaction?
AThe NAV of the previous business day.
BThe NAV of the current business day.
✓The NAV of the next business day.
DThe request will be rejected due to late submission.
💡 For equity-oriented schemes, the cut-off time for redemption is generally 3:00 PM on a business day. If a valid redemption request is received after the cut-off time, it is processed based on the NAV of the next business day. This is known as forward pricing.
Q84HardMinor's Folio
If a guardian of a minor's mutual fund folio passes away, what is the correct procedure for the new guardian to take charge of the folio?
AThe minor can operate the folio directly if they are above 12 years of age.
BThe new guardian must open a fresh folio in their name and transfer the units.
CThe new guardian applies for transmission of units to their name as the new unitholder.
✓The new guardian submits documents for a change of guardian to the AMC/RTA and continues the existing folio.
💡 In case of the death of the guardian, the new guardian is appointed by submitting necessary documents (e.g., death certificate of the old guardian, new guardian's identity proof, and potentially a court order if required) to the AMC/RTA, and the existing folio continues under the new guardian until the minor attains majority. Transmission applies only upon the death of the unitholder.
Q85MediumTransfer and Transmission of Units
What is the primary difference between 'transfer' and 'transmission' of mutual fund units?
ATransfer involves a change of ownership due to death, while transmission is a voluntary sale.
✓Transfer is a voluntary change of ownership, while transmission occurs due to operations of law (e.g., death, insolvency).
CTransfer applies only to physical units, while transmission applies only to dematerialized units.
DTransfer requires stamp duty, while transmission does not.
💡 Transfer refers to a voluntary change of ownership of units, typically through a sale or gift, initiated by the unit holder. Transmission, on the other hand, refers to the change of ownership of units due to operation of law, such as the death of the unit holder, insolvency, or a court order.
Q86MediumNAV Applicability for Liquid Funds
For a purchase application in a liquid fund, if the application is received before the cut-off time (e.g., 2:00 PM) on a business day, but the funds are credited to the AMC's bank account only after the cut-off time, which NAV will be applicable?
AThe NAV of the previous business day.
BThe NAV of the day the application was submitted.
✓The NAV of the day the funds are actually credited to the AMC's account.
DThe NAV of the next business day following the application submission.
💡 For liquid funds, the applicability of NAV for purchase transactions is based on the time of receipt of both the application and the funds. If the funds are credited after the cut-off time on the day of application, the NAV of the day the funds are actually realized/credited to the AMC's account will be applicable.
Q87EasyRedemption Process and TAT
As per SEBI regulations, what is the maximum turnaround time for a mutual fund to dispatch redemption proceeds to investors for open-ended schemes (excluding Liquid and Overnight funds)?
A1 business day
✓3 business days
C7 business days
D10 business days
💡 SEBI regulations generally mandate that redemption proceeds for most open-ended mutual fund schemes (excluding Liquid and Overnight funds) must be dispatched within 3 business days from the date of redemption request (T+3). For Liquid and Overnight funds, it is T+1.
Q88MediumStatement of Account (CAS)
What is the primary purpose of a Consolidated Account Statement (CAS) issued by depositories (NSDL/CDSL)?
ATo show only dematerialized mutual fund holdings.
✓To provide a single statement of all physical and dematerialized mutual fund holdings across all AMCs and other demat holdings (shares, bonds).
CTo detail the tax implications of mutual fund investments for the investor.
DTo serve as proof of identity for KYC purposes.
💡 The CAS, issued by depositories (NSDL/CDSL) to investors holding a demat account, consolidates all an investor's holdings in dematerialized form (shares, bonds, ETFs) and also all physical (non-demat) mutual fund holdings across all AMCs under a single PAN. This provides a comprehensive view of an investor's financial assets.
Q89MediumKYC and Investor Registration
Which of the following scenarios would typically require the investor to submit a new KYC application, even if they had previously completed KYC with another intermediary?
AChanging the registered address within the same city.
BAdding a new nominee to an existing folio.
✓Investing in a new mutual fund house for the first time, where the KYC was done through a different KRA and the investor's details are not updated.
DSwitching units between two schemes within the same AMC.
💡 While KYC is inter-operable across KRAs, if an investor's details are not updated or if there's a discrepancy, or if the KRA system indicates a 'KYC hold' or 'KYC invalid' status, a new KYC application or re-KYC might be required. Investing in a new fund house for the first time, if the KYC status is not 'KYC Validated' or 'KYC Registered' across KRAs, could trigger this. Other options are typically handled through service requests.
Q90EasyUnclaimed Amounts
Mutual Funds are required to prominently disclose details of unclaimed redemption and dividend amounts on their website for amounts exceeding a certain threshold. What is this threshold amount per investor?
AINR 500
✓INR 1,000
CINR 2,500
DINR 5,000
💡 SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016, mandates mutual funds to display details of unclaimed redemption and dividend amounts exceeding INR 1,000 per investor on their website.
Q91EasyMinor Investment
What is the maximum age until which a minor can hold a mutual fund investment in their name, operated by a guardian?
A16 years
✓18 years
C21 years
DNo age limit, as long as a guardian is appointed.
💡 A mutual fund investment can be made in the name of a minor, operated by a guardian, until the minor attains the age of majority, which is 18 years. Upon attaining majority, the minor's status changes, and specific formalities are required to continue operating the folio.
Q92MediumTransaction Types (STP/Switch)
An investor wants to regularly move a fixed amount from an equity fund to a debt fund at specific intervals (e.g., monthly). Which type of transaction is most suitable for this purpose?
ALumpsum purchase
BRedemption
CSwitch
✓Systematic Transfer Plan (STP)
💡 A Systematic Transfer Plan (STP) allows an investor to transfer a fixed amount at regular intervals from one scheme to another within the same mutual fund house. This is ideal for gradually moving investments, for example, from an equity fund (source) to a debt fund (target) to book profits or rebalance. A 'Switch' is a one-time transfer of all or a part of units.
Q93HardPAN Requirement and Exemptions
Under which of the following circumstances can an investor invest in a mutual fund without a PAN?
✓If the investor is a minor and the investment amount is below a specified limit.
BIf the investor is a Senior Citizen and invests through a micro-SIP.
CIf the investor is a Non-Resident Indian (NRI) with an OCI card.
DPAN is mandatory for all mutual fund investments, irrespective of the investor type or amount.
💡 As per SEBI guidelines, a PAN is mandatory for all investors in mutual funds. However, there is an exception for micro-SIPs where a minor (who does not have a PAN) can invest up to Rs. 50,000 per financial year per AMC without a PAN, provided the guardian's PAN is linked.
Q94HardTransmission of Units
If a unit holder dies and a valid nominee is registered, what is the typical timeframe within which the AMC is expected to process the transmission request upon submission of all required documents?
✓Within 7 working days.
BWithin 10 working days.
CWithin 15 working days.
DWithin 30 working days.
💡 As per SEBI circulars (e.g., SEBI/HO/IMD/DF3/CIR/P/2017/114), AMCs/RTAs are mandated to process valid transmission requests and credit units to the nominee's account within 7 working days from the date of receipt of all necessary documents.
Q95HardTransmission of Units
In a mutual fund folio held by a single unitholder without a nominee, what is the primary document required for the transmission of units to the legal heir(s) after the unitholder's demise?
AA simple affidavit from the legal heir(s).
BA copy of the deceased unitholder's will.
✓A legal heir certificate or succession certificate issued by a competent court.
DA death certificate attested by a notary public.
💡 For transmission of units in case of a single unitholder without nomination, a legal heir certificate or succession certificate (or probate of will or letter of administration) issued by a competent court is typically required to establish the legal heirship, along with the death certificate and KYC documents of the claimants. A will alone might not be sufficient without probate.
Q96EasyTransactions - Switch
What is the primary objective of a 'Switch' transaction in mutual funds?
ATo change the dividend payout option of an existing investment.
BTo transfer units from one folio to another within the same scheme.
✓To redeem units from one scheme and invest the proceeds into another scheme of the same mutual fund.
DTo pledge mutual fund units as collateral for a loan.
💡 A 'Switch' transaction allows an investor to move their investment from one scheme to another within the same Asset Management Company (AMC). It's essentially a simultaneous redemption from one scheme and a purchase into another, often done for portfolio rebalancing or changing investment objectives.
Q97MediumApplication Process - Bank Details & KYC
What is the implication if an investor submits a mutual fund application where the bank account details provided do not match the KYC records of the primary applicant?
AThe application will be processed, but redemption proceeds will be held until details are updated.
BThe application will be processed, but the investor will be charged a penalty.
✓The application may be rejected or put on hold until the bank details are updated and verified.
DThe AMC will automatically update the KYC records with the new bank details.
💡 As per SEBI's anti-money laundering (AML) guidelines, it is mandatory for the bank account details provided in the mutual fund application to match the KYC records of the primary applicant. If there's a mismatch, the application is typically rejected or put on hold, requiring the investor to either update their KYC or provide matching bank details. This is to ensure that investments are made from and redeemed into accounts belonging to the registered investor.
Q98MediumUnclaimed Dividends/Redemption
According to SEBI regulations, if redemption or dividend amounts remain unclaimed for a period of three years, how should Asset Management Companies (AMCs) treat these amounts?
✓Reinvest in a scheme similar to the original one (e.g., liquid or money market fund) and hold until claimed.
BTransfer the amounts to the Investor Protection Fund of SEBI.
CTransfer to a separate bank account and earn interest for the AMC, which is forfeited after 10 years.
DForfeit the amount to the AMC after 3 years if not claimed.
💡 SEBI mandates that unclaimed redemption and dividend amounts must be invested by AMCs in a separate scheme or plan specifically created for this purpose. These amounts can only be reinvested in money market instruments or liquid schemes. The investor can claim the accumulated amount at any time. (SEBI Circular CIR/IMD/DF/10/2012 dated May 25, 2012, and subsequent updates).
Q99MediumRedemption Process
An investor has submitted a redemption request. What is the maximum number of working days within which the redemption proceeds must be dispatched for an open-ended equity scheme, under normal circumstances?
A3 working days
B7 working days
✓10 working days
D15 working days
💡 As per SEBI regulations, for open-ended equity schemes, redemption proceeds must be dispatched to the investor within 10 working days of the redemption request. For liquid and money market schemes, it's typically within 1 working day.
Q100EasyGrievance Redressal
Which platform is provided by SEBI for investors to lodge complaints against market intermediaries, including Asset Management Companies (AMCs)?
AAMFI website
✓SCORES
CIRDAI portal
DPFRDA portal
💡 SEBI Complaints Redressal System (SCORES) is an online platform for investors to lodge complaints against SEBI-regulated entities, including AMCs, and track their status.
Q101EasyKYC Requirements
Which of the following is a mandatory requirement for all mutual fund investors, irrespective of the investment amount, as per SEBI regulations?
AHaving a demat account.
BSubmitting a physical application form.
✓Completing Know Your Customer (KYC) formalities.
DProviding a copy of their income tax return.
💡 As per SEBI regulations, all investors, including individuals and non-individuals, are required to complete Know Your Customer (KYC) formalities before investing in mutual funds. This ensures proper identification and address verification. (SEBI Master Circular for Mutual Funds, Section I, KYC Requirements)
Q102EasyConsolidated Account Statement (CAS)
An investor has mutual fund investments and no demat account. What is the frequency for receiving the Consolidated Account Statement (CAS) for such an investor?
✓Monthly
BQuarterly
CHalf-yearly
DAnnually
💡 As per SEBI regulations, investors holding only mutual fund units in physical form (i.e., not in a demat account) receive a Consolidated Account Statement (CAS) on a monthly basis. If there are no transactions in a month, a CAS is sent on a half-yearly basis (April and October). For those with demat holdings, the CAS combines both demat and mutual fund holdings.
Q103HardRedemption Process and Timelines
For redemption proceeds of an equity-oriented mutual fund scheme, if a valid redemption application is received before the cut-off time on Monday, when must the redemption proceeds be dispatched to the investor?
ABy Tuesday
BBy Wednesday
✓By Thursday
DWithin 10 working days
💡 For equity-oriented schemes, redemption proceeds must be dispatched within 3 working days (T+3) from the date of a valid redemption request. If the request is received on Monday (T), then T+1 is Tuesday, T+2 is Wednesday, and T+3 is Thursday. Hence, proceeds must be dispatched by Thursday.
Q104HardKYC - PAN Exemption
Under what circumstance can a mutual fund unit holder's PAN NOT be exempted from the KYC requirement?
AInvestments made by UN entities/multilateral agencies.
BMicro-investments in mutual funds up to Rs. 50,000 per financial year per investor.
CInvestments made by residents of Sikkim.
✓Investments made by NRIs from countries without a PAN equivalent.
💡 The requirement for PAN is generally universal. Exemptions exist for specific categories like UN entities, micro-investments (up to Rs. 50,000 per financial year per investor, subject to certain conditions), and residents of Sikkim. NRIs, regardless of their country of residence, are generally required to provide PAN for mutual fund investments in India.
Q105MediumSystematic Transfer Plan (STP)
Which of the following statements best describes a Systematic Transfer Plan (STP) in mutual funds?
AInvesting a fixed amount regularly from a bank account into a mutual fund scheme.
✓Periodically transferring a fixed amount from one mutual fund scheme to another within the same AMC.
CWithdrawing a fixed amount regularly from a mutual fund scheme.
DTransferring units from a physical folio to a demat account.
💡 A Systematic Transfer Plan (STP) allows investors to transfer a fixed amount or a fixed number of units at regular intervals (e.g., monthly, quarterly) from one scheme (typically a debt or liquid scheme) to another scheme (typically an equity scheme) within the same mutual fund house.
Q106EasyDividend Options
Which of the following statements is TRUE regarding the default option for dividend declaration in a growth option of a mutual fund scheme?
ADividends are mandatorily reinvested in additional units.
BDividends are paid out to the investor's registered bank account.
✓No dividends are declared in a growth option; all profits are reinvested.
DThe investor must choose between payout or reinvestment at the time of investment.
💡 In a growth option of a mutual fund scheme, all profits earned by the scheme are reinvested back into the scheme's corpus. No dividends are declared or paid out to investors. The NAV of the growth option reflects this compounding effect. Dividend options, on the other hand, allow for payout or reinvestment of declared dividends.
Q107EasyRole of Distributors
Which of the following is a primary service provided by a mutual fund distributor to investors?
AGuarantees specific returns on mutual fund investments.
✓Provides investment advice (if registered) and facilitates transaction processing.
CManages the investor's portfolio directly without AMC involvement.
DActs as a custodian for the investor's mutual fund units.
💡 Mutual fund distributors primarily provide investment advice (if registered as an Investment Advisor) and facilitate the processing of transactions (purchases, redemptions, etc.) by submitting applications to the AMC/RTA on behalf of the investor. They do not guarantee returns, directly manage portfolios, or act as custodians.
Q108MediumNomination and Transmission
In the absence of a nomination, how are the units of a deceased sole unitholder in a mutual fund scheme typically settled?
AThe units are transferred to the AMC's investor protection fund.
BThe units are held in abeyance until a claim is made by a legal heir.
CThe units are transferred to the surviving joint holder, if any.
✓The units are transmitted to the legal heirs upon submission of required legal documents like a Will or Succession Certificate.
💡 If there is no nominee, the units of a deceased sole unitholder are transmitted to their legal heirs. This process requires the legal heirs to submit necessary legal documents such as a Will, Succession Certificate, Letter of Administration, or Probate, along with other KYC documents, to establish their claim.
Q109MediumInvestor Grievances - SCORES
An investor has a grievance against a mutual fund AMC that remains unresolved after escalating it to the AMC's internal redressal mechanism. Which online platform should the investor primarily use to further escalate the complaint to SEBI?
AAMFI Website
BKRA Portal
✓SCORES
DCDSL/NSDL Website
💡 SCORES (SEBI Complaints Redress System) is the dedicated online platform launched by SEBI for investors to lodge and track their complaints against market intermediaries, including mutual funds, if their grievances are not resolved by the entity itself.
Q110EasySystematic Investment Plans
What does the acronym 'STP' stand for in the context of mutual fund investments?
ASystematic Tracking Procedure
BSecurities Transfer Program
✓Systematic Transfer Plan
DStandard Taxation Policy
💡 STP stands for Systematic Transfer Plan. It is a facility that allows investors to periodically transfer a fixed amount from one mutual fund scheme (typically a debt fund) to another scheme (typically an equity fund) within the same AMC.
Q111EasyRedemption Process and Timelines
As per SEBI regulations, within how many business days must redemption proceeds be dispatched to the investor after receiving a valid redemption request?
A1 business day
✓3 business days
C5 business days
D7 business days
💡 SEBI (Mutual Funds) Regulations, 1996, Chapter VI, Regulation 54, states that mutual funds must dispatch redemption proceeds to the unitholders within 3 business days of receiving the redemption request.
Q112MediumNAV Applicability - Liquid/Overnight Schemes
For subscription applications in Liquid and Overnight mutual fund schemes, what is the cut-off time for the application amount to be invested and reach the AMC/RTA for the same day's NAV applicability?
✓1:00 PM
B2:00 PM
C3:00 PM
D5:00 PM
💡 As per SEBI regulations, for Liquid and Overnight mutual fund schemes, applications received by the AMC/RTA before 1:00 PM on a business day, and where funds are available for utilization, are eligible for the same day's NAV. For applications received after 1:00 PM, the next business day's NAV applies.
Q113EasyConsolidated Account Statement (CAS)
As per SEBI regulations, what is the maximum permissible time limit for the dispatch of a Consolidated Account Statement (CAS) to an investor who has undertaken transactions in any of their mutual fund folios during a month?
AWithin 3 working days of the end of the month
BWithin 5 working days of the end of the month
CWithin 7 working days of the end of the month
✓Within 10 working days of the end of the month
💡 SEBI circulars mandate that the Consolidated Account Statement (CAS) for investors who have undertaken transactions in any of their mutual fund folios during a month must be dispatched within 10 working days of the end of the month. This ensures timely information dissemination to investors.
Q114MediumChange in Investor Details - Bank Mandate
An investor wishes to change their registered bank account details with a mutual fund. Which of the following is typically NOT required for this process?
AA cancelled cheque of the new bank account.
BA copy of the latest bank statement of the new account.
CA letter from the bank confirming the account holder's details.
✓A physical visit to the AMC's office by the investor.
💡 While physical visits are an option, they are not typically 'required'. Most AMCs allow bank account changes through submission of a request form along with supporting documents (cancelled cheque, bank statement copy, or bank letter) to a RTA or AMC branch, which can be done via post or through a distributor. (NISM Series V-A Study Material, Chapter 9: Investor Services - Change of Bank Mandate)
Q115MediumRedemption Process - Tax Implications
What is the significance of the 'First-in, First-out (FIFO)' principle in mutual fund unit allocation, particularly for capital gains calculation?
AIt determines the order in which redemption requests are processed by the AMC.
✓It dictates that the oldest units purchased are considered sold first for tax computation.
CIt ensures that units bought at the highest NAV are redeemed first.
DIt determines the order of dividend payout to unitholders.
💡 The First-in, First-out (FIFO) principle is crucial for calculating capital gains when an investor redeems units. It mandates that the units that were purchased earliest (first-in) are deemed to be sold first (first-out), regardless of the actual purchase price. This affects the holding period and the cost of acquisition used to calculate capital gains or losses.
Q116HardKYC (Non-Individual)
For Non-Individual KYC of a Partnership Firm, which of the following documents is *not* a mandatory requirement?
APartnership Deed
BPAN Card of the Partnership Firm
CProof of address of the Partnership Firm
✓Memorandum of Association (MOA) and Articles of Association (AOA)
💡 MOA (Memorandum of Association) and AOA (Articles of Association) are constitutional documents for a Company, not a Partnership Firm. For a Partnership Firm, mandatory KYC documents typically include the Partnership Deed, PAN card of the firm, proof of address of the firm, and PAN/Aadhaar/Proof of Address of partners and authorized signatories.
Q117EasyCommon Account Number (CAN)
What is the primary purpose of a Common Account Number (CAN) in the mutual fund industry?
✓To track an investor's transactions across different AMCs with a single reference.
BTo consolidate all bank accounts linked to an investor's mutual fund investments.
CTo serve as a unique identifier for distributors to track their clients.
DTo replace the need for PAN for mutual fund investments.
💡 A Common Account Number (CAN) allows an investor to consolidate all their mutual fund investments across various fund houses under a single account number, simplifying tracking and transaction processing. It helps in providing a consolidated view of holdings.
Q118EasyRole of RTA
Which entity is primarily responsible for maintaining investor records, processing transactions, and dispatching statements of account for a mutual fund?
AAsset Management Company (AMC)
BCustodian
✓Registrar and Transfer Agent (RTA)
DTrustee
💡 Registrar and Transfer Agents (RTAs) like CAMS and KFintech are appointed by mutual funds to manage investor records, process transactions (purchases, redemptions, switches), and send out statements of account.
Q119EasyNomination Facility
Who among the following cannot be appointed as a nominee for a mutual fund investment?
AA minor
BA foreign national
CA religious deity
✓A body corporate
💡 As per SEBI (Mutual Funds) Regulations, 1996, and AMFI guidelines, a body corporate, trust, or Karta of an HUF cannot be a nominee for mutual fund investments. A minor can be a nominee (with an appointed guardian), and foreign nationals are generally permitted.
Q120MediumChange of Details - Bank Account
When an investor requests a change in their registered bank account for a mutual fund folio, what is a crucial security measure typically implemented by the RTA/AMC before processing redemption payouts to the new account?
AThe new bank account must be a joint account with the existing nominee.
✓A confirmation letter is sent to the old registered address, or a cooling-off period is observed before redemption payouts to the new account.
CThe investor must personally visit the AMC office with original documents.
DAll active SIPs and SWPs are temporarily suspended until the change is complete.
💡 To prevent fraudulent changes, RTAs/AMCs typically implement security measures such as sending a confirmation letter to the investor's old registered address to verify the change, or enforcing a cooling-off period (e.g., 10 days) during which redemptions to the new account are restricted. This allows time for the investor to report any unauthorized changes.
Q121MediumTransmission vs. Transfer
What is the primary difference between 'transmission' and 'transfer' of mutual fund units?
ATransmission involves a change of ownership due to a voluntary sale, while transfer is due to an involuntary event like death.
✓Transmission involves a change of ownership due to an involuntary event like death, while transfer is due to a voluntary sale.
CTransmission applies only to units held in demat form, while transfer applies to physical units.
DTransmission is processed by the AMC, while transfer is processed by the Registrar and Transfer Agent (RTA).
💡 Transmission refers to the change in ownership of units due to an involuntary event like the death of a unit holder, lunacy, bankruptcy, etc. Transfer, on the other hand, refers to the change in ownership due to a voluntary act of the unit holder, such as a sale or gift.
Q122EasyKYC Requirements
Which of the following is a mandatory identification document required for all new mutual fund investors as per SEBI regulations?
AAadhaar Card
✓PAN Card
CDriving License
DPassport
💡 As per SEBI (Mutual Funds) Regulations, 1996, and subsequent amendments, a Permanent Account Number (PAN) is a mandatory requirement for all investors in mutual funds, irrespective of the investment amount. Aadhaar is used for KYC but PAN is specifically mandated for financial transactions.
Q123EasyMinor Investments
According to the Indian Majority Act, 1875, a minor unitholder attains majority upon completing which age?
A16 years
✓18 years
C20 years
D21 years
💡 As per the Indian Majority Act, 1875, a minor attains majority upon completion of 18 years of age. Special procedures are required when a minor unitholder becomes a major to change the account status from minor to major.
Q124EasyNomination Facility
What is the maximum number of nominees an investor can appoint for a mutual fund folio?
💡 As per SEBI regulations, an investor can appoint up to three nominees for a mutual fund folio. In case of multiple nominees, the percentage of allocation for each nominee must be specified, and if not specified, the units are distributed equally among them.
Q125MediumUnclaimed Amounts
What is the maximum period for which mutual fund redemption proceeds or dividend distributions can remain unclaimed before the AMC is mandated to transfer them to a separate bank account?
A1 year
✓3 years
C5 years
D7 years
💡 As per SEBI regulations, if redemption proceeds or dividend distributions remain unclaimed for a period of three years, the AMC is mandated to transfer such amounts to a separate bank account. After this, these amounts can only be used for investor education and awareness initiatives.
Q126EasyIn-Person Verification (IPV)
Which of the following is NOT typically a mandatory requirement for completing an In-Person Verification (IPV) for KYC compliance?
AOriginal proof of identity.
BOriginal proof of address.
CPhysical presence of the applicant.
✓A copy of the applicant's latest bank statement.
💡 For In-Person Verification (IPV), the applicant's physical presence is required along with original proofs of identity and address for verification against copies. A copy of the latest bank statement is not typically a mandatory requirement for IPV itself, though bank details are required for transactions.
Q127HardDormant Accounts
What is a specific restriction typically placed on dormant mutual fund folios (accounts) by AMCs to prevent misuse and ensure investor protection?
ANo transactions of any kind are permitted.
BOnly redemptions are allowed, provided they are made to the registered bank account.
✓Only specific non-financial transactions like updating KYC details or address are allowed, but financial transactions are restricted.
DAutomatic debit for SIPs and credit for SWPs continue, but fresh lump-sum purchases are stopped.
💡 For dormant accounts, AMCs typically restrict financial transactions (purchases, redemptions, switches) until the account is reactivated after due diligence. However, non-financial transactions such as updating KYC details, change of address, or bank details (after verification) may still be processed to facilitate eventual reactivation. SIPs/SWPs are usually stopped when an account becomes dormant.
Q128EasyPMLA Compliance
The Prevention of Money Laundering Act (PMLA) requires mutual funds to collect which of the following information from investors?
ADetails of their political affiliations.
✓Source of funds.
CEducational qualifications.
DMarital status.
💡 PMLA mandates financial institutions, including mutual funds, to collect information regarding the source of funds from investors, especially for large transactions, to prevent money laundering and terrorist financing.
Q129EasyTypes of Transactions - SIP
An investor wants to automatically invest a fixed sum of money into a mutual fund scheme at regular intervals. Which service should they opt for?
ASystematic Withdrawal Plan (SWP)
BSystematic Transfer Plan (STP)
✓Systematic Investment Plan (SIP)
DDividend Reinvestment Plan (DRP)
💡 A Systematic Investment Plan (SIP) allows investors to invest a fixed amount periodically (e.g., monthly, quarterly) into a chosen mutual fund scheme. This helps in rupee cost averaging and disciplined investing. (NISM Series V-A Study Material, Chapter 9: Investor Services)
Q130EasyNomination Facility
What is the primary purpose of providing a nomination facility in a mutual fund folio?
ATo allow the nominee to operate the folio during the investor's lifetime.
✓To ensure that the units are transmitted to the nominee(s) upon the death of the unitholder(s).
CTo enable the nominee to receive income distribution payouts.
DTo make the nominee a joint holder in the mutual fund investment.
💡 The primary purpose of nomination is to simplify the transmission of units to the designated nominee(s) upon the death of the sole unitholder or all joint unitholders, avoiding complex legal processes like obtaining a will or succession certificate. The nominee does not have any rights over the investment during the unitholder's lifetime.
Q131EasyCut-off Timings
For purchase transactions in liquid and overnight mutual fund schemes, what is the cut-off time on a normal business day for an investor to receive the *same day's* Net Asset Value (NAV)?
A1:00 PM
✓1:30 PM
C2:00 PM
D3:00 PM
💡 As per SEBI regulations, for investments in liquid and overnight funds, if the application is received before 1:30 PM on a business day and funds are available for utilization, the investor will receive the NAV of the same business day. For applications received after 1:30 PM, the NAV of the next business day will be applicable.
Q132EasyKYC Requirements
Which of the following is a mandatory requirement for all investors, including minors, to invest in mutual funds?
✓Permanent Account Number (PAN)
BAadhaar Card
CDriving License
DPassport
💡 SEBI regulations mandate PAN for all investors, including minors (through their guardian), for KYC compliance in the securities market, including mutual funds. While other documents can be used for address proof, PAN is universally required for financial transactions.
Q133EasyStatement of Account
What is the primary purpose of a Consolidated Account Statement (CAS) provided to mutual fund investors?
ATo provide details of tax liabilities on capital gains.
✓To offer a single view of all holdings across different AMCs and depositories.
CTo list all transactions for a specific fund scheme in a financial year.
DTo detail the fund manager's investment strategy and performance.
💡 A Consolidated Account Statement (CAS) provides investors with a unified view of all their mutual fund holdings across different Asset Management Companies (AMCs) and their holdings in dematerialized form (e.g., shares, bonds) with depositories (NSDL/CDSL). This simplifies portfolio tracking.
Q134EasyKYC Registration Agency (KRA)
What does KRA stand for in the context of KYC for mutual fund investors?
AKnow Your Rights Authority
✓KYC Registration Agency
CKey Regulatory Agent
DKnowledge Reporting Authority
💡 KRA stands for KYC Registration Agency. These are entities registered with SEBI that maintain KYC records of investors centrally, allowing investors to complete KYC once and use it across various SEBI-registered intermediaries.
Q135EasyNomination Facility
What is the maximum number of nominees an investor can register for a mutual fund folio?
💡 An investor can nominate up to three individuals for a mutual fund folio. The percentage share for each nominee should be clearly specified.
Q136EasyTypes of Transactions (Switch)
What does a 'Switch' transaction in mutual funds involve?
✓Transferring units from one scheme to another within the same fund house
BTransferring units from one fund house to another
CChanging the investment option (e.g., Growth to Dividend) within the same scheme
DSelling units and reinvesting the proceeds in the same scheme
💡 A 'Switch' transaction allows an investor to move their investment (units) from one scheme to another scheme offered by the same mutual fund house. This is treated as a redemption from the first scheme and a fresh purchase into the second scheme.
Q137MediumGrievance Redressal
What is the maximum timeframe provided to an Asset Management Company (AMC) to resolve an investor's complaint before the investor can escalate it to SEBI through the SCORES platform?
A7 calendar days
B15 calendar days
✓21 calendar days
D30 calendar days
💡 As per AMFI Best Practice Guidelines and SEBI's investor grievance redressal mechanism, an Asset Management Company (AMC) is expected to resolve an investor's complaint within 21 calendar days. If the complaint is not resolved within this period, the investor can escalate it to SEBI through the SCORES platform.
Q138EasyKYC Requirements
Which of the following documents is mandatory for all investors, including minors, to comply with Know Your Customer (KYC) requirements for mutual fund investments?
AAadhaar Card
BVoter ID Card
✓Permanent Account Number (PAN)
DDriving License
💡 As per SEBI regulations, a Permanent Account Number (PAN) is mandatory for all investors, including minors, to complete their KYC requirements for mutual fund investments. Aadhaar is also widely used but PAN remains the primary identifier for financial transactions.
Q139EasyKYC for Minors
What is a mandatory KYC requirement for an investment in a mutual fund scheme made in the name of a minor?
AMinor's PAN card
✓Guardian's PAN card
CMinor's Aadhaar card
DGuardian's income proof
💡 For investments in the name of a minor, the guardian's PAN card is mandatory for KYC compliance, as the minor cannot have a PAN card until they attain majority and the guardian operates the account on their behalf.
Q140EasySystematic Transactions (SIP, STP, SWP)
What does 'STP' stand for in mutual fund parlance?
✓Systematic Transfer Plan
BSpecial Transaction Process
CSecurities Tracking Program
DStandardized Trading Protocol
💡 STP stands for Systematic Transfer Plan. It is a facility that allows investors to periodically transfer a fixed amount from one mutual fund scheme to another scheme, usually from a debt fund to an equity fund.
Q141HardApplication Rejection Reasons
Under which of the following circumstances is a mutual fund application most likely to be rejected by the AMC/RTA?
AThe application form is filled in blue ink instead of black ink.
BThe applicant submits a self-attested copy of PAN instead of the original for verification.
✓The investment is made using a third-party cheque, and the third party is not a registered guardian or specific permitted relationship.
DThe applicant provides only a mobile number and no landline number.
💡 Mutual funds have very stringent rules against third-party payments to prevent money laundering. Unless the third party falls under specific exemptions (e.g., guardian for a minor, payment by employer on behalf of employee), an application funded by a third-party cheque is likely to be rejected. The other options are generally minor issues or acceptable practices.
Q142MediumChange of Investor Details
An investor wishes to change their bank account details registered with a mutual fund. What is the typical process?
ASend an email to the AMC with new bank details
✓Submit a physical request form along with a cancelled cheque of the new bank account
CInform the distributor and they will update the details
DIt can only be done at the time of redemption
💡 To change bank account details, investors typically need to submit a physical request form to the AMC or RTA, accompanied by supporting documents like a cancelled cheque leaf of the new bank account for verification purposes. This ensures security and prevents fraudulent changes.
Q143MediumInter-scheme/Inter-plan Switches (ELSS)
When an investor switches units from an Equity Linked Savings Scheme (ELSS) to another scheme, what is the primary consideration regarding the ELSS units?
AThe switch is treated as a fresh purchase in the new scheme, with no tax implications on the ELSS units.
BThe ELSS units are exempt from any exit load during the switch.
✓The ELSS units must fulfill a 3-year lock-in period from the date of investment.
DThe switch is permitted only if the ELSS units have generated positive returns.
💡 ELSS units are subject to a mandatory 3-year lock-in period from the date of investment. During this period, they cannot be redeemed or switched out to another scheme.
Q144MediumFATCA and CRS
What is the primary purpose of FATCA and CRS declarations collected from mutual fund investors?
ATo assess the investor's creditworthiness for loan applications.
BTo determine the investor's eligibility for specific fund schemes.
✓To combat tax evasion by identifying tax residency and reporting financial accounts.
DTo verify the investor's identity for KYC compliance.
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) are international initiatives aimed at combating tax evasion by enabling the automatic exchange of financial account information between participating jurisdictions based on tax residency.
Q145EasyNomination
Which of the following entities cannot be appointed as a nominee for a mutual fund investment?
AA minor through a guardian
BA Non-Resident Indian (NRI)
✓A Trust
DAn individual over 18 years of age
💡 As per SEBI (Mutual Funds) Regulations, 1996, and AMFI guidelines, only natural persons can be nominees for mutual fund units. Entities such as trusts, body corporates, Hindu Undivided Families (HUFs), and partnership firms cannot be nominated.
Q146MediumChange of Bank Details
When an investor requests a change in their registered bank account details for mutual fund redemptions, what is a typical security measure undertaken by the AMC/RTA?
AImmediate update based on the request form.
✓A cooling-off period before the new bank account becomes active for redemptions.
CA physical visit by an RTA representative to verify the new bank account.
DMandating a fresh KYC process.
💡 To prevent fraudulent redemptions, AMCs/RTAs typically enforce a 'cooling-off period' (e.g., 10 working days) during which no redemption proceeds can be credited to the newly registered bank account after a change request is submitted. This allows time for fraud detection and investor verification. (Ref: AMFI Best Practice Guidelines for Investor Services).
Q147MediumUnclaimed Amounts
What happens to unclaimed redemption amounts or dividends that remain unclaimed by investors for a period of three years?
AThey are transferred to the Investor Protection and Education Fund (IPEF) of SEBI.
✓They are invested in a separate liquid scheme and continue to earn returns.
CThey are forfeited by the mutual fund and added to the scheme's assets.
DThey are returned to the last known bank account of the investor.
💡 As per SEBI circulars, unclaimed redemption amounts and dividends that are unclaimed for more than three years are mandatorily invested in a separate liquid scheme (or similar type of scheme) and continue to earn returns until claimed by the investor. After 10 years, they are transferred to IPEF.
Q148MediumSwitch Process
What is the primary difference between an 'intra-scheme switch' and an 'inter-scheme switch' regarding the mutual fund house?
AIntra-scheme switch involves changing from equity to debt within the same AMC, while inter-scheme switch is between two different AMCs.
✓Intra-scheme switch is between two options (e.g., Growth to Dividend) within the same scheme, while inter-scheme switch is between two different schemes of the same AMC.
CIntra-scheme switch is tax-free, while inter-scheme switch is taxable.
DIntra-scheme switch requires fresh KYC, while inter-scheme switch does not.
💡 An 'intra-scheme switch' involves moving units between different plans or options (e.g., Growth to Dividend or Regular to Direct Plan) within the *same mutual fund scheme*. An 'inter-scheme switch' involves moving units from one scheme to a *different scheme* offered by the *same Asset Management Company (AMC)*. Both are considered redemption from one scheme and purchase in another for tax and exit load purposes.
Q149MediumNomination
If an investor has opted for nomination and has two nominees for a folio, what percentage of units will each nominee receive by default upon the death of the unitholder, assuming no specific percentage is mentioned?
A100% to the first nominee.
✓50% to each nominee.
CUnits will be equally distributed among nominees if they are joint holders.
DThe distribution will be determined by the R&T agent.
💡 If a unitholder has appointed more than one nominee and has not specified the percentage of units to be allocated to each nominee, the units will be equally distributed among all valid nominees. The maximum number of nominees allowed is three.
Q150EasyPower of Attorney (POA)
What is the main function of a Power of Attorney (POA) holder in the context of mutual fund investments?
ATo transfer units to their own name without the investor's consent
BTo act as a nominee for the units upon the investor's death
✓To execute transactions and make decisions on behalf of the original investor as per the POA terms
DTo become a joint holder in the mutual fund folio automatically
💡 A Power of Attorney (POA) grants an authorized person (the attorney) the legal authority to act on behalf of the principal (the investor) in specified financial matters, including executing mutual fund transactions like purchases, redemptions, switches, and making investment decisions, as per the scope defined in the POA document.
Q151EasyNAV Applicability and Cut-off Times
For an investment in a Liquid Fund, if an application for purchase is received before the cut-off time of 1:30 PM on a business day, what NAV will generally be applicable?
AThe NAV of the next business day
BThe NAV of the previous business day
✓The NAV of the same business day
DThe highest NAV of the week
💡 As per SEBI regulations, for investments in Liquid Funds, if the application and funds are received before the cut-off time (1:30 PM on a business day), the NAV of the same business day is applicable. For other schemes, it's typically the NAV of the day the funds are available for utilization by the scheme.
Q152MediumNAV Applicability and Cut-off Timings
For investments in mutual fund schemes other than liquid and overnight funds, what is the Net Asset Value (NAV) applicable if a valid application is received before the cut-off time of 3:00 PM on a business day, and funds are realized on the same day?
AThe NAV of the previous business day.
BThe NAV of the next business day.
✓The NAV of the same business day.
DThe NAV of two business days prior.
💡 For schemes other than liquid and overnight funds, if a valid application for purchase is received before the cut-off time of 3:00 PM on a business day and funds are realized by the AMC before the cut-off time, the NAV of the same business day is applicable. (SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2019/100 dated July 18, 2019, regarding applicability of NAV for subscriptions)
Q153MediumSystematic Transactions (SIP/SWP/STP)
Systematic Investment Plans (SIP), Systematic Transfer Plans (STP), and Systematic Withdrawal Plans (SWP) are all executed based on:
AThe NAV of the scheme as on the date of application submission.
✓The NAV of the scheme as on the pre-determined transaction date.
CThe closing NAV of the scheme on the last business day of the month.
DThe average NAV over the period of the plan.
💡 SIPs, STPs, and SWPs are executed on specific, pre-determined dates chosen by the investor. The Net Asset Value (NAV) applicable for these transactions is the NAV declared for that particular transaction date, subject to cut-off timings.
Q154MediumNAV Applicability for Transactions
If an investor submits a redemption request for an equity-oriented mutual fund at 1:00 PM on a business day, and the request is complete in all respects, which NAV will typically be applicable?
AThe NAV of the previous business day.
✓The NAV of the same business day (closing NAV).
CThe NAV of the next business day.
DThe average NAV of the last three business days.
💡 For equity-oriented funds, if a valid redemption request is received before the cut-off time (typically 3:00 PM on a business day), the NAV of the same business day (closing NAV) will be applicable.
Q155MediumDividend Options
An investor opts for the 'Dividend Reinvestment' option in an equity-oriented mutual fund scheme. What is the implication of this choice?
AThe dividend amount is automatically paid out to the investor's bank account.
BThe dividend amount is used to purchase additional units of the same scheme at the ex-dividend NAV.
✓The dividend amount is used to purchase additional units of the same scheme at the NAV prevailing on the reinvestment date.
DThe dividend amount is held in a separate account by the AMC and can be redeemed later.
💡 In the Dividend Reinvestment option, the declared dividend amount is used to purchase additional units of the same scheme at the NAV prevailing on the reinvestment date. This increases the number of units held by the investor.
Q156MediumRole of RTA
Which of the following is a key function performed by a Registrar and Transfer Agent (RTA) in the mutual fund industry?
AManaging the investment portfolio of the scheme.
BCalculating the Net Asset Value (NAV) of the scheme.
✓Processing investor transactions like purchases, redemptions, and switches.
DMarketing and selling mutual fund schemes to investors.
💡 Registrar and Transfer Agents (RTAs) are primarily responsible for maintaining investor records, processing various investor transactions (purchases, redemptions, switches), sending out statements of account, and handling other investor service requests on behalf of the Asset Management Companies (AMCs). Fund management, NAV calculation, and marketing are functions of the AMC.
Q157EasyKYC Norms
Which of the following is the primary document required for all new investors to comply with KYC norms before investing in mutual funds?
AAadhar card
✓PAN card
CDriving License
DPassport
💡 As per SEBI regulations, a Permanent Account Number (PAN) card is the mandatory document for all investors, including minors, to complete their KYC formalities for investing in the securities market, including mutual funds. Other documents are often used for address proof or identity proof but PAN is foundational for financial transactions.
Q158HardPledging of Units / Demat Account Linkage
An investor wants to pledge their mutual fund units as collateral for a loan. What specific type of account is generally required for holding these units for pledging purposes?
AA physical folio held directly with the AMC.
✓A dematerialized (demat) account.
CA joint bank account linked to the folio.
DA special 'Pledge Account' opened with the AMC.
💡 To pledge mutual fund units as collateral for a loan, the units must generally be held in a dematerialized (demat) account. This allows for electronic pledging and un-pledging of units, making the process efficient and secure, similar to pledging shares. Units held in physical folio form cannot be pledged.
Q159EasyApplication Process and Cut-off Timings
What is the cut-off time for receiving applications for Liquid Funds to be eligible for the previous day's NAV?
✓1:00 PM on the current business day
B3:00 PM on the current business day
C5:00 PM on the current business day
DThe application must be received before the cut-off time of the previous business day.
💡 For Liquid and Overnight Funds, applications received and funds available for utilization by the AMC before 1:00 PM on a business day are allotted the NAV of the previous business day. Applications received after 1:00 PM get the NAV of the current business day.
Q160MediumFATCA/CRS
Under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS), what is the primary responsibility of AMCs regarding their investors?
ATo provide tax advice to foreign investors.
✓To identify and report tax residencies of investors to tax authorities.
CTo ensure all investors are US citizens.
DTo manage the foreign exchange transactions of investors.
💡 FATCA and CRS are international tax compliance regimes. AMCs are required to identify the tax residency of their investors and, if they are tax residents of foreign countries (especially the US for FATCA or any CRS participating jurisdiction for CRS), report their account information to the Indian tax authorities, who then exchange this information with the respective foreign tax authorities.
Q161MediumChange of Investor Details
An investor has submitted a request to change their bank account details for their mutual fund folio. Which document is typically NOT required for this service request?
AA cancelled cheque leaf of the new bank account.
BProof of identity (e.g., PAN card).
✓A copy of the previous year's income tax return.
DA self-attested copy of the new bank passbook/statement.
💡 For changing bank account details, the AMC/RTA typically requires proof of the new bank account (cancelled cheque, passbook, or bank statement) and identity proof of the investor to ensure the request is legitimate. A copy of the previous year's income tax return is generally not required for this specific service request.
Q162MediumUnclaimed Dividends/Redemption
How are the gains from the deployment of unclaimed redemption and dividend amounts treated by the Asset Management Company (AMC)?
ARetained by the AMC as operational profit.
BTransferred to SEBI's Investor Protection and Education Fund.
CUsed to subsidize distributor commissions.
✓Accrued to the investors who originally owned the units.
💡 SEBI regulations mandate that any gains from the deployment of unclaimed redemption and dividend amounts must be accounted for separately and are to be paid to the original investors along with their unclaimed principal amount when they make a claim.
Q163EasyReasons for Application Rejection
Which of the following is NOT a valid reason for the rejection of a mutual fund application?
AApplication form is incomplete or unsigned.
BKYC documents are missing or invalid.
CPayment instrument is from a third-party bank account.
✓The investor has made a previous investment in a different AMC.
💡 An investor making a previous investment in a different AMC is not a valid reason for rejection. Mutual fund investments are generally accepted across multiple AMCs. Reasons for rejection typically involve non-compliance with regulatory requirements like KYC, incomplete forms, or issues with payment (e.g., third-party payments, post-dated cheques, insufficient funds).
Q164MediumConsolidated Account Statement (CAS)
A Consolidated Account Statement (CAS) provided by depositories (NSDL/CDSL) to a mutual fund investor typically includes details of:
AOnly mutual fund investments held in physical form
BOnly equity shares held in dematerialized form
✓All investments held in dematerialized form and mutual fund units held in statement of account form
DAll bank accounts and mutual fund investments
💡 A Consolidated Account Statement (CAS) provides a single view of an investor's holdings in dematerialized form (equities, bonds, etc.) across depositories and mutual fund units held in statement of account (SOA) form. It does not include bank account details.
Q165EasyKYC Requirements
Which of the following is a mandatory document for completing KYC requirements for an individual investor in a mutual fund, as per SEBI regulations?
AAadhaar Card
BDriving License
✓PAN Card
DPassport
💡 As per SEBI regulations, a Permanent Account Number (PAN) is a mandatory requirement for all investors, including individuals, to undertake transactions in the Indian securities market, including mutual funds. Other documents serve as proof of identity or address but PAN is universally mandatory.
Q166MediumPower of Attorney (PoA)
If a Power of Attorney (PoA) holder is appointed for a mutual fund account, which of the following statements is generally true regarding their authority?
AThe PoA holder becomes the primary owner of the units
✓The PoA holder can operate the account on behalf of the investor, but cannot appoint another PoA
CThe PoA holder can only view account statements, not transact
DThe PoA is valid even after the death of the investor
💡 A Power of Attorney (PoA) grants the appointed individual the authority to act on behalf of the investor (principal) for specific transactions. The PoA holder does not become the owner of the units and cannot further delegate their authority by appointing another PoA. A PoA typically becomes invalid upon the death of the principal.
Q167MediumGrievance Redressal
If an investor is not satisfied with the resolution provided by a mutual fund AMC for a complaint, which regulatory body should they approach next for grievance redressal?
AReserve Bank of India (RBI)
BInsurance Regulatory and Development Authority of India (IRDAI)
✓Securities and Exchange Board of India (SEBI)
DMinistry of Finance
💡 If an investor's complaint is not resolved to their satisfaction by the AMC or its RTA, they can escalate the complaint to SEBI through its SCORES (SEBI Complaints Redress System) platform.
Q168MediumChange in Investor Details
An investor wishes to change their registered bank account details for their mutual fund investments. Which of the following is typically a mandatory document required for this change?
AA copy of the investor's passport.
✓A cancelled cheque leaf of the new bank account with the investor's name pre-printed.
CA utility bill showing the new bank account address.
DA copy of the investor's PAN card.
💡 For changing bank account details, a cancelled cheque leaf of the new bank account, with the investor's name pre-printed on it, is typically a mandatory document to verify the authenticity of the new bank account and its ownership.
Q169HardMinor to Major Status Change
A minor investor attains majority. What is the stipulated timeframe for the investor to complete KYC and update their status with the Asset Management Company (AMC)?
AWithin 30 days from attaining majority.
BWithin 90 days from attaining majority.
✓Within 180 days from attaining majority.
DThere is no specific timeframe; the account remains operational as is.
💡 When a minor investor attains majority, the AMC/RTA will freeze their account. The investor is required to complete KYC and submit necessary documents (new bank mandate, signature) within 180 days from attaining majority to reactivate the folio and operate it in their individual capacity.
Q170EasyNomination Facility
Who can be a nominee in a mutual fund folio?
✓Any individual, including a minor, but not a trust or body corporate.
BOnly an adult Indian citizen.
CAny individual, trust, or body corporate.
DOnly a blood relative of the primary unit holder.
💡 As per SEBI regulations, nomination can only be made in favour of an individual. A minor can be a nominee, but a trust, society, body corporate, HUF, or partnership firm cannot be nominated.
Q171HardGrievance Redressal Mechanism
If an investor's complaint regarding a mutual fund scheme remains unresolved by the Asset Management Company (AMC) within the stipulated timeframe, which regulatory body should be approached next for grievance redressal?
AReserve Bank of India (RBI)
BMinistry of Finance
✓Association of Mutual Funds in India (AMFI)
DNational Stock Exchange (NSE)
💡 The typical escalation matrix for mutual fund investor grievances is: first the AMC, then the Association of Mutual Funds in India (AMFI), and finally SEBI (through its SCORES platform). RBI governs banks, Ministry of Finance is broader policy, and NSE is a stock exchange.
Q172MediumInactive Folios
An investor has not transacted in their mutual fund folio for an extended period. What is the status often referred to for such an account?
AFrozen account.
BDormant account.
CBlocked account.
✓Inactive account.
💡 While 'dormant' is commonly used for bank accounts, for mutual fund folios, accounts with no transactions for an extended period (e.g., 6 months or more) are often referred to as 'inactive accounts'. AMCs may have specific procedures or requirements to reactivate such accounts for further transactions, usually involving updated KYC or verification. 'Frozen' or 'blocked' implies a specific hold, often due to legal or regulatory reasons.
Q173EasyTypes of Transactions
What does a 'Switch' transaction in mutual funds involve?
AInvesting additional funds into an existing scheme.
✓Transferring investment from one scheme to another scheme within the same mutual fund.
CRedeeming units from one scheme and investing the proceeds into a scheme of a different mutual fund.
DChanging the dividend option (e.g., from payout to reinvestment) within the same scheme.
💡 A switch transaction allows an investor to move their investment from one scheme to another scheme within the same mutual fund house. This is treated as a redemption from the source scheme and a fresh purchase into the target scheme for tax and exit load purposes.
Q174EasyNAV Calculation and Disclosure
What is the frequency at which mutual funds are required to publish their Net Asset Value (NAV) for open-ended schemes?
AWeekly
BMonthly
✓Daily
DQuarterly
💡 Open-ended mutual fund schemes are required to compute and publish their Net Asset Value (NAV) on a daily basis (on every business day).
Q175EasyPayment Modes for Purchases
Which of the following payment methods is generally NOT accepted for purchasing mutual fund units for amounts exceeding a specific limit?
ACheque
BDemand Draft
✓Cash payment exceeding ₹50,00_ per investor per mutual fund per financial year
DUPI
💡 While cash payments are accepted for mutual fund purchases, there is a limit. Cash payments exceeding ₹50,000 per investor per mutual fund per financial year are generally not accepted for mutual fund transactions to comply with anti-money laundering regulations.
Q176EasyNomination facility
What is the maximum number of nominees allowed for a single mutual fund folio?
💡 Mutual fund regulations allow investors to appoint up to three nominees for a single folio. The percentage allocation to each nominee must also be specified.
Q177EasyPAN Requirement
Which document is mandatory for all transactions in mutual funds, irrespective of the amount, for resident Indians?
AAadhaar Card
BVoter ID Card
CPassport
✓Permanent Account Number (PAN)
💡 As per SEBI regulations, Permanent Account Number (PAN) is a mandatory requirement for all transactions in mutual funds, regardless of the investment amount, for resident Indians. (SEBI Master Circular for Mutual Funds, Section I, KYC Requirements)
Q178MediumConsolidated Account Statement (CAS)
For an investor holding mutual fund units in physical form and also having a demat account, how frequently will they receive a Consolidated Account Statement (CAS) if there is any transaction (either in demat or mutual fund units) during the month?
AQuarterly
✓Monthly
CHalf-yearly
DAnnually
💡 SEBI mandates that investors holding mutual fund units in physical form and also having a demat account receive a Consolidated Account Statement (CAS) on a monthly basis if there is any transaction (purchase, redemption, switch, etc.) in either their demat account or mutual fund folios during that month. If there are no transactions in either, a CAS is sent on a half-yearly basis.
Q179EasyApplication Process
What is the primary benefit of using a Common Application Form (CAF) for investing in mutual funds?
✓It allows investors to invest in multiple AMCs using a single form.
BIt simplifies the KYC process across all financial products.
CIt enables direct investment without a distributor.
DIt ensures faster unit allotment for all schemes.
💡 The Common Application Form (CAF) is a standardized form designed to streamline the application process for investors, allowing them to invest in schemes of different mutual funds (AMCs) by submitting a single form, provided they are KYC compliant.
Q180EasySystematic Withdrawal Plan (SWP)
When an investor opts for a Systematic Withdrawal Plan (SWP), what is the tax implication on the withdrawn amount?
AThe entire withdrawn amount is treated as capital gains and taxed accordingly.
✓Only the capital gains portion (if any) of each withdrawal is subject to tax, while the capital repayment portion is tax-free.
CThe entire withdrawn amount is tax-free until the original investment amount is recovered.
DSWP withdrawals are treated as dividends and taxed at a fixed rate.
💡 In an SWP, each withdrawal is considered a partial redemption. Therefore, the withdrawn amount comprises a portion of the original capital and a portion of capital gains. Only the capital gains component is subject to capital gains tax (short-term or long-term, depending on the holding period and asset class), while the capital repayment portion is not taxed.
Q181HardGrievance Redressal
In the context of investor services, what specific role does an 'Ombudsman' play in the mutual fund industry?
AAn Ombudsman is a regulatory body that approves new mutual fund schemes.
✓An Ombudsman is an independent authority appointed to resolve investor grievances that remain unresolved at the AMC/RTA level.
CAn Ombudsman is a mutual fund distributor who provides investment advice.
DAn Ombudsman is responsible for calculating and declaring the Net Asset Value (NAV) of schemes.
💡 An Ombudsman (specifically, the SEBI-appointed Ombudsman for the securities market) acts as an independent authority to resolve investor grievances that have not been satisfactorily addressed by the Asset Management Company (AMC) or its Registrar and Transfer Agent (RTA) within specified timelines. It provides an avenue for investors to seek redressal outside of the direct AMC/RTA channels.
Q182MediumTransaction Processing - Cut-off Timings
For a purchase application in an equity-oriented mutual fund scheme to receive the NAV of the same business day, the application money should be received by the AMC/RTA and be available for utilization before:
A1:00 PM
B2:00 PM
✓3:00 PM
D4:00 PM
💡 As per SEBI regulations, for equity-oriented schemes, purchase applications received by the AMC/RTA up to 3:00 PM on a business day, where funds are available for utilization on the same day, will be allotted units at the NAV of that same day. For applications received after 3:00 PM, or where funds are not available for utilization, the next business day's NAV applies.
Q183HardPower of Attorney (POA)
If an investor invests in a mutual fund through a Power of Attorney (POA) holder, what is a key restriction regarding the operation of the account by the POA holder?
AThe POA holder can only make purchase transactions, not redemptions.
BThe POA holder can nominate a beneficiary for the units.
✓The POA holder cannot change the bank account details of the original investor.
DThe POA holder's PAN is used for all transactions.
💡 While a POA holder can generally transact on behalf of the investor (purchases, redemptions, switches), they typically cannot change critical investor details such as bank account details or nomination to prevent fraud. The original investor's PAN is always used for transactions. (Ref: AMFI Best Practice Guidelines for Investor Services).
Q184EasyApplication Process (Demat)
Is it mandatory for all mutual fund units to be held in dematerialized form?
AYes, all mutual fund units must be held in demat.
✓No, investors have the option to hold units either in physical (account statement) or dematerialized form.
COnly equity-oriented mutual funds must be in demat form.
DOnly debt-oriented mutual funds must be in demat form.
💡 SEBI has provided the option for investors to hold mutual fund units in dematerialized form through a demat account, but it is not mandatory. Investors can still choose to hold units in physical (account statement) form, which is also referred to as statement of account (SOA) mode.
Q185MediumDividend Reinvestment
For a unit holder who has opted for dividend reinvestment, how are the additional units typically allotted?
AAt the face value of Rs. 10 per unit.
✓At the Net Asset Value (NAV) applicable on the record date (ex-dividend NAV).
CAt the highest NAV recorded during the dividend period.
DAt a pre-determined fixed price decided by the AMC.
💡 When an investor opts for dividend reinvestment, the dividend amount is used to purchase additional units of the same scheme. These units are typically allotted at the Net Asset Value (NAV) applicable on the record date (which is the ex-dividend NAV), subject to applicable exit loads if any.
Q186EasyKYC - In-Person Verification (IPV)
What is the primary purpose of an In-Person Verification (IPV) for KYC compliance in mutual funds?
ATo confirm the investor's financial standing and creditworthiness.
✓To verify the authenticity of the investor's identity and address proofs.
CTo provide investment advice to the investor directly.
DTo collect biometric data for future transactions.
💡 The primary purpose of In-Person Verification (IPV) in the KYC process for mutual funds is to verify the authenticity of the investor's identity and address proofs by visually matching the investor with their submitted documents and ensuring their physical presence.
Q187MediumSwitch Transactions and Loads
When an investor submits a request for a switch transaction, what is the 'load' implication typically applied?
AEntry load is applied on the source scheme, and exit load on the target scheme.
✓Exit load is applied on the source scheme, and entry load on the target scheme.
COnly exit load is applied on the source scheme, no load on the target scheme.
DNo load is applied on either scheme during a switch.
💡 A switch transaction is essentially a redemption from one scheme and a fresh purchase into another. Therefore, the exit load (if applicable) of the source scheme is applied, and the entry load (if applicable, though entry loads are currently banned for open-ended schemes) or applicable purchase price of the target scheme is considered. Since entry loads are not allowed, only the exit load on the source scheme is typically applicable.
Q188MediumUnclaimed Dividends and Redemption Proceeds
According to SEBI regulations, what happens to dividend and redemption amounts that remain unclaimed for more than three years in a mutual fund scheme?
✓They are transferred to the Investor Protection and Education Fund (IPEF) managed by SEBI.
BThey are forfeited by the mutual fund after a public notice.
CThey are transferred to a separate bank account and invested in money market instruments, with the gains accruing to the investor.
DThey are returned to the AMC's general fund after a fixed period.
💡 As per SEBI regulations, unclaimed dividend and redemption amounts that remain unclaimed for more than three years are transferred to the Investor Protection and Education Fund (IPEF) managed by SEBI. However, investors can still claim their dues from IPEF. (SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2016/37 dated March 16, 2016, and subsequent updates on unclaimed funds)
Q189MediumTransactions (STP)
A Systematic Transfer Plan (STP) involves moving funds from one mutual fund scheme to another within the same AMC. Which of the following best describes the underlying transactions of an STP?
✓A redemption from the source scheme and a simultaneous purchase into the target scheme.
BA direct transfer of units from the source scheme to the target scheme without any redemption/purchase.
CA loan taken against the source scheme units to invest in the target scheme.
DOnly a purchase into the target scheme, funded by external sources.
💡 An STP is essentially a series of periodic redemptions from a source scheme (e.g., a liquid or debt fund) and simultaneous purchases into a target scheme (e.g., an equity fund) within the same AMC. This allows for rupee cost averaging and systematic investment strategy.
Q190HardTransmission of Units to Nominee
In the event of the death of a sole unit holder who has made a valid nomination, which of the following documents is *not* typically required for the transmission of units to the nominee?
ADeath Certificate of the deceased unit holder.
BKYC documents of the nominee.
COriginal unit certificate/latest Statement of Account.
✓A No Objection Certificate (NOC) from other legal heirs.
💡 When a valid nomination exists, the nominee has the right to receive the units. Therefore, a No Objection Certificate (NOC) from other legal heirs is generally not required for transmission to the nominee. An NOC from legal heirs is typically required when there is no nomination and the units are being transmitted based on a will or succession certificate.
Q191MediumPayment Methods and KYC
For transactions involving purchase of mutual fund units up to Rs. 50,000, what is the maximum value of cash that can be accepted by an AMC, provided the investor has completed KYC?
ARs. 10,000 per investor per financial year
BRs. 20,000 per investor per financial year
✓Rs. 50,000 per investor per financial year
DCash payments are not allowed for mutual fund purchases.
💡 SEBI permits cash investments in mutual funds up to Rs. 50,000 per investor per financial year, provided the investor is KYC compliant. This facility is primarily aimed at promoting financial inclusion.
Q192EasyChange of Investor Details
An investor wishes to change their registered address in their mutual fund folio. Which of the following is required for this service request if the new address is in a different city?
AOnly a self-declaration of the new address.
✓Proof of new address (e.g., utility bill) and a valid ID proof.
CA cancelled cheque of the bank account linked to the new address.
DA new KYC form submission for the changed address.
💡 For changing a registered address, particularly if it's a significant change like a different city, the investor must submit valid proof of the new address (e.g., utility bill, passport, Aadhaar) along with their identity proof. While KYC ensures the investor's identity and current address, an address change requires specific supporting documents rather than a full new KYC form unless the KYC status itself is not updated.
Q193MediumRedemption Process
As per SEBI regulations, what is the maximum permissible time limit for a mutual fund to dispatch redemption proceeds to investors after receiving a valid redemption request?
A5 business days
B7 calendar days
✓10 business days
D15 calendar days
💡 SEBI (Mutual Funds) Regulations, 1996, stipulate that mutual funds must dispatch redemption proceeds within 10 business days from the date of receipt of a valid redemption request.
Q194MediumDividend Options
In a dividend option, what is the key difference between 'Dividend Payout' and 'Dividend Reinvestment'?
ADividend Payout offers higher returns, while Reinvestment offers lower returns.
✓Dividend Payout distributes the dividend amount to the investor, while Reinvestment uses the dividend to purchase additional units in the same scheme.
CDividend Payout is taxable, while Dividend Reinvestment is tax-free.
DDividend Payout is only for equity funds, while Reinvestment is for debt funds.
💡 In 'Dividend Payout', the declared dividend amount is paid out to the investor, usually credited to their bank account. In 'Dividend Reinvestment', the declared dividend amount is automatically used to purchase additional units of the same scheme at the prevailing NAV, thereby increasing the investor's unit holding. (NISM Series V-A Study Material, Chapter 9: Investor Services - Dividend Options)
Q195MediumTransactions
For investments in liquid funds, what is the typical cut-off time for receiving same-day Net Asset Value (NAV) for purchase applications, provided the funds are available for utilization by the AMC?
A1:00 PM
✓2:00 PM
C3:00 PM
D4:00 PM
💡 As per SEBI regulations, for liquid funds, applications received before 2:00 PM (along with funds available for utilization by the AMC) are eligible for the same day's NAV. For other schemes (equity, debt), the cut-off time is generally 3:00 PM. (SEBI Master Circular for Mutual Funds, Section 10.4.1).
Q196EasyTransmission of Units
In the context of mutual fund investments, what does 'transmission of units' refer to?
ATransferring units from one scheme to another within the same AMC.
BSelling units and reinvesting the proceeds into a different fund.
✓Passing on units to the legal heirs/nominee(s) upon the death of the unitholder.
DTransferring units from one AMC to another through a demat account.
💡 Transmission of units refers to the process of transferring mutual fund units to the legal heirs or nominee(s) of a deceased unitholder. This is a distinct process from regular transfers or switches.
Q197MediumChange Requests - Contact Details
An investor wishes to change their registered mobile number for a mutual fund folio. What is typically required for this update?
AA simple email request to the AMC's customer service.
✓A written request signed by all unitholders, along with self-attested ID proof.
CA verbal request over the phone, after answering security questions.
DThis change can only be done through a registered mutual fund distributor.
💡 For security reasons and to prevent unauthorized changes, updating critical contact information like a mobile number or email address typically requires a written request signed by all unitholders as per the mode of holding, along with self-attested copies of their identity proof. Verbal requests or simple emails are usually not sufficient.
Q198HardGrievance Redressal
If an investor is not satisfied with the resolution provided by the AMC for their grievance, which entity should they approach next for redressal?
ASecurities Appellate Tribunal (SAT)
BReserve Bank of India (RBI)
✓SEBI SCORES platform
DMinistry of Finance
💡 If an investor is not satisfied with the resolution provided by the AMC or its RTA, they can escalate their grievance to SEBI through its online platform, SEBI SCORES (SEBI Complaints Redressal System).
Q199HardTransmission of Units
In a joint holding with 'Either or Survivor' mode, if one holder passes away, how are the units transmitted?
✓The units are automatically transferred to the surviving holder upon intimation to the AMC.
BThe units are frozen until a legal heir certificate is produced.
CThe units are redeemed, and proceeds are paid to the surviving holder and legal heirs.
DThe surviving holder needs to obtain a court order for transmission.
💡 In 'Either or Survivor' mode, upon the death of one joint holder, the surviving holder(s) can claim the units by submitting a death certificate and a transmission request to the AMC. The units are then transferred to the surviving holder(s) without needing a legal heir certificate or court order, unless there's a dispute.
Q200MediumConsolidated Account Statement (CAS)
A Consolidated Account Statement (CAS) provides a single view of an investor's holdings across which of the following?
AAll mutual fund holdings only.
✓All mutual fund holdings and direct equity holdings in demat form.
CAll mutual fund holdings, direct equity holdings, and insurance policies.
DAll mutual fund holdings, direct equity holdings, and bank fixed deposits.
💡 The Consolidated Account Statement (CAS) provides a single, unified view of an investor's holdings in mutual fund units and securities held in dematerialized form (direct equity, bonds, etc.) across all depositories (NSDL and CDSL).
Q201HardUnclaimed Dividends/Redemption Proceeds
What is the maximum period for which dividend and redemption proceeds can remain 'unclaimed' with the Asset Management Company (AMC) before being transferred to a dedicated fund as per SEBI regulations?
A3 years
B5 years
✓7 years
D10 years
💡 As per SEBI regulations, unclaimed dividend and redemption proceeds of mutual funds must be transferred to a separate bank account and remain invested in a specific liquid/money market scheme for a period of 7 years. After 7 years, these amounts, along with any income earned, are transferred to the Investor Protection and Education Fund (IPEF) established by SEBI. Investors can still claim these amounts from the IPEF.
Q202MediumMinor's Folio
Upon a minor attaining majority, which of the following is mandatory for the former minor to continue holding the mutual fund units?
AAppoint a new guardian within 3 months.
BOpen a new folio in their own name and transfer the units.
✓Submit fresh KYC documents in their own name and update the bank mandate to an account solely in their name.
DProvide a notarized affidavit stating they have attained majority.
💡 Upon attaining majority, the former minor must provide fresh KYC documents in their own name and update the bank mandate to an account solely in their name to continue operating the folio.
Q203MediumGrievance Redressal Mechanism
An investor has a grievance regarding their mutual fund investment. After approaching the Asset Management Company (AMC) and not receiving a satisfactory resolution within the stipulated timeframe, what is the next logical step as per SEBI regulations?
AFile a direct lawsuit in a consumer court.
BApproach the Association of Mutual Funds in India (AMFI).
✓Lodge a complaint on the SEBI Complaints Redress System (SCORES).
DContact the Reserve Bank of India (RBI).
💡 As per SEBI guidelines, if an investor is not satisfied with the resolution provided by the AMC, or if the AMC fails to respond within the stipulated time, the next step is to lodge a complaint on the SEBI Complaints Redress System (SCORES).
Q204HardUnclaimed Redemption and Dividend
According to SEBI regulations, unclaimed redemption and dividend amounts of mutual funds must be invested in which type of scheme until claimed by investors?
AA dedicated equity scheme
BA dedicated debt scheme
✓A dedicated liquid scheme
DA dedicated gilt scheme
💡 SEBI (Mutual Funds) Regulations, 1996, and subsequent circulars (e.g., SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016) mandate that unclaimed redemption and dividend amounts shall be invested only in a separate plan of a dedicated liquid scheme or money market mutual fund scheme. This ensures safety and liquidity while awaiting claims.
Q205EasyRedemption Process and Timelines
For an open-ended equity-oriented mutual fund scheme, within how many business days must the redemption proceeds be dispatched to the investor after receiving a valid redemption request?
A1 business day
✓3 business days
C7 business days
D10 business days
💡 As per SEBI (Mutual Funds) Regulations, 1996, redemption proceeds must be dispatched to the unitholders within 3 business days of receiving the redemption request for open-ended schemes, except for schemes investing in overseas markets (which may have longer timelines).
Q206MediumStatement of Account Timelines
For a fresh mutual fund purchase, within how many working days must the Statement of Account (SOA) be dispatched to the investor?
A1 working day
B3 working days
✓5 working days
D10 working days
💡 As per SEBI (Mutual Funds) Regulations, for a fresh purchase application, the Statement of Account (SOA) must be dispatched to the investor within 5 working days from the date of receipt of the application. For subsequent transactions, the SOA is dispatched within 3 working days.
Q207MediumDematerialization of Mutual Fund Units
What is a significant advantage of holding mutual fund units in dematerialized (demat) form compared to physical (statement of account) form?
AHigher returns on investment due to reduced costs.
✓Ability to pledge units as collateral for loans more easily.
CExemption from capital gains tax.
DLower expense ratio for demat units.
💡 Holding units in demat form facilitates easier pledging of units as collateral for loans, as they are held in an electronic format with a depository, making the process more streamlined than with physical units. Other options are incorrect as demat form does not inherently offer higher returns, tax exemptions, or lower expense ratios.
Q208EasyChanges in Investor Details
An investor wants to update their bank account details in their mutual fund folio. Which of the following is a mandatory document typically required for this change?
ACopy of Aadhar card.
✓Cancelled cheque leaf with the investor's name pre-printed.
CUtility bill not older than 6 months.
DCopy of passport.
💡 For updating bank account details, a cancelled cheque leaf of the new bank account with the investor's name pre-printed is a mandatory document. This helps in verifying the account ownership. If the name is not pre-printed, a bank statement or passbook copy with name and account number is required along with a bank verification letter.
Q209HardDematerialization of Units
An investor holding mutual fund units in physical certificate form decides to convert them into electronic (dematerialized) form. What is this process known as?
ARematerialization
✓Dematerialization
CReconciliation
DConsolidation
💡 The process of converting physical securities (like mutual fund certificates) into electronic or dematerialized form is known as Dematerialization. Rematerialization is the reverse process, converting demat units back to physical form.
Q210HardFATCA and CRS
What is the significance of FATCA and CRS for mutual fund investors in India?
AThey are tax treaties that reduce capital gains tax for foreign investors.
✓They are regulations requiring AMCs to report financial information of certain non-Indian resident investors to tax authorities.
CThey are guidelines for managing foreign currency exposure in international funds.
DThey are investment restrictions for Indian residents investing in foreign mutual funds.
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) are international regulations aimed at combating tax evasion. They require financial institutions, including mutual funds, to identify and report financial account information of customers who are tax residents of other participating countries (for CRS) or the U.S. (for FATCA) to the respective tax authorities. Investors are required to self-certify their tax residency status.
Q211EasyNomination Facility
What is the maximum number of nominees allowed for a mutual fund folio?
AOne
BTwo
✓Three
DNo limit
💡 Investors are permitted to nominate up to three individuals for a mutual fund folio. If multiple nominees are appointed, the percentage of allocation for each nominee must be specified.
Q212MediumNAV Applicability for Redemptions
An investor submits a redemption request for an equity-oriented mutual fund scheme at 2:30 PM on a business day. What NAV will be applicable for this transaction?
AThe NAV of the previous business day.
BThe NAV of the same business day.
✓The NAV of the next business day.
DThe NAV will be determined based on the time of payout.
💡 For redemption requests in equity-oriented schemes, if the application is received after the cut-off time (3:00 PM on a business day), the NAV of the next business day will be applicable. For applications received before the cut-off time, the NAV of the same business day applies.
Q213MediumChanges in Investor Details
An investor wishes to change their bank account details for their mutual fund investments. Which of the following is NOT typically required for this process?
AA cancelled cheque leaf of the new bank account.
BA letter requesting the change, signed by all unit holders.
✓A copy of the previous bank statement.
DProof of identity of the unit holders.
💡 While a cancelled cheque of the new account, a signed request letter, and identity proofs are generally required for bank detail changes to prevent fraud, a copy of the previous bank statement is usually not a mandatory requirement. The AMC needs to verify the new bank account and the identity of the person requesting the change.
Q214EasyApplication Process (PAN)
For any mutual fund transaction (purchase, redemption, switch), regardless of the amount, what is a mandatory identification document for resident Indians?
AAadhaar Card
BPassport
✓Permanent Account Number (PAN)
DDriving License
💡 Permanent Account Number (PAN) is mandatory for all mutual fund transactions (purchases, redemptions, switches, SIPs, etc.) for resident Indian investors, irrespective of the transaction amount. This is a key requirement for KYC and tax compliance as per SEBI regulations.
Q215MediumThird-Party Payments
Which of the following is an exception to the general rule prohibiting third-party payments for mutual fund investments?
✓Payment made by an employer on behalf of an employee under a corporate SIP plan.
BPayment made by a spouse on behalf of their partner for a new investment.
CPayment made by a parent on behalf of their adult child.
DPayment made by an AMFI-registered distributor on behalf of their client.
💡 SEBI regulations generally prohibit third-party payments. However, exceptions include payment by an employer on behalf of an employee under a corporate SIP or similar arrangement, and payments by a guardian on behalf of a minor, subject to specific documentation requirements.
Q216EasyChange of Bank Details
When an investor requests a change in their registered bank account details for a mutual fund folio, what is a crucial security measure typically followed by AMCs?
AThe change is effective immediately upon submission of the request.
BA verification call is made to the investor's registered mobile number before processing.
CA nominal fee is charged for the change to deter fraudulent requests.
✓A cooling-off period, during which redemptions to the new account are restricted, is often imposed.
💡 To prevent fraudulent redemptions, AMCs often impose a cooling-off period (e.g., 5-10 days) after a change in bank details is registered. During this period, redemptions to the newly registered bank account are restricted.
Q217EasyNAV Applicability - Equity Schemes
For subscription applications in equity-oriented mutual fund schemes, what is the cut-off time for the application amount to be invested and reach the AMC/RTA for the same day's NAV applicability?
A1:00 PM
B2:00 PM
✓3:00 PM
D5:00 PM
💡 As per SEBI regulations, for equity-oriented mutual fund schemes, applications received by the AMC/RTA before 3:00 PM on a business day, and where funds are available for utilization, are eligible for the same day's NAV. For applications received after 3:00 PM, the next business day's NAV applies.
Q218MediumFATCA/CRS Compliance
For FATCA/CRS compliance, what is primarily required from investors, especially regarding their tax residency?
ASubmission of a foreign tax identification number (TIN) for all investors.
✓Self-certification of tax residency and jurisdiction(s) of tax residence.
CProof of income tax payment in all declared tax jurisdictions.
DA declaration that they are not tax residents of any foreign country.
💡 Under FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard), investors are required to self-certify their tax residency, including specifying all jurisdictions where they are tax residents and providing the corresponding Taxpayer Identification Number (TIN) or functional equivalent.
Q219MediumChange of Details - Bank Mandate
An investor wishes to change their registered bank account details in their mutual fund folio. Which of the following is typically NOT required for this process?
AA cancelled cheque leaf of the new bank account.
BA copy of the passbook or bank statement of the new account.
✓A photograph of the investor.
DA duly filled and signed bank mandate change form.
💡 To change bank account details, investors typically need to submit a duly filled and signed bank mandate change form along with proof of the new bank account (like a cancelled cheque leaf, copy of passbook, or bank statement). A photograph of the investor is generally not required for this specific transaction, assuming KYC is already complete.
Q220MediumPayment Modes and Third-Party Payments
For investment in mutual funds, which of the following is NOT a valid mode of payment for an investor?
✓Third-party cheque from a relative.
BNEFT/RTGS from the investor's registered bank account.
CUPI payment from a linked bank account.
DDemand Draft purchased by the investor from their bank account.
💡 SEBI regulations strictly prohibit third-party payments for mutual fund investments to prevent money laundering. The payment must originate from the investor's own bank account, except for specific exceptions like payment by parents/guardians for a minor, or payment by an employer on behalf of employees under a corporate plan. A cheque from a relative, unless they are a guardian for a minor, would be considered a third-party payment.
Q221MediumNAV Applicability for Transactions
If an investor submits a redemption request for an equity-oriented mutual fund scheme before the cut-off time on a business day, which NAV will be applicable for the transaction?
AThe NAV of the previous business day.
✓The NAV of the same business day.
CThe NAV of the next business day.
DThe average NAV of the last three business days.
💡 For equity-oriented schemes, if a redemption request is received before the cut-off time (typically 3:00 PM) on a business day, the NAV of the same business day will be applicable.
Q222EasyNomination Facility
In a mutual fund investment, who can be appointed as a nominee?
AOnly a blood relative of the unit holder.
✓Any individual, including a minor.
COnly an individual who is a major.
DOnly a trust or a corporate body.
💡 A unit holder can nominate any individual, including a minor, as a nominee. If a minor is nominated, the unit holder must also appoint an appointee to receive the units on behalf of the minor in case of the unit holder's demise.
Q223MediumMinor Accounts
For an investment made by a minor through a guardian, what happens to the folio when the minor attains majority?
AThe folio automatically gets frozen until the new KYC is completed.
BThe guardian continues to operate the folio until the minor requests a change.
CThe folio is redeemed, and proceeds are transferred to the guardian.
✓The minor's KYC is updated, and the minor takes over the operation of the folio.
💡 When a minor unit holder attains majority, the folio becomes inoperable until the status is changed from 'minor' to 'major'. The erstwhile minor (now major) needs to submit a fresh KYC application, updated bank account details, and a signature attestation. Once these formalities are completed, the major takes over the operation of the folio.
Q224HardRedemption Process and Timelines
What is the maximum timeline for dispatching redemption proceeds to investors from the date of receipt of a valid redemption request, as per SEBI regulations?
AWithin 1 business day (T+1)
BWithin 3 business days (T+3)
CWithin 7 business days (T+7)
✓Within 10 working days (T+10)
💡 As per SEBI (Mutual Funds) Regulations, 1996, redemption proceeds must be dispatched to the investors within 10 working days from the date of receipt of the redemption request. While AMCs often process redemptions much faster (e.g., T+1 for liquid, T+3 for equity), 10 working days is the regulatory maximum.
Q225EasyUnclaimed Amounts
As per SEBI regulations, what happens to unclaimed redemption amounts or dividends in a mutual fund scheme?
AThey are forfeited by the AMC after a specific period
✓They are invested in a separate scheme and continue to earn returns until claimed
CThey are transferred to the Prime Minister's Relief Fund
DThey are returned to the last known bank account of the investor
💡 SEBI mandates that unclaimed redemption amounts and dividends must be invested in a separate scheme (e.g., a Liquid or Money Market scheme) and continue to earn returns for the investor until they are claimed. They are not forfeited.
Q226HardConsolidated Account Statement (CAS)
An investor holds mutual fund units in physical form and also has a demat account with a Depository Participant (DP). If there are transactions in both physical and demat holdings within a month, how many Consolidated Account Statements (CAS) will the investor receive from the RTA/Depository?
AOne CAS from the RTA for physical holdings only.
BOne CAS from the DP for demat holdings only.
CTwo separate CAS (one from RTA for physical, one from DP for demat).
✓A single CAS combining both physical and demat mutual fund holdings, along with other demat securities.
💡 SEBI mandates a single, consolidated account statement (CAS) that combines all mutual fund folios (both physical and demat holdings) as well as other securities held in demat form, provided the investor's PAN is mapped across these holdings. This combined CAS is typically issued by the Depository (CDSL/NSDL) through the DP.
Q227EasyMinor's Account - Attaining Majority
When a minor investor in a mutual fund attains majority, what is the immediate consequence for the operation of their account?
✓The account is automatically frozen until the new KYC is completed.
BThe account continues to operate normally under the guardian's signature.
CThe units are automatically redeemed and proceeds are paid to the erstwhile guardian.
DThe minor can continue to transact using the same KYC details.
💡 Upon the minor attaining majority, the account is frozen for all transactions (redemption, switch, SIP, STP, SWP) until the erstwhile minor completes new KYC formalities in their own capacity, updates their status from minor to major, and provides updated bank details. (Ref: AMFI Best Practice Guidelines Circular No. 90/2021-22).
Q228MediumSystematic Transfer Plan (STP)
An investor initiates an STP from an equity fund to a debt fund. What is a key characteristic of this transaction?
AUnits are redeemed from the equity fund at the prevailing NAV and new units are purchased in the debt fund at the same day's NAV.
✓It involves a simultaneous redemption from one scheme and a purchase into another, typically on a periodic basis.
CIt is typically used to book profits from a debt fund and transfer them to an equity fund.
DThe capital gains/losses from the equity fund are deferred until the final redemption from the debt fund.
💡 A Systematic Transfer Plan (STP) involves periodically transferring a fixed amount or a fixed number of units from one mutual fund scheme (source scheme) to another mutual fund scheme (target scheme) within the same AMC. It is a simultaneous redemption and purchase, treated as separate transactions for tax purposes.
Q229EasyRole of RTA
Which entity is primarily responsible for maintaining the records of mutual fund unit holders, processing their transactions, and sending account statements?
AAsset Management Company (AMC)
BCustodial Bank
✓Registrar and Transfer Agent (RTA)
DAssociation of Mutual Funds in India (AMFI)
💡 The Registrar and Transfer Agent (RTA) is the entity primarily responsible for maintaining investor records, processing transaction requests (purchases, redemptions, switches), updating unit holdings, and sending out account statements and other investor communications on behalf of the Asset Management Company (AMC).
Q230EasyRole of RTA
Which of the following is a primary function of a Registrar and Transfer Agent (RTA) for a mutual fund?
AManaging the investment portfolio of the fund.
BCalculating the Net Asset Value (NAV) of schemes.
✓Maintaining investor records and processing transactions.
DMarketing and distributing mutual fund schemes.
💡 The Registrar and Transfer Agent (RTA) is responsible for maintaining all investor records, processing purchase/redemption/switch requests, handling dividend payouts, and dispatching statements of account.
Q231HardDormant Accounts
An investor's mutual fund folio has become inoperative due to no financial transactions for an extended period. To reactivate the folio for fresh transactions, which of the following is most likely to be required by the AMC/RTA?
✓A fresh KYC process, even if the investor was KYC compliant earlier.
BPayment of a dormancy fee to the AMC.
CA written application from the original mutual fund distributor.
DSubmission of the original physical unit certificate.
💡 While AMCs may have varying internal policies for deeming a folio 'inoperative', for reactivating such folios, especially after a long period of inactivity or if KYC details are outdated, a fresh KYC process (or re-submission of KYC documents) is often required to ensure compliance with PMLA (Prevention of Money Laundering Act) and investor verification norms.
Q232MediumApplication Process - FATCA/CRS
What specific declaration is mandatory for all new mutual fund investors to comply with international tax transparency requirements, specifically related to foreign accounts?
AIncome Tax Declaration
✓FATCA/CRS Declaration
CInvestment Suitability Declaration
DNomination Declaration
💡 The Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) declarations are mandatory for all new mutual fund investors. These declarations require investors to disclose their tax residency status and provide details of foreign tax identification numbers, if applicable, to comply with international agreements on tax transparency and information exchange.
Q233EasySEBI SCORES
What is the main purpose of the SEBI SCORES platform?
ATo provide investment advice to investors
BTo facilitate online trading of mutual funds
✓To enable investors to lodge and track their complaints against market intermediaries
DTo publish daily NAVs of mutual fund schemes
💡 SEBI SCORES (SEBI Complaints Redressal System) is an online platform launched by SEBI to help investors lodge and track their complaints against entities regulated by SEBI, including mutual funds and their intermediaries. It is a grievance redressal mechanism.
Q234MediumDividend Options
What is the key difference between a dividend payout option and a dividend reinvestment option in a mutual fund scheme?
ADividend payout distributes profits, while dividend reinvestment generates capital gains.
✓Dividend payout involves receiving cash, while dividend reinvestment uses the dividend to purchase more units.
CDividend payout is taxable, while dividend reinvestment is tax-free.
DDividend payout is available only for equity funds, while reinvestment is for debt funds.
💡 In the dividend payout option, the declared dividend is paid out to the investor as cash (or credited to their bank account). In the dividend reinvestment option, the dividend amount is automatically used to purchase additional units of the same scheme at the prevailing NAV, thereby increasing the unit holding.
Q235MediumUnclaimed Dividends and Redemption
If an investor's dividend or redemption proceeds remain unclaimed for more than three years, what action is mandated for the Asset Management Company (AMC) regarding these funds?
AThe funds are transferred to the AMC's Investor Protection Fund.
BThe funds are reinvested into the same scheme.
✓The funds are transferred to the Investor Protection and Education Fund (IPEF) administered by SEBI.
DThe funds are forfeited by the AMC.
💡 As per SEBI regulations, any unclaimed redemption or dividend amounts lying with the AMCs for more than three years must be transferred to the Investor Protection and Education Fund (IPEF) administered by SEBI. Until then, they remain invested in a separate bank account or liquid scheme.
Q236EasyNomination
A minor can be appointed as a nominee in a mutual fund folio, provided a guardian is also specified. Is this statement true or false?
✓True
BFalse
COnly if the minor is above 12 years of age
DOnly for specific types of schemes (e.g., children's funds)
💡 As per SEBI/AMFI regulations, a minor can be a nominee in a mutual fund folio, but it is mandatory to appoint a guardian who will act on behalf of the minor until they attain majority. This ensures proper handling of the units.
Q237EasySystematic Transaction Facilities
Which of the following is NOT a systematic transaction facility offered by mutual funds?
ASystematic Investment Plan (SIP)
BSystematic Transfer Plan (STP)
CSystematic Withdrawal Plan (SWP)
✓Systematic Redemption Plan (SRP)
💡 Mutual funds commonly offer Systematic Investment Plans (SIP), Systematic Transfer Plans (STP), and Systematic Withdrawal Plans (SWP). 'Systematic Redemption Plan (SRP)' is not a standard systematic transaction facility offered by AMCs in the same manner as the other three.
Q238HardKYC for Joint Holders
If an investment is made in a joint holding pattern (e.g., A & B), and only the first holder (A) is KYC compliant, while the second holder (B) is not, what will be the outcome?
AThe application will be processed, but only holder A can initiate transactions.
✓The application will be rejected, as all holders in a joint folio must be KYC compliant.
CThe application will be processed, but the second holder (B) will be marked as 'KYC pending' and will need to complete it later.
DThe application will be processed, but redemptions will only be permitted if requested by holder A.
💡 For joint holdings in mutual funds, it is mandatory for all applicants (all joint holders) to be KYC compliant as per SEBI regulations. If any of the joint holders are not KYC compliant, the application will be rejected.
Q239HardFund Distribution - EUIN
An investor submits a mutual fund transaction through a distributor, but the EUIN (Employee Unique Identification Number) of the sales person is not mentioned on the application form. What is the most accurate implication of this omission?
AThe transaction will be rejected outright by the AMC.
BThe transaction will be processed, but the distributor will not receive commission for it.
CThe transaction will be processed, but the investor will not be able to file a complaint against the sales person.
✓The transaction will be processed, but the investor will lose the ability to attribute the advice to a specific employee in case of mis-selling.
💡 The EUIN is a mechanism introduced by SEBI to address the issue of mis-selling and to enable the investor to identify the employee of the distributor who advised them. While its absence does not typically lead to transaction rejection or commission loss, it removes the crucial link for attributing specific advice to an individual employee, which is vital for grievance redressal related to mis-selling.
Q240MediumRedemption Process - Payout Timelines
What is the SEBI mandate regarding the processing time for mutual fund redemption proceeds for equity schemes?
AWithin T+1 business day.
✓Within T+3 business days.
CWithin T+7 calendar days.
DWithin T+10 business days.
💡 As per SEBI regulations, redemption proceeds for equity-oriented mutual fund schemes must be dispatched to investors within T+3 business days (where T is the date of the valid redemption request). For liquid and overnight funds, it's T+1 business day.
Q241HardChanges in Investor Details
An investor wants to change the mode of holding from 'single' to 'joint' in an existing mutual fund folio. Which of the following statements is true regarding this request?
AIt is generally permitted with a simple service request form and signatures.
✓It is not permitted as it constitutes a change in the legal entity of the investor, requiring a new folio.
CIt is only permitted if the original investor submits a no-objection certificate from the proposed joint holder.
DIt is permitted only for specific scheme types like liquid funds.
💡 Changing the mode of holding from 'single' to 'joint' or vice versa, or changing the order of holders, is generally not permitted as it is considered a change in the legal entity of the investor. It typically requires a new folio to be opened with the desired mode of holding, and units from the old folio would need to be redeemed and reinvested.
Q242MediumNomination for Minor
If a minor is nominated for a mutual fund investment, what additional mandatory detail must be provided in the nomination form?
AThe minor's bank account details.
BThe minor's school enrollment number.
✓The guardian's name, address, and signature.
DA copy of the minor's birth certificate.
💡 When a minor is nominated, the name, address, and signature of the guardian of the minor nominee must be provided. The guardian will act on behalf of the minor until the minor attains majority.
Q243EasyApplication Process - Payment Modes
Which of the following is a permissible mode of payment for a lump sum mutual fund purchase as per SEBI regulations?
ACash payment exceeding ₹50,000
BCredit Card payment directly to AMC for lump sum
CThird-party cheque, where the account holder is different from the investor
✓UPI payment from a bank account registered in the investor's name
💡 SEBI regulations prohibit cash payments exceeding ₹50,000 for mutual fund purchases. Credit card payments are generally not allowed for lump sum purchases due to regulatory concerns and high transaction costs. Third-party payments (where the payer is not the investor or one of the joint holders) are strictly disallowed to prevent money laundering. UPI payment from a bank account registered in the investor's name is a permissible and common mode of payment.
Q244EasyNomination Facility
Which of the following persons can be appointed as a nominee for mutual fund units?
✓Any individual, including a minor.
BOnly adult family members.
COnly a bank or financial institution.
DOnly the joint holder of the units.
💡 Any individual, including a minor, can be appointed as a nominee. If the nominee is a minor, the name and address of the guardian must also be provided. (NISM Series V-A Study Material, Chapter 9: Investor Services - Nomination)
Q245EasyTransaction Processing - Systematic Withdrawal Plan (SWP)
What facility allows investors to withdraw a fixed amount at regular, pre-determined intervals from their mutual fund investments?
ASystematic Investment Plan (SIP)
BSystematic Transfer Plan (STP)
✓Systematic Withdrawal Plan (SWP)
DValue Averaging Investment Plan (VAIP)
💡 A Systematic Withdrawal Plan (SWP) is a facility offered by mutual funds that allows investors to withdraw a fixed or variable amount from their investment at regular intervals (e.g., monthly, quarterly).
Q246HardTransaction Processing - Redemption Timelines
For a redemption request in an open-ended equity scheme, what is the SEBI mandated maximum timeline for dispatching redemption proceeds to the investor?
AT+1 business day
✓T+3 business days
CT+5 business days
DT+10 business days
💡 As per SEBI regulations, mutual funds are mandated to dispatch redemption proceeds to investors within T+3 business days for equity-oriented schemes (where T is the date of redemption request). For debt schemes, it is generally T+1 or T+3 business days depending on the scheme type.
Q247MediumConsolidated Account Statement (CAS)
How frequently is a Consolidated Account Statement (CAS) containing details of all mutual fund holdings and transactions across all AMCs generally issued to an investor who has made any transaction during a month?
AAnnually
BHalf-yearly
CQuarterly
✓Monthly
💡 If an investor has undertaken any financial transaction (purchase, redemption, switch, SIP registration, etc.) in any of their mutual fund folios during a month, a CAS is issued on a monthly basis. Otherwise, it is issued on a half-yearly basis.
Q248MediumLien and Pledge of Units
What is the primary difference between a 'lien' and a 'pledge' on mutual fund units?
ALien is for fixed deposits, pledge is for mutual funds
✓Lien grants the lender a right over the asset without transfer of possession, while pledge involves transfer of possession or control of units for security
CPledge is for securing loans, while lien is for gifting
DLien is always irrevocable, pledge can be revoked
💡 A lien implies a right to retain possession of units until a debt is repaid, without necessarily involving transfer of actual possession. A pledge, however, typically involves the borrower transferring legal possession or control of the mutual fund units to the lender as security for a loan, often by marking the units as 'pledged' with the RTA/AMC.
Q249HardNomination rules and rejections
Under which specific circumstance can a validly submitted nomination by an investor in a mutual fund be rejected by the AMC/RTA?
AIf the nominee is a minor and no guardian is appointed.
BIf the investor has invested less than ₹5,000.
✓If the nominee is a non-individual entity (e.g., a trust or company).
DIf the nomination form is not witnessed by a notary public.
💡 Nomination can only be made in favour of an individual. A nomination made in favour of a non-individual entity (like a trust, company, or HUF) is not permitted and will be rejected. If the nominee is a minor, a guardian must be appointed, but the nomination itself isn't rejected.
Q250HardTransmission of Units (Nomination)
In the event of the death of the sole unitholder, which of the following documents is generally NOT required for the transmission of units to the nominee?
AOriginal/attested copy of the death certificate of the deceased unitholder.
BKYC acknowledgement of the nominee.
CProof of relationship of the nominee with the deceased.
✓No Objection Certificate (NOC) from all legal heirs other than the nominee.
💡 If a valid nomination is in place, the units are transmitted to the nominee directly. A No Objection Certificate (NOC) from other legal heirs is typically required only when there is no nomination or if the transmission is to legal heirs other than the nominee. (NISM Series V-A Study Material, Chapter 9: Investor Services - Transmission of Units)
Q251EasyNomination
Who among the following is generally *not* eligible to be a nominee for mutual fund units?
AAn individual
BA minor (with a guardian)
✓A Hindu Undivided Family (HUF)
DThe sole holder of the units can nominate another individual
💡 As per SEBI regulations, only individuals can be nominees for mutual fund units. A minor can be a nominee, provided a guardian is appointed. HUFs, trusts, or corporate bodies cannot be nominated as per current regulations.
Q252HardFATCA/CRS Compliance
What is the primary implication for an investor who fails to provide FATCA/CRS self-certification details to the mutual fund?
ATheir existing investments will be frozen until the details are provided.
BThey will be subject to a higher rate of taxation on their mutual fund gains.
✓Their new investment applications may not be processed or existing accounts may be blocked for further transactions.
DThey will be automatically deemed a US person for tax purposes.
💡 Under FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) regulations, mutual funds are required to collect self-certification from investors regarding their tax residency. Failure to provide these details can lead to the inability to process new investment applications or block existing accounts for further transactions until compliance is met. (SEBI Circular CIR/MIRSD/2/2015/10 dated January 19, 2015, on FATCA/CRS implementation)
Q253MediumChanges in Investor Details
When an investor submits a request for a change of bank account, what is a standard security measure adopted by AMCs before updating the records?
AImmediate update upon receipt of the request form.
BA verification call to the new bank branch.
✓Sending a confirmation letter to the investor's old registered address.
DRequiring a physical visit to the AMC office by the investor.
💡 To prevent fraudulent activities, AMCs typically send a confirmation letter to the investor's previously registered address to verify the change of bank mandate before updating it in their records.
Q254EasyConsolidated Account Statement (CAS)
What is the primary purpose of a Consolidated Account Statement (CAS) provided to mutual fund investors?
ATo provide details of all transactions (purchases, redemptions, switches) for a specific mutual fund scheme.
✓To consolidate the holdings of an investor across all mutual funds and demat accounts in a single statement.
CTo provide a summary of the investor's tax liabilities arising from mutual fund investments.
DTo list all dividend payouts and capital gains distributed by various mutual fund schemes.
💡 A Consolidated Account Statement (CAS) consolidates an investor's holdings across all mutual funds and demat accounts (shares, bonds, ETFs) in a single statement. This provides a holistic view of their investments in the securities market.
Q255EasyRedemption Process and Timelines
Under normal circumstances, within how many business days must a mutual fund dispatch redemption proceeds to the unitholder after receiving a valid redemption request?
A3 business days
B5 business days
C7 business days
✓10 business days
💡 As per SEBI (Mutual Funds) Regulations, 1996, mutual funds are required to dispatch redemption proceeds within 10 business days of receiving a valid redemption request. For liquid schemes, this period is often much shorter (e.g., T+1 or T+2). (SEBI (Mutual Funds) Regulations, 1996, Fourth Schedule - Code of Conduct for Mutual Funds, Clause 10(f))
Q256EasyNomination
Under what condition can a minor be appointed as a nominee in a mutual fund folio?
AA minor cannot be a nominee under any circumstances.
BOnly if the minor is the sole nominee.
✓Only if a guardian is appointed for the minor nominee.
DOnly if the minor is above 12 years of age.
💡 A minor can be appointed as a nominee, but it is mandatory to also appoint a guardian for the minor nominee. The guardian will be entitled to receive the units on behalf of the minor in the event of the unitholder's death until the minor attains majority.
Q257EasyNomination Facility
Who can be nominated by a unitholder for their mutual fund investments?
✓Any person, including a minor.
BOnly immediate family members.
COnly adults who are Indian citizens.
DOnly individuals with a valid PAN.
💡 A unitholder can nominate any person, including a minor, for their mutual fund investments. If a minor is nominated, the name and address of the guardian of the minor nominee must also be provided.
Q258MediumInvestor Accounts - Minor attaining Majority
When a minor investor attains majority in a mutual fund folio, what is the necessary action to be taken?
AThe folio is automatically converted to an adult folio, and the minor's guardian continues to operate it.
✓The minor, now an adult, must submit a fresh KYC and sign new forms to convert the folio into their individual name.
CAll units in the folio are compulsorily redeemed, and the proceeds are paid to the minor's guardian.
DThe folio is frozen until the minor attains 21 years of age.
💡 Upon a minor attaining majority, the guardian's authority ceases. The folio is frozen for operations until the minor, now an adult, completes fresh KYC formalities, updates their signature, and confirms their intent to continue the folio in their individual capacity.
Q259EasyPayment Modes and Regulations
Under what circumstances are mutual fund distributors allowed to handle physical cash for investment applications?
AFor investments up to ₹50,000 in liquid funds.
BFor investments up to ₹5,000 per investor per mutual fund per financial year.
CFor investments from rural areas where banking facilities are limited.
✓Mutual fund distributors are strictly prohibited from handling physical cash for investment applications.
💡 SEBI regulations strictly prohibit mutual fund distributors from accepting cash for investment applications. All transactions must be through banking channels (cheque, NEFT, RTGS, UPI, etc.) to ensure transparency and prevent money laundering.
Q260EasyNomination Facility
What is the primary purpose of the 'Nomination' facility provided to mutual fund investors?
ATo allow the nominee to operate the mutual fund account during the investor's lifetime.
✓To simplify the process of transmitting units to legal heirs upon the death of the sole or all unit holders.
CTo appoint a power of attorney for managing the investment.
DTo designate an alternate beneficiary in case the primary investor defaults on payments.
💡 Nomination helps in simplifying the transmission of units to the nominated person(s) upon the death of the sole unit holder or all unit holders, without requiring a cumbersome legal heirship process. The nominee only receives the units as a trustee for the legal heirs and does not gain ownership during the investor's lifetime.
Q261HardConsolidated Account Statement (CAS)
An investor holds mutual fund units in physical (statement of account) form across multiple AMCs and also holds some units in dematerialized form. Which entity is responsible for providing a Consolidated Account Statement (CAS) encompassing all these holdings?
AThe largest AMC by AUM where the investor has holdings.
BThe Registrar and Transfer Agent (RTA) of each respective AMC.
✓The Depository (NSDL or CDSL) where the investor has a demat account.
DAMFI (Association of Mutual Funds in India).
💡 SEBI mandates that Depositories (NSDL and CDSL) issue a single Consolidated Account Statement (CAS) to an investor who has both demat account holdings and mutual fund holdings in physical (statement of account) form. This CAS consolidates all such holdings.
Q262MediumMinor Investments
What happens to the investments made by a minor upon attaining majority?
AThe units are automatically redeemed, and proceeds are transferred to the minor's bank account.
BThe minor's guardian continues to operate the account until the minor requests a change.
✓The minor needs to provide fresh KYC details and confirm the investment status to convert the account into a major's account.
DThe units are frozen, and no transactions can occur until a court order is obtained.
💡 Upon attaining majority, the minor's account status changes. The erstwhile minor must submit fresh KYC documents, a signature attestation, and a request to change the status from 'minor' to 'major' to the AMC. Only after this process is completed can the individual operate the account.
Q263MediumSystematic Transfer Plan (STP)
When an investor opts for a Systematic Transfer Plan (STP), which instruction is typically NOT part of the setup?
AThe source scheme from which units will be transferred.
BThe target scheme into which units will be transferred.
CThe fixed amount or number of units to be transferred at regular intervals.
✓The specific NAV at which the transfer will occur.
💡 An STP involves transferring a fixed amount or units from one scheme (source) to another (target) at predefined intervals. The transfers occur at the prevailing NAV on the date of transfer, similar to regular purchase/redemption transactions. Investors cannot specify a 'specific NAV' for the transfer; NAVs are market-determined.
Q264MediumTransaction Submission Modes
Which of the following is NOT a permissible mode for submitting mutual fund transaction requests (purchase, redemption, switch)?
APhysical application form at an RTA office.
BOnline through the AMC's website or an aggregator platform.
✓Through a registered mutual fund distributor after physically collecting cash from the investor.
DThrough an authorized common service center (CSC) for rural investors.
💡 Mutual fund distributors are strictly prohibited from collecting physical cash from investors for any transaction. All payments must come directly from the investor's bank account via cheque, online transfer, or other approved electronic means. Other options are valid submission modes.
Q265HardDormant Accounts
Which of the following conditions is most likely to classify a mutual fund folio as 'dormant' or 'inoperative' by the RTA/AMC?
AThe investor has not updated their email address for five years.
✓There have been no financial transactions (purchase, redemption, switch, SIP/SWP/STP) in the folio for a continuous period of three years.
CThe investor has not opted for an online transaction facility.
DThe total value of investments in the folio is less than INR 1,000.
💡 A mutual fund folio is typically classified as 'dormant' or 'inoperative' if there have been no financial transactions (purchases, redemptions, switches, SIP/SWP/STP installments) for a continuous period, often specified as 3-5 years. This measure is primarily to mitigate fraud risk and requires enhanced due diligence for future transactions. Other options are generally not triggers for dormancy.
Q266MediumTransmission of Units
In the context of mutual funds, what is 'transmission of units'?
ATransferring units from one investor's folio to another investor's folio for consideration.
✓The process of transferring units from a deceased unit holder to their legal heirs or nominee.
CShifting units from one scheme to another within the same AMC.
DConverting physical units into dematerialized form.
💡 Transmission of units refers to the process by which units of a deceased unit holder are transferred to the surviving joint holder(s), nominee(s), or legal heir(s) based on the legal framework, without any consideration being paid. This is distinct from 'transfer' which involves a sale/purchase.
Q267HardSpecial Investor Categories - Minors
A guardian invests in a mutual fund scheme on behalf of a minor. Upon the minor attaining majority, what is the mandatory action required to continue operating the folio?
AThe folio automatically converts to a major's folio after 18 years.
BThe guardian must submit a fresh KYC for the minor as a major and update bank details.
CThe minor must apply for a new folio as a major and transfer units from the old folio.
✓The minor, upon attaining majority, must provide fresh KYC details, updated bank account details, and confirm the intent to continue the folio, ceasing the guardian's authority.
💡 Upon a minor attaining majority, the guardian's authority ceases. The erstwhile minor must submit fresh KYC documents, update their bank account details (as the guardian's bank account can no longer be used), and provide a request to change the status of the folio from minor to major. This is a mandatory process for continued operation.
Q268EasyRole of R&T Agents
Which of the following is a key responsibility of the Registrar and Transfer Agent (R&T Agent) in the mutual fund industry?
AManaging the fund's investment portfolio.
BProviding investment advice to unitholders.
✓Processing investor transactions like purchases, redemptions, and switches.
DSetting the daily Net Asset Value (NAV) of schemes.
💡 The R&T Agent is responsible for maintaining investor records, processing investor transactions (purchases, redemptions, switches, SIPs, etc.), sending Statements of Account, and handling other investor service requests. The AMC manages the portfolio, and the NAV is calculated by the AMC based on the valuation principles.
Q269HardIn-Person Verification (IPV)
For non-Aadhaar based KYC, what is the specific requirement for 'In-Person Verification (IPV)'?
AIt must be conducted by a SEBI registered investment advisor.
✓It must be conducted by an AMFI certified distributor or authorized personnel of the AMC/RTA.
CIt is optional and only required if the investment amount exceeds a certain threshold.
DIt must be conducted by a public notary.
💡 For non-Aadhaar based KYC, In-Person Verification (IPV) is mandatory and must be carried out by AMFI certified distributors who have undergone a special training, or by authorized personnel of the AMC/RTA. This is to ensure that the person presenting the documents is the actual investor. (SEBI Master Circular for Mutual Funds, Section I, KYC Requirements - In-Person Verification)
Q270MediumPAN and KYC requirements
For an investment in a mutual fund, if the PAN of the investor is not available, what is the maximum aggregate amount that can be invested by an investor per financial year under PAN-exempted categories (e.g., Micro SIPs)?
A₹10,000
B₹25,000
✓₹50,000
D₹1,00,000
💡 As per SEBI regulations, investments up to ₹50,000 per investor per financial year per mutual fund are allowed without a PAN, specifically for Micro SIPs, provided the investor submits KYC documents other than PAN, such as a proof of identity and address.
Q271HardNAV and Cut-off Timings
What is the typical cut-off time for receiving applications for liquid funds to be eligible for the previous day's NAV, for investments up to Rs. 5 lakh?
✓1:00 PM on the transaction day.
B3:00 PM on the transaction day.
C5:00 PM on the transaction day.
DThe previous day's NAV is not applicable for liquid funds; it's always the current day's NAV.
💡 For liquid funds, if the application is received before 1:00 PM on a business day, and funds are available for utilization, the previous day's NAV is applicable for investments up to Rs. 5 lakh. For amounts above Rs. 5 lakh, or applications received after 1:00 PM, the NAV of the day the funds are available for utilization is applicable.
Q272EasyNAV Applicability and Cut-off Times
For a purchase application in an equity-oriented mutual fund scheme, what is the cut-off time for the applicability of the same day's NAV?
A1:00 PM
B2:00 PM
✓3:00 PM
D4:00 PM
💡 For equity-oriented schemes, if a purchase application is received before 3:00 PM along with the realization of funds, the Net Asset Value (NAV) of the same day is applicable.
Q273HardFATCA/CRS
What is the primary objective of the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) compliance requirements for mutual fund investors in India?
ATo facilitate faster redemption processing for foreign investors
BTo prevent money laundering and terrorist financing activities
✓To ensure tax transparency and exchange of information on financial accounts between countries
DTo simplify the KYC process for international investors
💡 FATCA (Foreign Account Tax Compliance Act, a US law) and CRS (Common Reporting Standard, an OECD initiative) are international standards for the automatic exchange of information on financial accounts between tax authorities. Their primary objective is to combat tax evasion by ensuring tax transparency and facilitating the exchange of information about financial accounts held by tax residents of participating jurisdictions.
Q274HardMinor Attaining Majority
When a minor unit holder attains majority, what is the mandatory action required from the former minor to continue holding the mutual fund units?
AThe guardian must transfer the units to a new folio opened in the minor's name.
✓The former minor must submit a new KYC application, PAN, and updated bank details, and sign a fresh application form.
CThe fund house automatically converts the folio to an adult folio upon receiving the minor's birth certificate.
DThe units are compulsorily redeemed, and proceeds are paid to the former minor.
💡 Upon attaining majority, the former minor's status changes. They are required to complete fresh KYC, provide their own PAN, update bank details, and submit a fresh application form with their signature to affirm their intent to continue the investment as an adult. Until this process is completed, no new transactions are allowed in the folio.
Q275HardFATCA and CRS
Which of the following statements is true regarding the FATCA and CRS requirements for mutual fund investors?
AThey apply only to Non-Resident Indian (NRI) investors.
✓They are primarily for tax reporting to foreign governments and require self-certification from all investors.
CThey are voluntary disclosures and not mandatory for investment.
DThey only apply to institutional investors, not individual investors.
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) are international initiatives for automatic exchange of financial account information to combat tax evasion. Mutual funds are required to collect self-certification regarding tax residency from ALL investors (including resident Indians) and report relevant information to tax authorities, which may then be shared with foreign governments.
Q276MediumPower of Attorney (PoA)
Which of the following transactions can typically NOT be executed by a Power of Attorney (PoA) holder on behalf of the investor in a mutual fund folio?
APurchase of units
BRedemption of units
CSwitch transactions between schemes
✓Changing the nominee of the folio
💡 While a PoA holder can generally execute financial transactions like purchases, redemptions, and switches, personal decisions such as changing or adding nominees usually require the direct signature or consent of the unitholder, or very specific, explicit powers in the PoA which are rarely granted for such personal matters.
Q277HardMinor's Account Operation
When a minor unitholder attains majority, what is the mandatory action required to continue operating their mutual fund account?
AThe guardian must re-register the account in their own name
BThe account automatically converts to a major's account and the minor can transact
✓The erstwhile minor, now major, must submit a fresh KYC and sign a form to change the status
DThe units are compulsorily redeemed and proceeds paid to the major
💡 Upon a minor attaining majority, the erstwhile minor must submit a fresh KYC application with their updated details (including PAN and photograph) and a signed request to change the account status from 'minor' to 'major' to continue operating the account. The guardian's authority ceases.
Q278MediumChanges in Investor Details (Bank Account)
When an investor requests a change in their registered bank account details for mutual fund investments, what is typically required to ensure the security of the transaction and prevent fraud?
AA simple email request from the registered email ID
✓A signed request form along with a cancelled cheque of the *new* bank account
CA verbal confirmation over the phone by the investor
DA signed request form along with a cancelled cheque of the *old* bank account
💡 To prevent fraudulent changes, AMCs typically require a physical signed request form along with proof of the new bank account, such as a cancelled cheque bearing the investor's name and account number, or a bank statement/passbook copy. This verifies the new account details and the investor's identity.
Q279EasyCut-off timings
For investments in Liquid and Overnight funds, to receive the previous day's NAV, what is the latest time by which funds must be available with the AMC?
A3:00 PM on the transaction day.
B1:00 PM on the transaction day.
C2:00 PM on the transaction day.
✓1:30 PM on the transaction day.
💡 For subscriptions in Liquid and Overnight Funds, the NAV of the previous business day is applicable if the application is received before the cut-off time (currently 1:30 PM) and funds are available for utilization by the AMC before the cut-off time.
Q280EasyStatement of Account
As per SEBI regulations, within how many working days should a Statement of Account be dispatched to investors after each financial transaction (e.g., purchase, redemption, switch)?
✓3 working days
B5 working days
C7 working days
D10 working days
💡 SEBI (Mutual Funds) Regulations, 1996, mandate that the Statement of Account reflecting transactions should be dispatched to the unitholders within 3 working days of the transaction.
Q281HardRedemption Suspension
Which of the following is a permissible reason for an AMC to temporarily suspend redemption requests in a mutual fund scheme?
ATo prevent investors from exiting during a market downturn.
✓When there are insufficient funds due to large-scale redemptions, especially in illiquid assets.
CTo ensure the fund manager can buy more units at lower prices.
DTo penalize investors who frequently redeem their units.
💡 An AMC can temporarily suspend redemption requests under exceptional circumstances, such as when there are insufficient funds due to large-scale redemptions, particularly in schemes holding illiquid assets, or due to market dislocation, to protect the interests of the remaining unit holders. This is done with prior approval from the Trustees and SEBI. Options a, c, and d are not permissible reasons.
Q282EasyTransaction Confirmation
After making a fresh purchase in a mutual fund scheme, what document does an investor receive as proof of transaction?
AShare Certificate
BUnit Certificate
✓Statement of Account or Confirmation of Allotment
DPassbook
💡 Upon successful processing of a purchase transaction, investors receive a Statement of Account (SOA) or a Confirmation of Allotment, detailing the transaction, the number of units allotted, and the NAV.
Q283EasyRole of RTA
What is the primary role of a Registrar and Transfer Agent (RTA) in the mutual fund industry?
ATo manage the investment portfolio of the mutual fund scheme.
✓To collect and process investor applications, maintain investor records, and handle redemption requests.
CTo provide investment advisory services to investors.
DTo act as the custodian of the mutual fund's assets.
💡 Registrar and Transfer Agents (RTAs) like CAMS and KFintech are responsible for back-office operations, including processing transactions (purchases, redemptions, switches), maintaining unit holder records, dispatching statements of account, and handling investor service requests on behalf of AMCs.
Q284MediumTransmission of Units
In the event of the death of a sole unit holder, which of the following documents is generally NOT required for the transmission of mutual fund units to the nominee(s)?
ADeath certificate of the deceased unit holder.
BKYC acknowledgement of the nominee(s).
COriginal unit certificate/Statement of Account of the deceased.
✓An affidavit from a local notary confirming the deceased's marital status.
💡 For transmission of units to nominees, standard documents include the death certificate, KYC of the nominees, and the original financial documents of the deceased. An affidavit confirming the deceased's marital status is not a typical requirement for nominee-based transmission.
Q285MediumNomination
Which of the following statements regarding the nomination facility in mutual funds is correct?
✓A minor can be a nominee only if a guardian is appointed.
BA non-individual entity (e.g., a trust or company) can be a nominee.
CNomination is mandatory for all mutual fund investments.
DA maximum of three nominees are allowed per folio.
💡 As per SEBI regulations, a minor can be a nominee in a mutual fund folio, but a guardian must be appointed to receive the units on behalf of the minor. Non-individual entities cannot be nominees. Nomination is optional, not mandatory. While some platforms might allow multiple, SEBI guidelines generally permit one or up to three nominees for a folio with specified percentages, but the core rule allows for one or more, not strictly limited to three as a maximum for all cases.
Q286HardFATCA and CRS Compliance
Under FATCA and CRS regulations, what is the primary purpose of collecting self-certification from mutual fund investors regarding their tax residency?
ATo determine eligibility for tax deductions
✓To report financial information of non-resident investors to their respective tax authorities
CTo assess the investor's creditworthiness
DTo verify the source of funds for investment
💡 FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) are international standards for the automatic exchange of financial account information. The self-certification helps financial institutions (like AMCs) identify and report financial information of account holders who are tax residents of other participating jurisdictions to the relevant tax authorities. (Ref: CBDT Notifications and FATCA/CRS guidelines).
Q287MediumGrievance Redressal
An investor has submitted a grievance to an AMC regarding a delay in receiving redemption proceeds. If the investor is not satisfied with the AMC's resolution, what is the next recourse available to them?
AApproach the Reserve Bank of India (RBI).
✓File a complaint directly with the Securities and Exchange Board of India (SEBI) through SCORES.
CInitiate legal proceedings in a civil court immediately.
DContact the Association of Mutual Funds in India (AMFI).
💡 If an investor is not satisfied with the resolution provided by the AMC, or if the AMC fails to respond within the stipulated time, the investor can escalate the complaint to SEBI through its online grievance redressal system, SCORES (SEBI Complaints Redress System).
Q288EasyStatement of Account (CAS)
Within how many working days must a consolidated account statement (CAS) be dispatched to an investor for any transaction in a month?
A5 working days
B7 working days
✓10 working days
D15 working days
💡 As per SEBI circulars, a Consolidated Account Statement (CAS) must be dispatched to an investor within 10 days of the end of the month in which a transaction has taken place.
Q289MediumInvestments by Minors
In the context of a minor's investment in a mutual fund, what is generally required when the minor attains majority?
AThe units are automatically redeemed and proceeds are paid to the erstwhile minor.
✓The erstwhile minor must submit KYC documents and confirm their desire to continue the investment, or request redemption.
CThe guardian continues to operate the account until the minor requests a change.
DThe folio is frozen, and no transactions are allowed until a new nominee is appointed.
💡 Upon the minor attaining majority, the erstwhile minor must complete KYC formalities in their own name and confirm their intention to continue the investment. All operations by the guardian cease, and the account can only be operated by the major.
Q290MediumGrievance Redressal
If an investor's grievance against a mutual fund remains unresolved after approaching the Asset Management Company (AMC), what is the next appropriate body to escalate the complaint to?
AReserve Bank of India (RBI)
✓Association of Mutual Funds in India (AMFI)
CMinistry of Finance
DInvestor Education and Protection Fund Authority (IEPFA)
💡 The standard grievance redressal hierarchy for mutual fund investors is to first approach the AMC. If the issue is not resolved, the next step is to escalate it to the Association of Mutual Funds in India (AMFI). If still unresolved, the investor can approach SEBI (via SCORES).
Q291EasyUnclaimed Dividends/Redemption
As per SEBI (Mutual Funds) Regulations, 1996, if dividend or redemption proceeds remain unclaimed by investors for a period exceeding ______ years from the due date, the amount must be transferred to the Investor Protection Fund of the AMC.
A1 year
✓3 years
C5 years
D7 years
💡 SEBI (Mutual Funds) Regulations, 1996, mandate that any unclaimed redemption or dividend amounts exceeding 3 years from the due date must be transferred to the Investor Protection Fund (IPF) of the respective Asset Management Company (AMC). Before 3 years, these amounts are held in a separate bank account.
Q292MediumGrievance Redressal Mechanism
An investor has a grievance regarding their mutual fund investment. After exhausting the grievance redressal mechanism at the AMC and the RTA, which of the following bodies should the investor approach next for redressal?
AReserve Bank of India (RBI)
✓Securities and Exchange Board of India (SEBI) through SCORES
CAssociation of Mutual Funds in India (AMFI)
DMinistry of Finance
💡 If an investor is not satisfied with the resolution provided by the AMC or RTA, the next step is to escalate the complaint to SEBI through its SEBI Complaint Redressal System (SCORES). AMFI primarily acts as a self-regulatory organization, but SEBI is the regulatory authority for investor protection.
Q293EasySystematic Investment Plan (SIP)
Which of the following best describes a Systematic Investment Plan (SIP)?
AA lump-sum investment made at regular intervals.
BA strategy to withdraw a fixed amount at regular intervals.
✓A facility to invest a fixed amount regularly into a mutual fund scheme.
DA method to transfer funds from one scheme to another within the same AMC.
💡 A Systematic Investment Plan (SIP) allows investors to invest a fixed amount of money at regular intervals (e.g., monthly, quarterly) into a chosen mutual fund scheme. Option B describes an SWP, and Option D describes a Switch.
Q294HardAnti-Money Laundering (AML) - PMLA
Under the Prevention of Money Laundering Act (PMLA), what is the threshold for a 'suspicious transaction' reportable by a mutual fund to the Financial Intelligence Unit - India (FIU-IND)?
ATransactions above INR 10 lakhs.
BTransactions above INR 50 lakhs.
✓Any transaction, irrespective of value, that gives rise to a reasonable suspicion of being involved in money laundering.
DOnly cash transactions above INR 2 lakhs.
💡 PMLA defines a suspicious transaction not primarily by its value, but by its nature. Any transaction, regardless of the amount, that gives rise to a reasonable suspicion that it may involve proceeds of crime or financing of terrorism, is considered suspicious and must be reported to FIU-IND.
Q295MediumNomination Facility and POA
Can a Power of Attorney (POA) holder nominate someone for the units held by the original investor?
AYes, a POA holder can nominate if explicitly authorized in the POA document.
✓No, nomination is a personal right and cannot be exercised by a POA holder.
CYes, but only if the POA is registered with the AMC.
DYes, but only if the POA holder is a family member.
💡 Nomination is considered a personal right of the unit holder and cannot be exercised by a Power of Attorney (POA) holder. The original unit holder must make the nomination themselves.
Q296MediumTransmission of Units
In the event of the death of the sole unitholder, what is the maximum time frame within which the AMC/RTA is expected to process a complete transmission request?
A7 working days
✓15 calendar days
C30 working days
D90 calendar days
💡 SEBI circulars mandate that transmission requests for mutual fund units, once all necessary documents are submitted, should be processed within 15 calendar days.
Q297EasyGrievance Redressal
Which of the following bodies is NOT directly involved in the grievance redressal mechanism for mutual fund investors?
AAMC (Asset Management Company)
BAMFI (Association of Mutual Funds in India)
✓IRDAI (Insurance Regulatory and Development Authority of India)
DSEBI SCORES (SEBI Complaints Redress System)
💡 IRDAI is the regulatory body for the insurance sector, not mutual funds. The primary grievance redressal hierarchy for mutual fund investors involves the AMC first, then AMFI, and finally SEBI through its SCORES platform.
Q298HardMinor to Major Status Change
When a unit holder who invested as a minor attains majority, which of the following documents is NOT typically required for the change of status from 'minor' to 'major' in the mutual fund records?
AA letter from the erstwhile guardian and the major confirming the change.
BKYC documents of the major.
CBank account details of the major.
✓A new nomination form signed by the major.
💡 While a new nomination is advisable and can be submitted by the major, it is not a mandatory requirement for the change of status from minor to major. The primary requirements are a request letter, KYC of the major, and updated bank details of the major, along with the guardian's confirmation. The existing nomination made by the guardian becomes invalid upon the minor attaining majority, and the major *can* make a fresh nomination, but it's not a prerequisite for the status change itself.
Q299EasySystematic Investment Plan (SIP)
Which of the following is a common way to register a Systematic Investment Plan (SIP) mandate for recurring investments in mutual funds?
ASubmitting a post-dated cheque for each installment.
BProviding a one-time bank transfer for the entire SIP duration.
✓Registering a NACH (National Automated Clearing House) mandate.
DSetting up a direct debit from a credit card.
💡 While some AMCs might allow limited post-dated cheques, the most common, efficient, and preferred method for SIP registration is through a NACH (National Automated Clearing House) mandate. This allows for automated debits from the investor's bank account on pre-specified dates. Direct debit from a credit card is generally not permitted for SIPs.
Q300EasyGrievance Redressal
What should be the first point of contact for an investor to register a complaint regarding their mutual fund investment?
ASEBI directly through its SCORES portal
✓The Asset Management Company (AMC) or its Registrar and Transfer Agent (RTA)
CAMFI directly through its grievance redressal mechanism
DA consumer court in their jurisdiction
💡 The primary and first point of contact for any investor grievance is the Asset Management Company (AMC) itself or its designated Registrar and Transfer Agent (RTA). If the issue remains unresolved at this level, the investor can then escalate the complaint to AMFI or SEBI (SCORES).
Take the Full NISM Mock Test
Timed test with score tracking, chapter analysis & performance report.
Start Full Mock Test →