Feel Real Exam 3- NISM-Series-V-A: Mutual Fund Distributors Certification

Mutual funds benefit from economies of scale, leading to cost advantages.

The investment range in debt instruments in a Conservative Hybrid Fund is between 75 percent and 90 percent of total assets.

Asset Management Company is expected to make continuous efforts to remind investors to claim their unclaimed dividend dues.

Mr. Amit has to give the purchase request specifying the amount he wants to invest in the mutual fund scheme.

In the Dividend Re-investment option, the dividend is reinvested in the same scheme, and additional units are allotted to the investor without any transaction being done by the investor.

An investor can remit money in an Indian mutual fund from abroad through SWIFT transfer.

Mr. Sonu is not likely to get any remedy from the AMC as the offer document clearly states that mutual fund investments are subject to market risks.

Beta is a measure of risk for equity schemes, and variance is a measure of risk for both debt and equity schemes. A fall in prices of debt securities due to default or other reasons is referred to as a 'credit event'.

The distributor must assess the implications of capital gains tax and exit loads on the investor's portfolio during repurchases/redemptions.

AMCs are required to establish a due diligence process to regulate distributors who have a presence in more than 20 locations.

KIM and SID are not two broad types of scheme documents. The correct statement is that KIM is essentially a summary of the SID and SAI.

In the event of the death of one of the joint holders, the units will continue to be held by the surviving joint holders.

Beta coefficient is used to measure the fund's risk relative to the market index.

The sponsor is the promoter of the mutual fund, not the Chief Executive.

Art is not considered a commodity as it cannot be standardized like other commodities such as fibers, spices, and energy products.

SEBI regulates mutual funds in India.

The number of units allotted can be calculated by dividing the amount invested by the NAV. In this case, 2,00,000 / 50 = 4000 units.

Unitholders have the right to inspect key documents like Memorandum & Articles of Association, RTA agreement, Custodial Services Agreement, and others with respect to their mutual fund investments.

Recency bias applies to both positive and negative events.

The ARN code number is issued by AMFI to mutual fund distributors, and it is not required to be renewed every three years.

The belief that one can always outperform the market is an example of overconfidence/optimism bias.

The investors of a mutual fund have the authority to terminate the AMC or wind up a scheme if 75% or more of the unit holders agree to it.

The exit load is not applicable on the purchase of units. The units will be allotted based on the NAV.

Systematic Withdrawal Plan can be used in lieu of Income distribution cum capital withdrawal pay-outs.

As per SEBI rules, the mutual fund shall display the unaudited financial results on the AMC website.

A conservative investor seeks lower risk and is willing to accept lower returns in exchange for stability and security.

Stock exchanges play a crucial role in facilitating the buying and selling of mutual fund units. Investors can buy and sell mutual fund units on stock exchanges, making it a convenient and accessible platform for investment. However, there is no compulsory lock-in period of 3 years for units purchased on a stock exchange. The lock-in period, if applicable, depends on the specific mutual fund scheme. Stock exchanges provide a broad and liquid marketplace where mutual fund asset management companies (AMCs) can connect with investors, expanding their reach and distribution network. Therefore, the correct answer is "Stock exchanges offer a good channel for mutual fund AMCs to reach out to the investors."

In the case of ETFs, the minimum investment in securities of a particular index shall be 95 percent of total assets.

The Asset Management Company (AMC) has the authority to terminate the empanelment of a mutual fund distributor at any time.

Sector funds have a high concentration risk as they invest in stocks of a single sector.

The sponsors apply to SEBI for the registration of a mutual fund.

The best strategy in selecting a mutual fund scheme is not solely based on its past performance. Past performance is just one factor to consider, and other factors such as investment objective, risk profile, and future prospects should also be taken into account. When an investor wants to redeem from a scheme, the distributor should suggest redemption from the scheme with the minimum exit load.

In an Assured Return scheme, if the scheme is not able to pay the assured return amount, then the guarantor has to pay the same. Investor returns might vary from the scheme returns on account of choices regarding the investment schedule. The returns published in a mutual fund advertisement do not factor the entry or exit load, as may be applicable.

The minimum investment in G-Secs in case of a Gilt Fund is 80% of total assets.

Value investment styles involve buying stocks that are priced lower in the markets compared to their assessment based on fundamental analysis.

A specific Board resolution authorizes a company to invest in a specific mutual fund scheme.

The risks in the scheme are listed in the segment on Risk Factors in Section I, Sub-section A of the Scheme Information Document (SID). This section includes standard or general risk factors that affect all mutual fund schemes.

KIM and SID are not two broad types of scheme documents. The correct statement is that KIM is essentially a summary of the SID and SAI.

SEBI regulates mutual funds in India.

The AMC has the authority to change the Total Expense Ratio of a scheme, and it is mandatory to communicate this change to all the unit holders.

In case of a conflict between the Principles of Fair Valuation and AMC's Valuation Guidelines, the Principles of Fair Valuation will take precedence.

The sponsors apply to SEBI for the registration of a mutual fund.

Sale of units of equity-oriented mutual funds (delivery-based) attracts Securities Transaction Tax (STT) at the rate of 0.001%.

The Key Information Memorandum (KIM) is a summary of both the Scheme Information Document (SID) and the Statement of Additional Information (SAI). It contains essential information for investors to make decisions about the investment's suitability.

Investors can hold the units of a mutual fund in fractions of 1 unit. Investors are not restricted to whole units; they can hold fractional units as well.

Art is not considered a commodity as it cannot be standardized like other commodities such as fibers, spices, and energy products.

The KIM should be updated at least twice in a year based on the relevant data and information.

Appeals against the rulings of SEBI are handled by the Securities Appellate Tribunal (SAT).

Standing instructions like Systematic Investment Plans (SIP) are registered in a minor folio only until the date of the minor attaining majority, even though the instructions may be for an extended period. Therefore, the SIP will be registered for only 1 year until the investor attains majority.

The expense ratio is more critical for debt funds compared to equity funds. Ultra-short term debt funds do not have to mandatorily invest in high credit quality debt securities.

The belief that one can always outperform the market is an example of overconfidence/optimism bias.

Only individual investors are allowed to do a nomination.

Analyzingmutual fund performance and making it available to investors is not a function of Registrars and Transfer Agents (RTAs). The functions of RTAs include maintaining investors' records, processing redemption and dividend payouts, and updating unit capital of the fund.

An SIP can be used to initiate a fresh purchase in a scheme and open a folio. It can also be used for additional purchases in an existing folio.

The performance of a portfolio is influenced by various factors, including stock selection, investment policy, and asset allocation strategy.

The equity share prices of gold mining companies can depend on the gold reserves of the company, the operational efficiency and management of the company, and international prices of gold.

In the usual course of events, a fund manager will have to provide the maximum liquid assets for Open-end funds.

The TER of mutual fund schemes is regulated by SEBI, and there are specific regulations regarding the cap for TER and the periodic disclosure of the same.

Time stamping is relevant only for financial transactions and not for non-financial transactions.

Nomination does not create any title or beneficial interest in the units in favor of the nominee after the death of the unit-holder. The nominee holds the units in trust for the legal heirs of the investor.

The Fund Fact Sheet is frequently used by media and research analysts to check the performance of various schemes of a mutual fund.

Net Asset Value (NAV) has to be declared for up to 4 decimal points in the case of liquid funds.

An index fund aims to replicate the performance of a specific benchmark index. However, the actual performance of an index fund may deviate from its benchmark due to tracking error. Tracking error represents the variability in returns between the index fund and its benchmark. Factors such as transaction costs, fund expenses, sampling techniques, and market conditions can contribute to the tracking error. It indicates how closely the index fund tracks the benchmark. Therefore, the correct answer is "Tracking error."

The Statement of Additional Information (SAI) needs to be regularly updated by the end of 3 months of every financial year, and material changes have to be updated on an ongoing basis and uploaded on the websites of the mutual fund and AMFI.

Investors select a mutual fund scheme based on whether their investment objective aligns with that of the scheme.

The AMC is responsible for ensuring the valuation of the securities in a mutual fund scheme's portfolio is true and fair.

In the mutual fund application form, when an NRI subscribes for the units, they need to provide their current overseas address along with other required information.

An investor in a mutual fund scheme is the beneficial owner of the units they have bought.

Charitable Trusts / Private Trusts are considered institutional investors.

The distributor must assess the implications of capital gains tax and exit loads on the investor's portfolio during repurchases/redemptions.

Companies are considered as institutional investors, while NRIs, HUFs, and HNIs are considered as individual investors.

In a close-ended mutual fund, the units are traded on the stock exchange between the unit holders/investors themselves.

The AMC can charge expenses that are incurred to manage the fund.

Analyzing mutual fund performance and making it available to investors is not a function of Registrars and Transfer Agents (RTAs). The functions of RTAs include maintaining investors' records, processing redemption and dividend payouts, and updating unit capital of the fund.

The transaction costs for investments in real estate are generally high compared to other financial assets.

In the Income Distribution cum capital withdrawal option, the investor receives the dividend in their bank account.

It is mandatory for the AMC to disclose the valuation policy, but the AMC is accountable for the procedures for detecting incorrect valuation.

A model portfolio for Senior Citizens may have exposure to equity, depending on the individual's risk appetite, financial goals, and investment horizon. While it is common for portfolios designed for senior citizens to havesome allocation to fixed income and less volatile assets, including debt instruments, it is not necessary for them to completely exclude equity. The asset allocation in a model portfolio for senior citizens should be tailored to their specific financial situation and risk tolerance. Some senior citizens may have a higher risk tolerance or a longer investment horizon, which could warrant a certain level of exposure to equity to generate potentially higher returns. Therefore, the statement "With respect to a model portfolio for Senior Citizens, it will not have any exposure to equity" is false.

Share certificates and debentures are not physical assets. They are considered financial assets.

Mutual funds must publish their unaudited accounts once every six months on the AMC website.

Nomination does not create any title or beneficial interest in the units in favor of the nominee after the death of the unit-holder. The nominee holds the units in trust for the legal heirs of the investor.

The redemption value of the investment is calculated by multiplying the number of units (2000) by the NAV (Rs 13), then subtracting the exit load (1 percent) from the total value.

Passive funds invest based on a specified index they seek to track. Gold Exchange Traded Fund, which generates returns in line with the gold index, is a passive fund.

Individuals can register up to five bank accounts with a mutual fund, while a non-individual can register up to ten bank accounts.

Focused funds carry higher risks as compared to diversified funds due to their highly concentrated portfolio.

SEBI has prescribed cut-off timing to determine the applicable NAV to ensure fairness to investors.

The management of investments by mutual funds is governed by both the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

SEBI specifies the heads of expenses that can be charged to a mutual fund scheme by the Asset Management Company.

KYC Registration Agencies are responsible for the implementation of uniform KYC across investors in the securities market, including mutual fund investors.

When the units are pledged, the unit holder cannot sell the units until the pledgee gives written no-objection to release the pledge.

An investor in a mutual fund scheme is the beneficial owner of the units they have bought.

The number of units allotted can be calculated by dividing the amount invested by the NAV. In this case, 2,00,000 / 50 = 4000 units.

Product Label helps investors understand the suitability of a mutual fund scheme to them.

Appeals against the rulings of SEBI are handled by the Securities Appellate Tribunal (SAT).

As per the Advertisement Guidelines for Mutual Funds, point-to-point returns on a standard investment of Rs. 10,000 shall also be shown in addition to CAGR for a scheme that has been in existence for more than 3 years.

Liquid funds provide high liquidity, allowing quick redemption of investments.

The Asset Management Company (AMC) is expected to make a continuous effort to remind the investors through letters to claim their dues. The AMC is responsible for notifying and reminding investors about unclaimed dividend amounts.

Inflation rate plays a crucial role in estimating the future value of a financial goal.

Mark to Market involves valuing each security in the portfolio at its current market value.