Fund Monitoring, Reporting and Exit
7 questions. Each answer is explained.
Question 1 of 7Practice · Series XIX-A — Alternative Investment Funds (Category I and II) Distributors
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Learn these topics
More units in NISM Series XIX-A
- Overview of Alternative Investments7
- Alternative Investment Funds in India7
- Concepts in Alternative Investment Funds Industry7
- Regulatory Framework – Indian Context15
- Alternative Investment Fund Structuring15
- Risk and Return – Investor and Fund Perspective15
- Investment Process and Governance of Funds15
- Fund Due Diligence – Investor Perspective23
- Legal Documents and Negotiations – Investor Perspective15
- Valuation8
- Taxation – India specific8
- Good Practices8
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 10% · 0.1 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 5 of 100 marks (5%) |
Source: 19 March 2025 Annexure I, Unit 10: Fund Monitoring, Reporting and Exit
NISM Series XIX-A Alternative Investment Funds (Category I and II) Distributors
Exam rules read on NISM's site on 29 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 29 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 7 questions on Fund Monitoring, Reporting and Exit, with answers
Q1Which exit route involves selling a portfolio business to an industry participant seeking a business combination?
Option A. A fund-unit transfer
Why it is wrong: A transfer of fund units changes a fund investor rather than directly selling the portfolio business.
Option B. An investor capital call
Why it is wrong: A capital call brings money into the fund rather than selling a portfolio business.
Option C. A strategic sale — Correct answer
Option D. An initial public offering
Why it is wrong: An initial public offering accesses public investors rather than necessarily selling to one industry buyer.
Answer: C. A strategic sale transfers the business to a buyer with a strategic business interest. It differs from raising money through a public offering or transferring fund units. Remember: Identify an exit by what is being sold and to whom.
Hint, shown before you answer in practice mode: Consider why the buyer wants to own and combine the operating business. Common mistake: Confusing a sale of the portfolio company with a transfer of fund units.
XIX-A-120easyconceptual
Q2An investor sells its fund units to another eligible investor while the fund keeps its portfolio. What type of transaction is this?
Option A. A new capital commitment from the fund to a business
Why it is wrong: The transaction changes ownership of units rather than creating the described portfolio investment.
Option B. A distribution paid by every investee to the fund
Why it is wrong: An investor-to-investor transfer is different from cash distributed by portfolio businesses.
Option C. A sale of every underlying portfolio company
Why it is wrong: The case states that the fund continues to hold its portfolio.
Option D. A secondary transfer of the investor’s fund interest — Correct answer
Answer: D. This is a secondary transfer of the investor’s fund interest. The fund’s underlying holdings need not be sold, although transfer conditions and permissions still apply. Remember: An investor exit and a portfolio-company exit are different transactions.
Hint, shown before you answer in practice mode: Track which ownership interest changes hands. Common mistake: Assuming that selling fund units requires the fund to liquidate its portfolio.
XIX-A-121mediumconceptual
Q3Within how many days of year-end must a Category II AIF provide the annual investor information required by regulation 22(g)?
Option A. 120 days
Why it is wrong: 120 days is shorter than the stated 180-day deadline and is not this rule’s threshold.
Option B. 180 days — Correct answer
Option C. 60 days
Why it is wrong: 60 days is not the annual year-end deadline specified here for a Category II AIF.
Option D. 90 days
Why it is wrong: 90 days is not the annual investor-information deadline specified by this provision.
Answer: B. The required annual information must be provided within 180 days from year-end. This is the Category II annual investor-reporting deadline under regulation 22(g). Remember: Use the reporting deadline for the correct fund category and reporting obligation.
Hint, shown before you answer in practice mode: Distinguish the annual reporting rule for this category from other reporting cycles. Common mistake: Applying a different fund category’s reporting cycle to a Category II annual report.
XIX-A-122easyregulatory
Q4What does an in-specie distribution mean when permitted under a fund’s applicable exit arrangements?
Option A. Guaranteeing a cash buyer for each security distributed
Why it is wrong: Receiving securities does not by itself ensure an immediate cash buyer.
Option B. Cancelling all investor obligations without distributing property
Why it is wrong: An in-specie distribution transfers property rather than simply cancelling obligations.
Option C. Paying an extra cash bonus for accepting a late distribution
Why it is wrong: In-specie refers to the form of the distributed property, not a delay bonus.
Option D. Distributing assets such as securities instead of cash — Correct answer
Answer: D. An in-specie distribution provides assets such as securities rather than cash. The recipient may still face restrictions, valuation uncertainty and difficulty selling them. Remember: Receiving an asset is not the same as receiving spendable cash.
Hint, shown before you answer in practice mode: Focus on the form of what the investor receives. Common mistake: Treating a securities distribution as an immediate cash exit.
XIX-A-123mediumconceptual
Q5A fund reports a 20% rise in net asset value, based entirely on revised estimates for unsold holdings. It made no cash distribution during the period. A distributor describes the rise as cash profit received by investors. What is the reporting error?
Option A. It confuses an unrealised valuation increase with a cash distribution — Correct answer
Option B. It treats every valuation change as automatically unlawful
Why it is wrong: A valuation update can be legitimate, but its nature must be represented accurately.
Option C. It assumes that cash distributions must be ignored in performance reports
Why it is wrong: The problem is mislabelling an unrealised increase, not a rule against reporting actual distributions.
Option D. It assumes that net asset value can include the value of unsold assets
Why it is wrong: Including supported unsold asset values in net asset value is not itself the error described.
Answer: A. The statement wrongly turns an unrealised valuation increase into a cash distribution. A report should distinguish estimated remaining value from money actually paid to investors. Remember: Report valuation movements and cash distributions as different things.
Hint, shown before you answer in practice mode: Compare the claimed investor receipt with the cash actually paid. Common mistake: Using the word received for gains that exist only in current asset valuations.
XIX-A-124hardapplication
Q6A portfolio company completes an initial public offering. The fund still owns shares, some are subject to restrictions, and the market price can change. What can be concluded about the fund’s exit?
Option A. The listed market price guarantees the same proceeds whenever shares are sold
Why it is wrong: Prices and market liquidity can change before an actual sale.
Option B. Every retained share is automatically sold at the offering price
Why it is wrong: The case states that shares remain held and some have restrictions.
Option C. Listing creates a possible exit route but does not complete every sale — Correct answer
Option D. The fund has received cash for every share still shown in its portfolio
Why it is wrong: Unsold holdings do not become cash merely because the company has listed.
Answer: C. Listing can create an exit route but does not mean all of the fund’s shares have been sold. Restrictions, liquidity and future prices still affect the eventual exit. Remember: An initial public offering is not automatically a completed fund realisation.
Hint, shown before you answer in practice mode: Separate a company’s listing from the fund’s actual disposal of its holding. Common mistake: Counting the whole listed holding as an immediate realised cash exit.
XIX-A-125mediumapplication
Q7During an AIF scheme’s dissolution period under regulation 29B, which activity is NOT permitted?
Option A. Making a fresh investment in a new portfolio company — Correct answer
Option B. Selling remaining assets under the applicable dissolution arrangements
Why it is wrong: Realising remaining assets is consistent with the purpose of the dissolution period, subject to its rules.
Option C. Settling permitted expenses related to completing the scheme’s affairs
Why it is wrong: The stated restriction on new investments does not prohibit every permitted winding-down expense.
Option D. Providing the required information about remaining investments
Why it is wrong: The dissolution period does not remove applicable information obligations.
Answer: A. Fresh investments are not permitted during the dissolution period under regulation 29B(4). The scheme also cannot accept fresh commitments during that period. Remember: A dissolution period is for completing the scheme’s affairs, not restarting investment activity.
Hint, shown before you answer in practice mode: Distinguish completing existing affairs from starting a new investment cycle. Common mistake: Treating dissolution as another extension of the normal investment period.
XIX-A-126hardregulatory
Fund Monitoring, Reporting and Exit: common questions
How many practice questions are there on Fund Monitoring, Reporting and Exit?
7 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 13 practice topics for NISM Series XIX-A, which has 150 questions in total.
Are these real NISM Series XIX-A questions on Fund Monitoring, Reporting and Exit?
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.
How much of the NISM Series XIX-A exam is Fund Monitoring, Reporting and Exit?
NISM's published syllabus outline gives it 5 of the paper's 100 marks, or 5% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: 19 March 2025 Annexure I, Unit 10: Fund Monitoring, Reporting and Exit
Does negative marking apply to NISM Series XIX-A?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 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.
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