Investors in Mutual Funds
10 questions. Each answer is explained.
Question 1 of 10Practice · Series II-B — Registrars to an Issue and Share Transfer Agents - Mutual Fund
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Learn these topics
More units in NISM Series II-B
- Introduction to Securities5
- Characteristic of Equities7
- Characteristics of Debt Securities7
- Characteristics of Other Securities5
- SEBI- Role and Regulations6
- Basics of Registrars and Transfer Agents12
- Registrars and Transfer Agents Regulations12
- Basics of Mutual Funds14
- Structure and Constituents of Mutual Funds11
- Mutual Fund Products12
- Operational Concepts of Mutual Funds14
- Banking Operations in Mutual Funds12
- Financial Transactions12
- Non-Financial Transactions11
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 30 of 100 marks (30%) |
That figure belongs to one published unit covered under these headings — Investors in Mutual Funds and Banking Operations in Mutual Funds and Financial Transactions and Non-Financial Transactions — so the marks belong to the whole group. They are quoted together because no source divides them among its headings.
Source: March 2025 Annexure I, Units 12 to 15 (Investors in Mutual Funds to Non-Financial Transactions): 30%
NISM Series II-B Registrars to an Issue and Share Transfer Agents - Mutual Fund
Exam rules read on NISM's site on 31 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 31 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 10 questions on Investors in Mutual Funds, with answers
Q1What does KYC stand for in mutual fund investor servicing?
Option A. Keep Yearly Capital
Why it is wrong: Capital records are not the expansion of KYC.
Option B. Keep Your Coupon
Why it is wrong: Coupon is debt interest, not identity checking.
Option C. Know Your Customer — Correct answer
Option D. Key Yield Calculation
Why it is wrong: Yield calculations concern investments, not verification.
Answer: C. KYC means Know Your Customer, the process of identifying and verifying investors.
Hint, shown before you answer in practice mode: Recall the process that verifies who an investor is.
II-B-106easyconceptual
Q2Why does a mutual fund RTA verify investor identity before updating a bank mandate?
Option A. To reset the stock market index for the scheme
Why it is wrong: The index is unrelated to an investor mandate.
Option B. To choose the best-performing scheme for the investor
Why it is wrong: Bank account updates do not involve portfolio selection.
Option C. To guarantee dividend income on the investor's units
Why it is wrong: Identity checks do not guarantee investment income.
Option D. To prevent unauthorised changes and payment fraud — Correct answer
Answer: D. Identity verification reduces the risk of funds being redirected through fraudulent bank changes.
Hint, shown before you answer in practice mode: Think about protecting payouts from impersonation.
II-B-107mediumconceptual
Q3What is the role of a guardian for a minor mutual fund investor?
Option A. Act on the minor's behalf within applicable rules — Correct answer
Option B. Become the mutual fund's investment manager
Why it is wrong: A guardian's role concerns the minor investor.
Option C. Guarantee the scheme never loses money
Why it is wrong: A guardian cannot remove market risk.
Option D. Decide securities regulations for all investors
Why it is wrong: Guardians do not make regulation.
Answer: A. A guardian represents a minor in permitted mutual fund account transactions.
Hint, shown before you answer in practice mode: Think about legal capacity before adulthood.
II-B-108easyconceptual
Q4Who ordinarily represents a Hindu Undivided Family for authorised investment instructions?
Option A. Any unrelated market investor
Why it is wrong: An unrelated investor has no automatic authority.
Option B. Karta — Correct answer
Option C. The fund's custodian
Why it is wrong: The custodian safeguards scheme assets.
Option D. The scheme benchmark administrator
Why it is wrong: A benchmark administrator does not represent an HUF.
Answer: B. The Karta generally represents the HUF in permitted investment and account matters.
Hint, shown before you answer in practice mode: Recall the managing representative of an HUF.
II-B-109mediumconceptual
Q5What should the RTA check when opening a folio for a corporate investor?
Option A. Only the marketing brochure
Why it is wrong: A brochure cannot prove legal authority.
Option B. Only an employee's personal bank statement and photo
Why it is wrong: An employee statement does not prove corporate mandate authority.
Option C. Entity identity and authorised signatory documents — Correct answer
Option D. Only the share market closing price
Why it is wrong: Market prices are unrelated to legal onboarding.
Answer: C. Corporate onboarding requires verification of the entity and persons authorised to transact.
Hint, shown before you answer in practice mode: Think about who can legally act for an organisation.
II-B-110hardconceptual
Q6Which information helps identify an investor's tax status for applicable cross-border reporting?
Option A. The next day's NAV forecast for the investor's scheme
Why it is wrong: A forecast does not identify tax residency.
Option B. The portfolio manager's personal address and contact details
Why it is wrong: Manager data cannot substitute for investor declarations.
Option C. The index's market capitalisation on the reporting date
Why it is wrong: Index size is unrelated to reporting status.
Option D. Declared tax residency and required identifying details — Correct answer
Answer: D. Tax-residency declarations support applicable FATCA and CRS identification and reporting.
Hint, shown before you answer in practice mode: Consider declarations used for FATCA and CRS.
II-B-111mediumconceptual
Q7An individual gives a valid Power of Attorney to an authorised representative. What should the RTA do?
Option A. Verify and register the authority before accepting covered instructions — Correct answer
Option B. Accept any verbal claim of authority made by the representative
Why it is wrong: Verbal claims alone do not establish a registered mandate.
Option C. Transfer ownership of the units to the attorney automatically on receipt
Why it is wrong: A PoA authorises action but does not itself transfer beneficial ownership.
Option D. Remove all identity controls on the folio for the representative
Why it is wrong: Representatives remain subject to appropriate checks.
Answer: A. An RTA should verify the PoA and its scope before allowing the representative to act.
Hint, shown before you answer in practice mode: Distinguish delegated authority from transfer of ownership.
II-B-112mediumapplication
Q8What is the purpose of nomination in an investor's mutual fund holding?
Option A. Replace the fund's risk disclosures for the investor's holding
Why it is wrong: Nomination is unrelated to investment-risk disclosure.
Option B. Record a person designated for transmission or claim processes — Correct answer
Option C. Provide market trading signals to the nominated person
Why it is wrong: Nominees are not market forecasters.
Option D. Guarantee a fixed redemption NAV for the investor's family
Why it is wrong: Nomination does not set unit prices.
Answer: B. Nomination records a designated person for relevant post-death transmission procedures.
Hint, shown before you answer in practice mode: Think about claims after the investor's death.
II-B-113mediumconceptual
Q9A folio is in a minor's name and the investor has become an adult. What should be checked before allowing independent operation?
Option A. Whether the guardian prefers direct plan
Why it is wrong: The guardian's preference does not determine legal adulthood.
Option B. Whether the fund manager approves a share trade
Why it is wrong: This concerns investor account authority, not a trade.
Option C. Updated status, identification and operating mandate — Correct answer
Option D. Only whether NAV is above face value
Why it is wrong: Unit value does not confirm account capacity.
Answer: C. The RTA should update minor-to-major status and verify the adult investor's authority and KYC as required.
Hint, shown before you answer in practice mode: Think about the change in legal capacity and signer.
II-B-114hardapplication
Q10A corporate transaction request is signed by a former authorised signatory. What should the RTA do?
Option A. Replace the corporation's PAN with the signer's own PAN on the folio
Why it is wrong: Corporate and personal tax identities cannot be swapped.
Option B. Assign the transaction to an unrelated folio until the signer is found
Why it is wrong: Another investor's account is not authorised.
Option C. Process it because the signature once appeared on the folio's records
Why it is wrong: Past authority may no longer be valid.
Option D. Hold processing pending verification of current authorised signatories — Correct answer
Answer: D. The RTA must verify the current corporate mandate before processing instructions from a former signatory.
Hint, shown before you answer in practice mode: Check whether representative authority remains current.
II-B-115hardapplication
Investors in Mutual Funds: common questions
How many practice questions are there on Investors in Mutual Funds?
10 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 15 practice topics for NISM Series II-B, which has 150 questions in total.
Are these real NISM Series II-B questions on Investors in Mutual Funds?
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 II-B exam is Investors in Mutual Funds?
NISM's published syllabus outline gives it 30 of the paper's 100 marks, or 30% of the exam. That figure covers one published unit taught here under more than one heading (Investors in Mutual Funds and Banking Operations in Mutual Funds and Financial Transactions and Non-Financial Transactions). So it is the marks for the group, not for this page alone. No source splits it, so it is not split here. The published unit it comes from: March 2025 Annexure I, Units 12 to 15 (Investors in Mutual Funds to Non-Financial Transactions): 30%
Does negative marking apply to NISM Series II-B?
No. NISM applies no negative marking to Series II-B. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. 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.
Banking Operations in Mutual Funds
12 questions on Banking Operations in Mutual Funds. Its quiz opens on that unit.
Open Banking Operations in Mutual FundsPaper Trading Try it on the practice trading desk