Structure and Constituents of Mutual Funds
11 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
- Mutual Fund Products12
- Operational Concepts of Mutual Funds14
- Investors in Mutual Funds10
- 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 | 25 of 100 marks (25%) |
That figure belongs to one published unit covered under these headings — Structure and Constituents of Mutual Funds and Mutual Fund Products and Operational Concepts of Mutual Funds — 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 9 to 11 (Structure and Constituents of Mutual Funds to Operational Concepts of Mutual Funds): 25%
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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 11 questions on Structure and Constituents of Mutual Funds, with answers
Q1Who normally establishes and promotes a mutual fund structure?
Option A. Individual distributor
Why it is wrong: A distributor markets products but does not establish the fund.
Option B. Sponsor — Correct answer
Option C. Registrar and transfer agent
Why it is wrong: The RTA services investor records, not sponsors the fund.
Option D. Collecting bank
Why it is wrong: The bank handles money collection, not fund promotion.
Answer: B. The sponsor is the entity that establishes and promotes the mutual fund structure.
Hint, shown before you answer in practice mode: Recall the founder-like participant in the fund structure.
II-B-069easyconceptual
Q2What is the primary responsibility of mutual fund trustees?
Option A. Guaranteeing yearly returns to every unit holder
Why it is wrong: Trustees do not guarantee market performance.
Option B. Selecting each investor's bank account for payouts
Why it is wrong: An investor provides and authorises bank details.
Option C. Overseeing the scheme in the interests of unit holders — Correct answer
Option D. Setting the RBI policy rate for debt market schemes
Why it is wrong: Monetary policy is not a trustee role.
Answer: C. Trustees provide oversight to help protect the interests of mutual fund unit holders.
Hint, shown before you answer in practice mode: Think about oversight of investor interests.
II-B-070easyconceptual
Q3Who normally manages securities selection and portfolio investments for a mutual fund?
Option A. Investor Service Centre
Why it is wrong: An ISC handles investor service requests.
Option B. Registrar and transfer agent
Why it is wrong: RTA activities concern investor records and transactions.
Option C. Depository
Why it is wrong: The depository supports dematerialised ownership accounts.
Option D. Asset Management Company — Correct answer
Answer: D. The Asset Management Company manages the scheme's investments according to its mandate.
Hint, shown before you answer in practice mode: Separate investment management from record keeping.
II-B-071easyconceptual
Q4What is the principal role of a mutual fund custodian?
Option A. Safekeeping scheme securities — Correct answer
Option B. Promising redemption at face value
Why it is wrong: Custody does not guarantee unit value.
Option C. Writing each investor's financial plan
Why it is wrong: Financial planning is a distinct advice service.
Option D. Authorising new securities laws
Why it is wrong: Legislation and regulation are not custodian duties.
Answer: A. A custodian safeguards fund securities and helps administer custody-related operations.
Hint, shown before you answer in practice mode: Think about safe custody of portfolio assets.
II-B-072easyconceptual
Q5Which organisation maintains a mutual fund's investor folio and transaction data?
Option A. Portfolio custodian only
Why it is wrong: Custody of securities is separate from the investor register.
Option B. Registrar and transfer agent — Correct answer
Option C. Stock index provider
Why it is wrong: Index providers calculate benchmarks, not folios.
Option D. Credit rating agency
Why it is wrong: Ratings assess credit risk, not unit records.
Answer: B. The RTA keeps scheme investor and transaction records for the fund.
Hint, shown before you answer in practice mode: Identify the back-office investor servicing party.
II-B-073easyconceptual
Q6A fund manager chooses a new bond, while the RTA records new subscriptions. Which function belongs to the AMC?
Option A. Recording investor address changes
Why it is wrong: Investor profile servicing is normally an RTA function.
Option B. Printing investor statements alone
Why it is wrong: Statement production can be an RTA service.
Option C. Choosing the bond investment — Correct answer
Option D. Updating nomination records
Why it is wrong: Nomination servicing belongs in investor operations.
Answer: C. The AMC is responsible for security-selection decisions within the scheme investment mandate.
Hint, shown before you answer in practice mode: Distinguish portfolio decisions from account administration.
II-B-074mediumapplication
Q7Which party generally carries out an independent review of fund financial statements?
Option A. Scheme distributor
Why it is wrong: A distributor sells or services fund investments, not independently audits accounts.
Option B. Payment gateway
Why it is wrong: A payment gateway transports payment instructions.
Option C. Investor service desk
Why it is wrong: An investor service desk is not an independent financial auditor.
Option D. Auditor — Correct answer
Answer: D. The auditor independently examines financial statements under the applicable audit framework.
Hint, shown before you answer in practice mode: Think about financial reporting assurance.
II-B-075mediumconceptual
Q8What does a fund accountant primarily support?
Option A. Valuation records and calculation of scheme financial figures — Correct answer
Option B. Approval of the investor's income-tax slab for each financial year
Why it is wrong: Personal tax slabs come from law and individual facts.
Option C. Selection of distributor sales targets for new fund offers
Why it is wrong: Marketing is not fund accounting.
Option D. Making market prices legally binding on the scheme's investors
Why it is wrong: Accounting does not determine exchange prices.
Answer: A. Fund accounting supports accurate portfolio valuation, expenses, liabilities and NAV records.
Hint, shown before you answer in practice mode: Think about balances, valuations and scheme accounts.
II-B-076mediumconceptual
Q9An AMC sends allotment data while the bank reports different collection amounts. Who should reconcile investor-level discrepancies?
Option A. Only the benchmark index provider named in the scheme documents
Why it is wrong: An index provider does not track fund collections.
Option B. RTA and relevant fund operations teams using source records — Correct answer
Option C. The custodian by changing security prices to match the bank
Why it is wrong: Security-price changes do not fix missing subscription cash.
Option D. The unit holder acting alone without access to source records
Why it is wrong: An investor cannot reconcile private operational ledgers alone.
Answer: B. The RTA and fund operations teams should reconcile source receipts, accepted applications and allotments.
Hint, shown before you answer in practice mode: Match cash and investor records without changing prices.
II-B-077hardapplication
Q10Why must the scheme's service providers have clearly separated roles?
Option A. It eliminates the need for any records
Why it is wrong: Distinct roles increase the importance of reliable records.
Option B. It guarantees that every scheme tracks an index
Why it is wrong: Role separation applies beyond index funds.
Option C. It supports accountability and internal controls — Correct answer
Option D. It makes investment losses impossible
Why it is wrong: Clear duties do not remove market risk.
Answer: C. Clear responsibilities reduce conflicts and support effective oversight of scheme operations.
Hint, shown before you answer in practice mode: Consider who checks whose work.
II-B-078mediumconceptual
Q11A discrepancy appears between the custodian's holding report and a fund valuation file. Which first step best fits governance?
Option A. Ignore the difference until the year-end audit is completed
Why it is wrong: NAV can affect current investor transactions.
Option B. Ask distributors to decide the correct asset quantity for the fund
Why it is wrong: Distributors do not control custodial positions.
Option C. Change the NAV to an unverified estimate of the holding value
Why it is wrong: Unverified changes can misstate investor unit values.
Option D. Investigate and reconcile the underlying portfolio records — Correct answer
Answer: D. Portfolio positions should be reconciled with custody evidence before finalising fund valuation data.
Hint, shown before you answer in practice mode: Separate safekeeping data from valuation records but reconcile them.
II-B-079hardapplication
Structure and Constituents of Mutual Funds: common questions
How many practice questions are there on Structure and Constituents of Mutual Funds?
11 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 Structure and Constituents of 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 Structure and Constituents of Mutual Funds?
NISM's published syllabus outline gives it 25 of the paper's 100 marks, or 25% of the exam. That figure covers one published unit taught here under more than one heading (Structure and Constituents of Mutual Funds and Mutual Fund Products and Operational Concepts of Mutual Funds). 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 9 to 11 (Structure and Constituents of Mutual Funds to Operational Concepts of Mutual Funds): 25%
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.
Mutual Fund Products
12 questions on Mutual Fund Products. Its quiz opens on that unit.
Open Mutual Fund ProductsPaper Trading Try it on the practice trading desk