Key Regulations
15 questions. Each answer is explained.
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Learn these topics
More units in NISM Series X-A
- Introduction to Personal Financial Planning4
- Time Value of Money14
- Evaluating the Financial Position of Clients5
- Debt Management and Loans2
- Introduction to the Indian Financial Markets4
- Securities Market Segments21
- Introduction to Investment5
- Investing in Stocks20
- Investing in Fixed Income Securities25
- Understanding Derivatives25
- Mutual Funds25
- Portfolio Manager10
- Overview of Alternative Investment Funds (AIFs)15
- Introduction to Modern Portfolio Theory14
- Portfolio Construction Process11
- Portfolio Performance Measurement and Evaluation25
- Operational Aspects of Investment Management15
- Ethical Issues15
- Grievance Redress Mechanism15
Exam format
| Questions | 135 · 1 or 2 marks each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 25% · 0.25 or 0.5 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series X-A Investment Adviser (Level 1)
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 15 questions on Key Regulations, with answers
Q1Under the SEBI Act, 1992, what are SEBI's main aims?
Option A. To set interest rates and manage the rupee's exchange rate
Why it is wrong: Interest rates and the rupee are matters for the RBI.
Option B. To protect investors and to develop and regulate the securities market — Correct answer
Option C. To fix the price at which every company issues its shares
Why it is wrong: Issue prices are set by issuers within SEBI's rules, not fixed by SEBI.
Option D. To guarantee the returns that investors earn through registered intermediaries
Why it is wrong: No regulator guarantees investment returns.
Answer: B. SEBI's aims are to protect investors' interests and to develop and regulate the securities market. The SEBI Act, 1992 sets out this mandate. Remember: SEBI's mandate: protect investors, and develop and regulate the securities market.
Hint, shown before you answer in practice mode: Common mistake: Mixing up SEBI's role with the RBI's role over rates and the currency.
X-A-241easyregulatory
Q2Which law provides for the recognition of stock exchanges and regulates contracts in securities?
Option A. The Securities Contracts (Regulation) Act, 1956 — Correct answer
Option B. The Securities and Exchange Board of India Act, 1992
Why it is wrong: The SEBI Act sets up SEBI and its powers. Recognition of stock exchanges comes from SCRA.
Option C. The Prevention of Money-Laundering Act, 2002
Why it is wrong: PMLA deals with money laundering and reporting.
Option D. The Indian Contract Act, 1872
Why it is wrong: The Contract Act is general contract law. It does not recognise exchanges.
Answer: A. The Securities Contracts (Regulation) Act, 1956 provides for recognising stock exchanges. It also regulates contracts in securities. Remember: SCRA covers stock exchange recognition and contracts in securities.
Hint, shown before you answer in practice mode: Common mistake: Assuming general contract law governs stock exchanges.
X-A-242easyregulatory
Q3Which person can give investment advice without registering as an investment adviser?
Option A. A person who advises clients on shares for a fee as the main line of business
Why it is wrong: Paid advice as the main business needs registration.
Option B. An online influencer who recommends shares to paying subscribers
Why it is wrong: Paid recommendations on specific shares need registration.
Option C. A retired banker who gives paid portfolio advice to many clients
Why it is wrong: Paid personal advice to clients needs registration, whatever the career.
Option D. A chartered accountant whose advice is only incidental to professional work — Correct answer
Answer: D. A chartered accountant giving advice only incidental to professional services is exempt. The IA Regulations list exemptions like this one. They do not cover anyone whose paid business is advice. Remember: Exemptions cover advice incidental to another professional or regulated activity, not advice sold as a business.
Hint, shown before you answer in practice mode: Common mistake: Treating any qualified professional as exempt even when advice is the main paid activity.
X-A-243mediumregulatory
Q4For how long must an investment adviser keep records such as client risk profiles and the advice given?
Option A. One year
Why it is wrong: One year is far shorter than the period SEBI requires.
Option B. Three years
Why it is wrong: Three years is shorter than the period SEBI requires.
Option C. At least five years — Correct answer
Option D. Only until the client relationship ends
Why it is wrong: Records must be kept for a set period, not only while the client stays.
Answer: C. Records must be preserved for at least five years. The IA Regulations allow physical or electronic records, and signed electronic records must be digitally signed. Remember: Advisers keep the required records for at least five years.
Hint, shown before you answer in practice mode: Common mistake: Thinking records can be deleted once the client relationship ends.
X-A-244mediumregulatory
Q5Who can carry out an investment adviser's yearly audit of compliance with the IA Regulations?
Option A. The adviser's own compliance officer, through an internal annual review
Why it is wrong: An internal review is not the outside audit the rules require.
Option B. A member of ICAI, ICSI or the Institute of Cost Accountants of India — Correct answer
Option C. A client who has been with the adviser for a year
Why it is wrong: Clients are not auditors.
Option D. The stock exchange where the clients trade
Why it is wrong: Exchanges do not audit an adviser's compliance.
Answer: B. The yearly compliance audit must be done by a member of ICAI, ICSI or the Institute of Cost Accountants of India. The adviser then submits the report as SEBI specifies. Remember: The yearly compliance audit is done by an outside CA, CS or cost accountant.
Hint, shown before you answer in practice mode: Common mistake: Treating an internal compliance review as the required audit.
X-A-245mediumregulatory
Q6An individual investment adviser's client count crosses 300 during the year. What must the adviser do?
Option A. Stop taking new clients until the next financial year
Why it is wrong: The rule requires a move to non-individual registration, not a pause.
Option B. Nothing, because client limits apply only to part-time investment advisers
Why it is wrong: The threshold applies to individual advisers.
Option C. Move to non-individual registration, applying within three months — Correct answer
Option D. Pass the extra clients to another adviser within a week
Why it is wrong: Transferring clients is not what the rule requires.
Answer: C. The adviser must inform the supervisory body and apply for registration as a non-individual adviser within three months. The same applies when fees in a financial year cross ₹3 crore, whichever comes first. Remember: Above 300 clients or ₹3 crore of fees in a year, an individual adviser must move to non-individual registration.
Hint, shown before you answer in practice mode: Common mistake: Assuming the adviser simply stops taking clients.
X-A-246hardregulatory
Q7The spouse of an individual investment adviser is a mutual fund distributor. Which arrangement do SEBI's rules allow?
Option A. The spouse may distribute to the adviser's clients if commission is disclosed
Why it is wrong: Disclosure does not make this allowed.
Option B. The spouse may distribute to others, but not to the adviser's own clients — Correct answer
Option C. The spouse must stop all distribution while the adviser is registered
Why it is wrong: The bar covers only the adviser's own clients.
Option D. The adviser may advise the spouse's distribution clients without limit
Why it is wrong: The adviser may not advise clients who take distribution services from family.
Answer: B. The family of an individual adviser may not distribute to the clients the adviser advises. The adviser also may not advise clients who receive distribution services from family members. Remember: An individual adviser's family must not distribute to the adviser's own clients.
Hint, shown before you answer in practice mode: Common mistake: Thinking disclosure makes a family distribution link acceptable.
X-A-247hardregulatory
Q8Which set of information must an adviser collect from a client for risk profiling under SEBI's rules?
Option A. Age, goals and time frame, income, assets, risk appetite and debts — Correct answer
Option B. Only the client's income and the amount to be invested
Why it is wrong: Income and amount alone leave out goals, assets, debts and risk appetite.
Option C. The client's favourite shares, recent trades and the brokers the client uses
Why it is wrong: Preferences and trades do not measure the risk the client can take.
Option D. Only the client's signature on a general risk statement
Why it is wrong: A signature collects no information about the client.
Answer: A. The adviser must collect the client's age, goals and time frame, income, existing assets, risk appetite and liabilities. It must also assess the client's capacity to absorb losses. Remember: A risk profile needs age, goals and time frame, income, assets, risk appetite and debts.
Hint, shown before you answer in practice mode: Common mistake: Profiling risk from income and the investment amount alone.
X-A-248mediumregulatory
Q9An adviser offers implementation services so that clients can act on its advice. Which practice is allowed?
Option A. Taking a referral fee from the broker if it is paid to a family member
Why it is wrong: No consideration is allowed at group or family level either.
Option B. Charging a commission that is built into the product's price
Why it is wrong: Embedded or indirect commission is also barred.
Option C. Helping clients invest with no commission or referral fee at any level — Correct answer
Option D. Requiring every client to use the adviser's preferred broker
Why it is wrong: Implementation must be optional for the client.
Answer: C. The adviser may help clients invest only if no commission or referral fee is received at any level. The rule covers embedded and indirect payments, and payments to the adviser's group or family. Clients may also choose not to use the service. Remember: Implementation is optional for the client and earns the adviser no commission at any level.
Hint, shown before you answer in practice mode: Common mistake: Thinking a referral fee paid to family falls outside the rule.
X-A-249hardregulatory
Q10Under SEBI's insider trading rules, what is unpublished price-sensitive information (UPSI)?
Option A. Price-sensitive company information that is not yet generally available — Correct answer
Option B. Any information printed in the company's annual report
Why it is wrong: Published information is generally available, so it is not UPSI.
Option C. Analysts' public forecasts of the company's profits
Why it is wrong: Public forecasts are not unpublished company information.
Option D. Information that the company has already given to the stock exchange for release
Why it is wrong: Once disclosed to the exchange, information is generally available.
Answer: A. UPSI is information about a company or its securities that is not generally available and is likely to move the price once public. Trading on it or passing it on is restricted. Remember: UPSI is unpublished information likely to move the price once it becomes public.
Hint, shown before you answer in practice mode: Common mistake: Treating information as UPSI even after it has been made public.
X-A-250mediumregulatory
Q11An adviser buys a share for himself just before telling many clients to buy it, then sells as their buying lifts the price. Which SEBI rules does this most directly breach?
Option A. The Intermediaries Regulations, as only a registration lapse
Why it is wrong: This is a fraudulent practice, not a registration lapse.
Option B. The Securities Contracts (Regulation) Act, as a defect in the contracts traded
Why it is wrong: The trades are valid contracts. The problem is the misconduct.
Option C. The money-laundering law, as a failure to report cash
Why it is wrong: This is market misconduct, not a reporting failure.
Option D. The rules against fraudulent and unfair trade practices (PFUTP, 2003) — Correct answer
Answer: D. Trading ahead of his own recommendation to profit from clients breaches the PFUTP Regulations, 2003. These rules forbid fraudulent, manipulative and unfair practices in the securities market. Remember: Trading ahead of one's own recommendation to profit from clients is a fraudulent and unfair trade practice.
Hint, shown before you answer in practice mode: Common mistake: Treating front-running as only a paperwork or registration issue.
X-A-251hardapplication
Q12Under the Prevention of Money-Laundering Act, where must a regulated intermediary report suspicious transactions?
Option A. To the client's bank branch
Why it is wrong: A bank branch is not where an intermediary files these reports.
Option B. To the investor helpline of the stock exchange where the client trades
Why it is wrong: Helplines handle investor queries, not suspicious transaction reports.
Option C. To the client's income tax officer
Why it is wrong: These reports go to the financial intelligence unit, not a tax officer.
Option D. To the Financial Intelligence Unit–India (FIU-IND) — Correct answer
Answer: D. Suspicious transaction reports go to the Financial Intelligence Unit–India (FIU-IND). PMLA also requires customer due diligence and record keeping. Remember: Suspicious transaction reports go to FIU-IND.
Hint, shown before you answer in practice mode: Common mistake: Thinking suspicious activity is reported to the client's bank.
X-A-252mediumregulatory
Q13Why does a minor's investment account need a guardian?
Option A. A minor's income is always taxed at a higher rate
Why it is wrong: Tax rules do not decide who may operate the account.
Option B. A minor cannot make a valid contract under the Indian Contract Act — Correct answer
Option C. SEBI forbids minors from owning any securities
Why it is wrong: Minors can own securities, operated through a guardian.
Option D. Banks cannot open any kind of account at all for a person under 18 years old
Why it is wrong: Accounts for minors can be opened, with a guardian.
Answer: B. A minor cannot make a valid contract under the Indian Contract Act. So a guardian acts for the minor until the minor turns 18. Remember: Minors cannot contract, so a guardian acts for them.
Hint, shown before you answer in practice mode: Common mistake: Thinking minors are barred from owning investments.
X-A-253easyconceptual
Q14Which law makes the dishonour of a cheque for insufficient funds a criminal offence?
Option A. The Negotiable Instruments Act, 1881 — Correct answer
Option B. The Consumer Protection Act, 2019
Why it is wrong: The Consumer Protection Act deals with defects in goods and services.
Option C. The SEBI Act, 1992
Why it is wrong: The SEBI Act regulates the securities market, not cheques.
Option D. The Insolvency and Bankruptcy Code, 2016
Why it is wrong: The IBC deals with insolvency resolution, not cheque bouncing.
Answer: A. Section 138 of the Negotiable Instruments Act, 1881 makes a cheque dishonoured for insufficient funds a criminal offence, subject to its conditions. Remember: Section 138 of the NI Act covers cheques dishonoured for insufficient funds.
Hint, shown before you answer in practice mode: Common mistake: Taking a bounced cheque to a consumer forum as if it were a service defect.
X-A-254easyregulatory
Q15Why does a financial intermediary ask a client to fill a FATCA and CRS self-certification?
Option A. To check the client's credit score before the client is allowed to invest
Why it is wrong: Credit scores are not part of FATCA or CRS.
Option B. To decide the client's risk profile for advice
Why it is wrong: Risk profiling is a separate process.
Option C. To register the client's nominee on the account
Why it is wrong: Nomination is a separate form.
Option D. To find clients who are tax residents of other countries, for reporting — Correct answer
Answer: D. The self-certification identifies clients who are tax residents of other countries. Under FATCA and the Common Reporting Standard, such accounts are reported for exchange of tax information between countries. Remember: FATCA and CRS forms identify foreign tax residency for information exchange.
Hint, shown before you answer in practice mode: Common mistake: Confusing tax-residency reporting with risk profiling.
X-A-255hardconceptual
Key Regulations: common questions
How many practice questions are there on Key Regulations?
15 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 20 practice topics for NISM Series X-A, which has 285 questions in total.
Are these real NISM Series X-A questions on Key Regulations?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series X-A?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1 or 2-mark question that is 0.25 or 0.5 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Ethical Issues
15 questions on Ethical Issues. Its quiz opens on that unit.
Open Ethical Issues