Operational Aspects of Portfolio Managers
20 questions. Each answer is explained.
Question 1 of 10Practice · Series XXI-A — Portfolio Management Services (PMS) Distributors
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Learn these topics
More units in NISM Series XXI-A
- Investments11
- Introduction to Securities Markets7
- Investing in Stocks15
- Investing in Fixed Income Securities8
- Derivatives7
- Collective Investment Vehicles8
- Role of Portfolio Managers15
- Portfolio Management Process22
- Performance Measurement and Evaluation of Portfolio Managers15
- Taxation7
- Regulatory, Governance and Ethical Aspects of Portfolio Managers15
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 | Not published by NISM |
NISM Series XXI-A Portfolio Management Services (PMS) Distributors
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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 20 questions on Operational Aspects of Portfolio Managers, with answers
Q1A prospect has seen a PMS presentation showing past returns but has not reviewed the disclosure document or agreement. What is the most appropriate next step before committing?
Option A. Review the mandate, risks, costs and contract terms, and resolve key questions. — Correct answer
Option B. Use the highest return shown as a substitute for reading the agreement.
Why it is wrong: Performance figures cannot establish the prospect’s rights, costs or authorised investment universe.
Option C. Sign first, because the disclosures matter only after the first contribution is paid.
Why it is wrong: Material terms should be understood before relying on the commitment.
Option D. Assume all portfolio managers charge the same fees and use the same restrictions.
Why it is wrong: Service terms and investment approaches can differ and must be checked.
Answer: A. Pre-investment review links the proposed service to the investor’s objectives and the actual contractual and risk disclosures. Identify what is missing: authority, eligible investments, fees, risk disclosures and rights on withdrawal or termination. Read the relevant documents and clarify inconsistencies before committing. Past performance should be evaluated in context, not used to replace the documents. Remember: A performance presentation is not a substitute for understanding the agreement.
Hint, shown before you answer in practice mode: Common mistake: Allowing an attractive return figure to overshadow the service terms.
XXI-A-072easyapplication
Q2Under SEBI’s 16 July 2025 PMS master circular, how should the Most Important Terms and Conditions document be treated?
Option A. As an internal checklist for the manager that never needs to be shown to the client.
Why it is wrong: The named requirement includes client acknowledgement.
Option B. As a guarantee that the portfolio’s returns will meet its stated investment objective.
Why it is wrong: Summarising contractual terms does not guarantee performance.
Option C. As an extra key-terms document to be acknowledged, not a replacement for other documents. — Correct answer
Option D. As a short summary that replaces and cancels the detailed portfolio management agreement.
Why it is wrong: A concise key-terms document does not remove the governing agreement.
Answer: C. A key-terms summary improves attention to important conditions while the complete agreement and disclosures remain relevant. Distinguish the purpose of a concise summary from the function of the full contract. The dated master circular adds an acknowledged MITC document. It does not turn that document into a performance assurance or erase the remaining terms. Remember: Read a key-terms summary alongside, not instead of, the complete service documentation.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a short summary contains every relevant condition.
XXI-A-073easyregulatory
Q3A company applies for a PMS account. Its authorised signatory is identified, but the natural persons who ultimately own or control the company have not been established. Which issue remains?
Option A. Beneficial-ownership and control due diligence remains incomplete. — Correct answer
Option B. The portfolio’s benchmark can be selected to replace the missing identification.
Why it is wrong: An investment benchmark does not resolve customer-identification requirements.
Option C. The company should automatically be treated as an individual investor.
Why it is wrong: Its legal form is not changed by identifying a signatory.
Option D. No issue remains because the signatory is always the ultimate owner.
Why it is wrong: Signing authority and ultimate ownership or control are not identical.
Answer: A. Customer due diligence for a legal entity separates its legal identity, authorised representatives and ultimate beneficial ownership or control. Verify the signatory’s authority, but do not assume that this establishes the ownership chain. Obtain and verify the appropriate ownership and control information under the applicable framework before treating the due-diligence process as complete. Remember: A person authorised to sign is not necessarily the person who ultimately owns or controls the customer.
Hint, shown before you answer in practice mode: Common mistake: Stopping corporate due diligence after checking one representative’s identity.
XXI-A-074mediumapplication
Q4A distributor asks a new client to send the PMS contribution to the distributor’s personal bank account for onward transfer. The onboarding instructions identify a different authorised destination. What should the client do?
Option A. Send the money to that account if the distributor first shares a screenshot of expected returns.
Why it is wrong: A return screenshot does not establish authority to receive client investment money.
Option B. Send the money first and verify the destination account after the portfolio has opened.
Why it is wrong: After-the-event verification may be too late to prevent a misdirected payment.
Option C. Avoid the personal account and verify the authorised funding instructions with the portfolio manager. — Correct answer
Option D. Split the amount into several smaller transfers so that the personal-account route becomes acceptable.
Why it is wrong: Splitting transfers does not correct an unauthorised destination.
Answer: C. Funding controls should establish the authorised beneficiary and route before money is transferred. Compare the requested account with the verified onboarding instructions. Resolve the mismatch directly through authorised channels rather than relying on informal assurances or changing the transfer size. Remember: Verify where money is going before making an investment transfer.
Hint, shown before you answer in practice mode: Common mistake: Treating personal familiarity with a distributor as proof of payment authority.
XXI-A-075easyapplication
Q5Under the direct-onboarding provision in SEBI’s 16 July 2025 PMS master circular, which distinction is correct?
Option A. Direct onboarding requires the client to appoint a distributor before the account can open.
Why it is wrong: That reverses the purpose of access without distributor intermediation.
Option B. The onboarding limit on non-statutory charges does not make ongoing management fees zero. — Correct answer
Option C. Statutory charges are forbidden even at the time of direct onboarding with the portfolio manager.
Why it is wrong: The named provision expressly distinguishes statutory charges.
Option D. A directly onboarded client is exempt from every future management fee and performance fee.
Why it is wrong: The onboarding provision does not create that blanket exemption.
Answer: B. Direct access, distributor involvement and the timing and type of fees are different dimensions of a PMS arrangement. The named rule allows direct onboarding and restricts charges at that point except statutory charges. Read the continuing management agreement separately. Do not infer that the client receives every later service without a fee. Remember: Apply a fee restriction to the stage and charge category it actually covers.
Hint, shown before you answer in practice mode: Common mistake: Turning a specific onboarding restriction into a claim of zero ongoing cost.
XXI-A-076mediumregulatory
Q6A prospect is asked to sign an incomplete agreement so that fees and the investment approach can be entered later. What is the most appropriate response?
Option A. Sign because the missing fee terms cannot affect the investment outcome.
Why it is wrong: Fees can materially affect net outcomes and are part of the agreement.
Option B. Sign only the last page and assume that this prevents later changes.
Why it is wrong: A last-page signature does not resolve incomplete or unreviewed terms.
Option C. Ignore the blank fields if the distributor is familiar with the product.
Why it is wrong: The distributor’s familiarity does not substitute for the client’s informed agreement.
Option D. Request completed terms and review them before signing. — Correct answer
Answer: D. An informed commitment requires sufficiently complete and understood material terms. Identify the missing terms as material: the service’s investment scope and costs. Seek a completed document, verify consistency with disclosures and resolve questions before signing. This prevents reliance on unspecified future insertions. Remember: Do not delegate understanding of material agreement terms through a blank signature.
Hint, shown before you answer in practice mode: Common mistake: Confusing an administrative shortcut with informed consent.
XXI-A-077easyapplication
Q7A hypothetical agreement charges a performance fee only on value above a high-water mark of ₹120 lakh. With no cash flows or other fees, value falls to ₹108 lakh and later recovers to ₹118 lakh. What is the fee base at that later point?
Option A. ₹2 lakh
Why it is wrong: This is the shortfall below the high-water mark, not a gain above it.
Option B. ₹118 lakh
Why it is wrong: This treats the entire portfolio value as performance-fee profit.
Option C. ₹10 lakh
Why it is wrong: This measures recovery from the trough and ignores the high-water mark.
Option D. ₹0 — Correct answer
Answer: D. A high-water-mark condition prevents charging a performance fee merely for recovering a previously suffered loss below the relevant reference. Compare the fee-assessment value directly with the unchanged ₹120 lakh mark. Fee base = max(₹118 lakh − ₹120 lakh, 0) = ₹0. The ₹10 lakh recovery from the trough is not the contractual fee base. Remember: A recovery is not automatically a new fee-bearing gain.
Hint, shown before you answer in practice mode: Common mistake: Using the lowest intervening value as the performance-fee reference.
XXI-A-078mediumnumerical
Q8A hypothetical agreement charges 20% of value above an unchanged ₹120 lakh high-water mark. At the assessment date value before this fee is ₹132 lakh. No other hurdle, cash flow or fee applies. What performance fee is due?
Option A. ₹24.00 lakh
Why it is wrong: This applies the fee percentage to the high-water mark rather than the excess.
Option B. ₹2.40 lakh — Correct answer
Option C. ₹26.40 lakh
Why it is wrong: This charges 20% of the entire portfolio rather than the qualifying gain.
Option D. ₹12.00 lakh
Why it is wrong: This is the fee base, not the fee itself.
Answer: B. A fee percentage applies to the contractually defined fee base, not necessarily to total assets or total lifetime gains. Qualifying gain = ₹132 lakh − ₹120 lakh = ₹12 lakh. Performance fee = 20% × ₹12 lakh = ₹2.40 lakh. The value is explicitly stated before this fee, avoiding a circular calculation. Remember: Identify the fee base before applying the fee rate.
Hint, shown before you answer in practice mode: Common mistake: Applying a performance percentage to total assets.
XXI-A-079mediumnumerical
Q9A portfolio is worth ₹100 lakh with a matching fee reference. The client adds ₹20 lakh, and market values do not change. Why should the new ₹120 lakh account value not automatically create a ₹20 lakh performance gain?
Option A. The manager should charge a performance fee on the contribution because the account is now larger.
Why it is wrong: A larger account may affect a separately defined management fee, but does not by itself create performance profit.
Option B. The original ₹100 lakh fee reference must never change, whatever money the client adds or withdraws.
Why it is wrong: A cash-flow adjustment may be needed to keep the comparison economically consistent.
Option C. The rise came from the client’s money, so the fee reference needs the applicable cash-flow adjustment. — Correct answer
Option D. Every contribution must be treated as an investment return, so the ₹20 lakh counts as a gain.
Why it is wrong: That would overstate performance by treating additional capital as a gain.
Answer: C. External cash flows must be separated from investment performance, including when maintaining fee references. Reconcile the increase: ₹100 lakh + ₹20 lakh contribution = ₹120 lakh, with no market gain. Apply the contract’s relevant cash-flow adjustment. Do not infer a performance-fee base from the raw account-value increase alone. Remember: Client contributions enlarge a portfolio without being portfolio returns.
Hint, shown before you answer in practice mode: Common mistake: Mistaking new capital for investment skill or fee-bearing profit.
XXI-A-080hardapplication
Q10A hypothetical one-year contract charges 20% only on gains above an 8% hard hurdle on opening capital of ₹80 lakh. Closing value before this fee is ₹90 lakh. No other fee or higher reference applies. What fee is due?
Option A. ₹1.28 lakh
Why it is wrong: This charges 20% on the hurdle amount itself rather than on the excess gain.
Option B. ₹2.00 lakh
Why it is wrong: This charges on the entire ₹10 lakh gain and ignores the hard hurdle.
Option C. ₹3.60 lakh
Why it is wrong: This is the qualifying excess, not the 20% fee on it.
Option D. ₹0.72 lakh — Correct answer
Answer: D. A hard hurdle makes only the specified excess above the hurdle value eligible for the performance fee. Hurdle gain = ₹80 lakh × 8% = ₹6.40 lakh. Hurdle value = ₹86.40 lakh. Excess gain = ₹90 lakh − ₹86.40 lakh = ₹3.60 lakh. Fee = 20% × ₹3.60 lakh = ₹0.72 lakh. Remember: Under a hard hurdle, distinguish the hurdle gain from the gain above it.
Hint, shown before you answer in practice mode: Common mistake: Charging on all profits after the hurdle has merely been crossed.
XXI-A-081hardnumerical
Q11On ₹100 lakh for one year, gross profit is ₹12 lakh. Contract H charges 20% only on profit above an 8% hurdle. Contract S charges 20% on all profit once that hurdle is exceeded. No other condition applies. How much more fee does S charge?
Option A. ₹1.60 lakh — Correct answer
Option B. ₹0
Why it is wrong: The two expressly defined fee bases are different once the hurdle is exceeded.
Option C. ₹0.80 lakh
Why it is wrong: This is H’s fee, not the difference between the two fees.
Option D. ₹2.40 lakh
Why it is wrong: This is S’s total fee, not its excess over H.
Answer: A. Hurdle terminology is not enough without the contract’s fee-base definition. These supplied methods charge on different profit amounts. H fee = (₹12 lakh − ₹8 lakh) × 20% = ₹0.80 lakh. S fee = ₹12 lakh × 20% = ₹2.40 lakh because the hurdle was crossed. Difference = ₹2.40 lakh − ₹0.80 lakh = ₹1.60 lakh. Remember: Compare fee formulas, not just the headline percentage and hurdle rate.
Hint, shown before you answer in practice mode: Common mistake: Assuming that every contract with the same hurdle has the same fee outcome.
XXI-A-082hardnumerical
Q12A hypothetical contract charges a 1.5% annual management fee on a constant ₹120 lakh base using actual/365. What fee accrues over 73 days, excluding taxes and all other costs?
Option A. ₹1,80,000
Why it is wrong: This is the full-year fee rather than the fee for 73 days.
Option B. ₹30,000
Why it is wrong: This uses one-sixth of a year rather than the expressly stated 73/365 fraction.
Option C. ₹36,000 — Correct answer
Option D. ₹3,600
Why it is wrong: This loses one factor of ten when applying the percentage or lakh conversion.
Answer: C. A time-apportioned fee needs a defined asset base, annual rate and day-count convention. Annual fee on the stated base = ₹1,20,00,000 × 0.015 = ₹1,80,000. Time fraction = 73/365 = 0.2. Fee = ₹1,80,000 × 0.2 = ₹36,000. Remember: Keep the asset base, fee rate and time fraction explicit.
Hint, shown before you answer in practice mode: Common mistake: Using a rough month fraction instead of the stated day-count convention.
XXI-A-083mediumnumerical
Q13A client starts a year with ₹100 lakh. Investment gains before expenses are ₹12 lakh, and total expenses deducted are ₹2 lakh. With no external cash flows, what is the net return?
Option A. 10% — Correct answer
Option B. 14%
Why it is wrong: This adds expenses to gains rather than deducting them.
Option C. 9.09%
Why it is wrong: This uses the ₹110 lakh ending value instead of the opening investment as the return base.
Option D. 12%
Why it is wrong: This is the gross return before the stated expense deduction.
Answer: A. For a no-external-flow holding period, net return reflects gains after the relevant expenses on the opening value. Closing value after expenses = ₹100 lakh + ₹12 lakh − ₹2 lakh = ₹110 lakh. Net return = (₹110 lakh − ₹100 lakh)/₹100 lakh = 10%. The expense amount is supplied directly rather than inferred from an annual fee ratio. Remember: Check which expenses are included before comparing gross and net performance.
Hint, shown before you answer in practice mode: Common mistake: Subtracting an annual fee percentage mechanically when the actual expense base is unstated.
XXI-A-084mediumnumerical
Q14For an ordinary PMS withdrawal in the second year, apply the maximum 2% exit-load rate specified in SEBI’s 16 July 2025 master circular. What is that maximum on ₹20 lakh withdrawn? Exclude co-investment and special large-value accredited arrangements.
Option A. ₹60,000
Why it is wrong: This uses the three-percent first-year figure rather than the stated second-year ceiling.
Option B. ₹4,00,000
Why it is wrong: This applies twenty percent, a tenfold percentage-conversion error.
Option C. ₹40,000 — Correct answer
Option D. ₹20,000
Why it is wrong: This uses one percent rather than the specified two percent.
Answer: C. A maximum rate is a ceiling for the relevant withdrawal category and period, not proof that every agreement charges that maximum. Use the named second-year ceiling: 2% × ₹20,00,000. The result is ₹40,000. An actual contractual charge may be lower, and the explicitly excluded special arrangements are not assessed. Remember: Distinguish a regulatory ceiling from the actual contractual charge.
Hint, shown before you answer in practice mode: Common mistake: Applying a rate from the wrong holding period or to the whole account rather than the withdrawal.
XXI-A-085mediumnumerical
Q15A report says an account grew from ₹60 lakh to ₹90 lakh during a period when the client contributed ₹30 lakh. What further information is essential before accepting a claim of 50% investment return?
Option A. Only the difference between closing and opening account values
Why it is wrong: The difference includes external capital and cannot by itself isolate investment performance.
Option B. Only the total contribution amount, without its timing
Why it is wrong: Knowing the amount does not provide the cash-flow timing or valuations needed for the chosen return method.
Option C. Only the number of securities held at the period end
Why it is wrong: A security count does not measure the return earned on capital over the period.
Option D. The timing of external cash flows and an appropriate return calculation — Correct answer
Answer: D. Account-value growth includes both investment results and cash moving in or out. A return measure must separate them appropriately. The ₹30 lakh increase equals the contribution amount, but the timing and intra-period valuation history are not provided. Do not infer a 50% return from the opening and closing values alone. Use the data required for the chosen time-weighted or money-weighted measure. Remember: Account growth is not a return until external cash flows have been treated correctly.
Hint, shown before you answer in practice mode: Common mistake: Dividing closing value by opening value despite material contributions.
XXI-A-086mediumapplication
Q16A bank statement shows a ₹12,000 dividend receipt that is absent from the client’s portfolio ledger. Which action best addresses the discrepancy?
Option A. Record a made-up fee of the same ₹12,000 so the ledger balance stays exactly as it was.
Why it is wrong: An invented offset conceals the error rather than resolving it.
Option B. Trace the payment, reconcile the entitlement and fix the ledger if the money is the client’s. — Correct answer
Option C. Ignore the difference, because the portfolio’s market value went up that month anyway.
Why it is wrong: Market performance does not establish that cash-income records are complete.
Option D. Move the ₹12,000 into the manager’s own income account without first checking who owns it.
Why it is wrong: The source and entitlement must be verified. The manager cannot assume ownership.
Answer: B. Reconciliation compares independent records and resolves differences with evidence rather than forcing numbers to agree. Match the payer, security entitlement, date and amount against the client’s records. If the receipt is the client’s dividend, post the missing income and retain the audit trail. A reconciliation should explain the difference, not hide it. Remember: Investigate the economic cause of an exception before making a corrective entry.
Hint, shown before you answer in practice mode: Common mistake: Using an unsupported balancing entry to make two records match.
XXI-A-087mediumapplication
Q17A client has raised an eligible securities-service complaint with the portfolio manager’s designated grievance contact but remains dissatisfied. Which SEBI platform is relevant for escalation?
Option A. SCORES — Correct answer
Option B. A depository’s securities-transfer instruction facility
Why it is wrong: Holding transfers are not a substitute for the stated grievance-escalation process.
Option C. NISM’s examination-registration portal
Why it is wrong: Exam registration does not handle an investor’s PMS service grievance.
Option D. SEBI’s intermediary-registration application system
Why it is wrong: Registration processing is different from the complaint-facilitation function described.
Answer: A. Grievance handling distinguishes raising an issue with the responsible entity from escalating it through an appropriate complaint mechanism. The client has already used the entity’s designated grievance route. For an eligible unresolved complaint, SCORES provides a relevant SEBI escalation channel. Its use does not promise a particular recovery or replace every legal dispute forum. Remember: Use the designated entity route and then the appropriate escalation mechanism.
Hint, shown before you answer in practice mode: Common mistake: Assuming that submitting a complaint guarantees compensation.
XXI-A-088easyapplication
Q18A portfolio declines after a broad market fall. The client asks whether that loss alone proves the manager breached the agreement. Which response is most accurate?
Option A. The loss alone is not enough, and conduct must be checked against the mandate and duties. — Correct answer
Option B. Every negative return automatically proves that the manager broke the agreement.
Why it is wrong: A permitted investment can lose money without a breach.
Option C. No loss can ever involve any misconduct if the wider market also fell at the same time.
Why it is wrong: A broad market fall does not rule out a separate mandate or conduct breach.
Option D. A high fee by itself establishes the reason for every loss the portfolio makes.
Why it is wrong: Fees affect returns but do not alone establish the cause or legal nature of all losses.
Answer: A. A performance outcome does not by itself establish whether the manager fulfilled its contractual and other duties. Identify the alleged action or omission and compare it with the agreement, disclosures and applicable obligations. A market decline can occur without default, while a mandate breach can exist even in a rising market. Evidence about conduct is necessary. Remember: Assess performance and compliance separately before drawing a conclusion about responsibility.
Hint, shown before you answer in practice mode: Common mistake: Treating either a gain or a loss as conclusive evidence of proper conduct.
XXI-A-089hardapplication
Q19A distributor learns that a PMS approach has materially changed its investment universe. A prospect has only last year’s presentation. What is the appropriate response?
Option A. Describe only last year’s holdings and leave out the new investment universe.
Why it is wrong: A past snapshot does not explain the current range of permitted exposure.
Option B. Get the current documents and explain the changed exposure before the prospect decides. — Correct answer
Option C. Assume that the approach name guarantees the mandate has stayed exactly the same.
Why it is wrong: The scenario explicitly states that a material change has occurred.
Option D. Keep using last year’s presentation, because the past returns shown in it are stronger.
Why it is wrong: Selective reliance on obsolete information can misrepresent the service now being offered.
Answer: B. Investment descriptions must be consistent with the service actually offered, especially after a material change. Identify the difference between the historical presentation and the current investment universe. Use updated documents, explain the implications and reassess fit. Historical performance should not be presented as though it came from unchanged conditions if that is misleading. Remember: Update the information behind a recommendation when the investment approach changes.
Hint, shown before you answer in practice mode: Common mistake: Relying on a familiar label instead of current underlying terms.
XXI-A-090mediumapplication
Q20A portfolio opens at ₹80 lakh. During the period it receives ₹20 lakh from the client, earns ₹8 lakh before fees, pays ₹10 lakh to the client and deducts ₹1 lakh of fees. What is the closing value?
Option A. ₹99 lakh
Why it is wrong: This adds the fee rather than deducting it.
Option B. ₹107 lakh
Why it is wrong: This omits the ₹10 lakh withdrawal.
Option C. ₹97 lakh — Correct answer
Option D. ₹77 lakh
Why it is wrong: This omits the ₹20 lakh contribution.
Answer: C. A portfolio-value bridge separates external cash flows, investment results and charges. Add the inflows and investment result: ₹80 lakh + ₹20 lakh + ₹8 lakh = ₹108 lakh. Deduct withdrawal and fees: ₹108 lakh − ₹10 lakh − ₹1 lakh = ₹97 lakh. This reconciliation is not, by itself, a return calculation. Remember: Reconcile the account first, then select the appropriate performance measure.
Hint, shown before you answer in practice mode: Common mistake: Treating all value changes as gains or losses from investing.
XXI-A-091mediumnumerical
Operational Aspects of Portfolio Managers: common questions
How many practice questions are there on Operational Aspects of Portfolio Managers?
20 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 12 practice topics for NISM Series XXI-A, which has 150 questions in total.
Are these real NISM Series XXI-A questions on Operational Aspects of Portfolio Managers?
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 XXI-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.
Portfolio Management Process
22 questions on Portfolio Management Process. Its quiz opens on that unit.
Open Portfolio Management Process