Legal and Regulatory Environment
19 questions. Each answer is explained.
Question 1 of 10Practice · Series V-A — Mutual Fund Distributors
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More units in NISM Series V-A
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 | Not published by NISM |
NISM Series V-A Mutual Fund 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 19 questions on Legal and Regulatory Environment, with answers
Q1An adult individual has passed NISM Series V-A and wants to work as a mutual fund distributor. Which registration is required for that distributor role?
Option A. Registration with SEBI as an investment adviser in every case
Why it is wrong: A distributor and an investment adviser are different roles. Adviser registration is not the next step for every distributor.
Option B. Registration with NISM for a second examination certificate instead of an ARN
Why it is wrong: An exam certificate does not replace AMFI registration.
Option C. Registration with AMFI to obtain an ARN — Correct answer
Option D. Registration with an exchange as a stock broker
Why it is wrong: Stock-broker registration is not the registration for this role.
Answer: C. To work as a mutual fund distributor, the person must register with AMFI and get an ARN, the AMFI Registration Number. AMFI's January 2026 master circular asks for the NISM certificate and this registration. Other rules still apply before selling, such as empanelment with each AMC. Remember: Do not treat the examination certificate and the distributor’s ARN as the same credential.
Hint, shown before you answer in practice mode: Common mistake: Assuming that passing NISM alone completes every requirement to distribute mutual funds.
VA-020easyregulatory
Q2An empanelled mutual fund distributor brings an ordinary regular-plan investment that falls outside any special upfronting or onboarding incentive provision. Which payment is consistent with the normal full-trail model?
Option A. An upfront cash bonus paid when the application is accepted
Why it is wrong: An upfront cash reward for the ordinary investment is inconsistent with the normal full-trail model being tested.
Option B. A recurring trail commission under the applicable distribution terms — Correct answer
Option C. A prepaid holiday linked to the amount of fresh subscriptions
Why it is wrong: A non-cash reward does not avoid the rule. Calling a payment a holiday rather than commission does not turn it into trail remuneration.
Option D. An upfront incentive routed through an AMC associate
Why it is wrong: Changing the paying entity does not convert an upfront incentive into permitted ordinary trail commission.
Answer: B. This is the normal remuneration form described by the full-trail model. The question expressly excludes special provisions. The investment is outside any expressly permitted special arrangement, so apply the normal distribution rule. SEBI’s inspected master circular requires the full-trail model and restricts upfront payments or indirect rewards in cash or kind. A recurring trail commission fits that model. An upfront cash bonus, holiday or associate-routed incentive does not become permissible merely by changing its description. The master circular separately retains a narrow SIP upfronting provision. This question does not deny that provision or extend it to an ordinary investment. Remember: For ordinary distribution remuneration, identify genuine trail commission rather than a renamed upfront reward.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a non-cash or indirectly routed benefit is outside commission rules.
VA-021easyregulatory
Q3A non-individual distributor proposes a separately identifiable, SEBI-registered investment-advisory division. It plans to charge one client an advisory fee while a group company receives distribution commission from the same client. Under SEBI’s published segregation guidance, which change is required?
Option A. Keep both receipts but disclose them in the advisory agreement
Why it is wrong: Disclosure alone does not replace the required client-level segregation. The same group cannot treat the client as both categories in this arrangement.
Option B. Keep both receipts but issue invoices from different group companies
Why it is wrong: Separate invoices or legal entities within the same group do not satisfy a rule explicitly applied at group level.
Option C. Keep both receipts but collect the advisory fee only after redemption
Why it is wrong: Changing the billing date does not remove the underlying combination of advisory fees and distributor consideration for the same client.
Option D. Choose advisory or commission-based distribution for that client at group level — Correct answer
Answer: D. The guidance requires client-level segregation at group level. A paid advisory client cannot simultaneously generate distributor consideration within the group. The proposal addresses registration and a separately identifiable division. Those steps do not by themselves settle the conflict created by receiving both types of consideration. SEBI’s published guidance says a non-individual adviser must maintain client-level segregation at group level. For the client in the question, the group must choose a paid advisory relationship without distributor consideration, or a distribution relationship without an advisory fee. Disclosure and separate group companies do not replace that distinction. The latest consolidated requirements must still be checked before implementing the business arrangement. Remember: For a non-individual adviser, test the client relationship across the group rather than looking only at one invoice.
Hint, shown before you answer in practice mode: Common mistake: Assuming that registration, disclosure or a separate group company automatically permits both fee and distribution commission from the same client.
VA-022hardapplication
Q4Under SEBI's trail commission rules, which SIP qualifies for upfronting of trail commission?
Option A. A ₹2,500 monthly first SIP of an investor new to mutual funds, identified by PAN — Correct answer
Option B. A ₹6,000 monthly first SIP of an investor new to mutual funds, identified by PAN
Why it is wrong: ₹6,000 a month is above the limit for upfronting.
Option C. A ₹2,500 monthly SIP of an existing investor who is new only to this AMC
Why it is wrong: Being new to one AMC is not enough. The investor must be new to mutual funds.
Option D. A ₹2,500 monthly SIP that starts after the same investor's earlier first SIP
Why it is wrong: Only the investor's first SIP qualifies. A later SIP does not.
Answer: A. This SIP meets all three tests: the investor is new to mutual funds by PAN, it is the first SIP, and the amount is small. SEBI allows trail to be upfronted on such a first SIP of up to ₹3,000 a month per scheme. The upfront trail is up to 1% a year for at most three years and comes from the AMC's own books. Remember: Apply the new-to-industry, monthly ceiling and first-SIP timing tests together.
Hint, shown before you answer in practice mode: Common mistake: Confusing new-to-AMC with new-to-industry, or treating every SIP of a newly enrolled investor as eligible.
VA-045mediumregulatory
Q5An AMC pays ordinary recurring distributor commission relating to a regular-plan scheme. No special upfronting or onboarding provision applies. Under the general scheme-expense rule, where must this expense be borne?
Option A. By the AMC’s own profits so it can sit outside scheme expense limits
Why it is wrong: Moving an ordinary scheme commission to the AMC’s books cannot be used to bypass the rule or the expense limits.
Option B. By the scheme within the applicable regulatory expense limits — Correct answer
Option C. By an AMC associate and later reimbursed outside scheme expenses
Why it is wrong: Routing the expense through an associate does not change its scheme-related character or permit it to escape the applicable limits.
Option D. By the sponsor’s marketing budget without entering scheme expenses
Why it is wrong: A sponsor-funded route does not avoid the general rule on scheme-related distributor commission.
Answer: B. Section 11.3.3 requires scheme-related distributor commission to be paid from the scheme within the regulatory limits, subject to specific provisions outside this question. The payment is an ordinary recurring commission relating to a scheme. The question excludes the specifically regulated special arrangements. Section 11.3.3 states that scheme-related expenses, including distributor commission, must be paid from the scheme within regulatory limits. The rule addresses the AMC, associates, sponsor, trustee and other routes. A different payer is not a general exemption. This does not mean every special incentive or initially funded SIP upfronting arrangement uses identical accounting. Their own express conditions must be read separately. Remember: For ordinary scheme commission, check both the permitted source of funding and the expense limits.
Hint, shown before you answer in practice mode: Common mistake: Assuming that an AMC-funded or sponsor-funded payment is automatically outside the scheme’s expense restrictions.
VA-046mediumregulatory
Q6A distributor compares three competing mutual fund schemes for a client and recommends one. Which commission-disclosure approach gives the required comparison rather than hiding an incentive conflict?
Option A. Disclose only the recommended plan’s TER, as shown in the latest factsheet
Why it is wrong: TER is a plan-level expense measure. It does not by itself disclose each competing scheme’s distributor commission.
Option B. Disclose only the commission payable on the recommended scheme
Why it is wrong: This withholds the comparison that could reveal whether the recommendation carries a stronger financial incentive.
Option C. Disclose the commissions payable on the competing schemes considered — Correct answer
Option D. Disclose the distributor’s total annual income from all schemes instead
Why it is wrong: Total income does not show the different incentives attached to the specific competing schemes considered for this client.
Answer: C. The client needs to see how the distributor’s incentives differ across the alternatives from which the recommendation is made. The distributor is choosing among competing schemes, so the comparison includes the financial incentives attached to those alternatives. SEBI’s investor FAQ describes disclosure of commissions payable for competing schemes from which the recommendation is made. AMFI’s code also requires attention to conflicts and investor interests. A TER figure, total annual income or disclosure only for the selected scheme does not provide that same incentive comparison. The scheme still has to be suitable for the investor. Remember: Disclose the relevant competing incentives, not just a number associated with the selected product.
Hint, shown before you answer in practice mode: Common mistake: Assuming that disclosing TER or the selected scheme’s commission is enough to explain incentives across the alternatives.
VA-047mediumapplication
Q7A distributor onboards P, a new-to-industry male individual from a T-30 city, and Q, a new-to-industry woman from a B-30 city. Both invest in eligible schemes and meet all other conditions. Under SEBI’s March 2026 mutual fund master circular, which additional onboarding-incentive claim is consistent with these facts?
Option A. One qualifying claim for each because both investors are new to the industry
Why it is wrong: New-to-industry status is necessary here but is not by itself enough. The specified geographic or woman-investor eligibility also matters.
Option B. One qualifying claim for P alone because T-30 inflows are eligible
Why it is wrong: A new male individual from T-30 does not meet the stated new B-30 individual or new woman investor categories.
Option C. Two qualifying claims for Q, one for each of her eligibility categories
Why it is wrong: Meeting both descriptions does not permit a duplicate incentive on the same investor or investment.
Option D. One qualifying claim for Q, with no dual claim for the same investment — Correct answer
Answer: D. Q fits the new-woman and B-30 descriptions, but the same investor or investment cannot produce dual incentives. P does not fit either specified entry category. The relevant categories in the inspected provision include new-to-industry individuals from B-30 cities and new women investors from T-30 or B-30 cities. P is a new male individual from T-30, so neither stated category is met. Q is a new woman from B-30 and meets the stated categories. The other conditions are expressly assumed to be satisfied. The provision prohibits dual incentives for the same investor or investment. Therefore Q can support one qualifying claim, not separate B-30 and woman-investor claims. Remember: Check both eligibility and the prohibition on double-counting the same investor or investment.
Hint, shown before you answer in practice mode: Common mistake: Assuming every new PAN qualifies, or claiming twice when one investor meets two eligibility descriptions.
VA-048mediumapplication
Q8A distributor repeatedly moves a client between similar schemes mainly to earn more commission. The client’s goals and risk profile are unchanged, and no investment-related reason for the switches is documented. This practice is best described as:
Option A. Churning — Correct answer
Option B. A routine correction of an investor-service error
Why it is wrong: The scenario describes deliberate repeated switches, not correction of an administrative mistake.
Option C. Goal-based rebalancing
Why it is wrong: A justified rebalance responds to a target allocation or changed circumstances. The scenario gives neither as its reason.
Option D. Tax-loss harvesting
Why it is wrong: A tax-loss strategy needs an identified tax rationale. The scenario instead states a commission motive.
Answer: A. The repeated transactions are driven by the distributor’s commission rather than a demonstrated investor need. Check whether the trades follow an investor objective, an allocation need or another documented investment reason. None is given here. The stated main motive is higher distributor commission through repeated moves between similar schemes. AMFI’s distributor code prohibits over-transacting or churning for higher commissions. Genuine changes can be justified, but that is not the scenario described. Remember: Judge switching by the investor need and documented reason, not by the mere existence of a new scheme.
Hint, shown before you answer in practice mode: Common mistake: Calling commission-driven turnover “rebalancing” without identifying a portfolio need.
VA-049easyapplication
Q9Under SEBI’s March 2026 mutual fund master circular, a scheme proposes a change in fundamental attributes covered by the normal unitholder exit requirement. Which exit arrangement is specified?
Option A. At least 30 calendar days to exit at prevailing NAV without exit load. — Correct answer
Option B. At least 30 business days to exit at prevailing NAV with the usual exit load.
Why it is wrong: This changes calendar days to business days and incorrectly preserves the usual exit load.
Option C. At least 30 calendar days to exit at the original purchase NAV without exit load.
Why it is wrong: The value basis is prevailing NAV, not the NAV at which the investor originally purchased.
Option D. At least 30 calendar days to exit at prevailing NAV with the usual exit load.
Why it is wrong: The period and valuation basis are right, but imposing the usual exit load conflicts with the specified waiver.
Answer: A. This matches the calendar-day period, the prevailing-NAV basis and the exit-load waiver. Use the dated provision, not a generic redemption assumption. The SID-format requirement specifies a period of at least 30 calendar days. During that opportunity, the exit is at the prevailing NAV and without an exit load. The exit opportunity does not itself erase a market loss or imply a tax exemption. The question does not ask for the full procedure for changing the scheme. Remember: For this provision, remember the period, valuation basis and exit-load treatment separately.
Hint, shown before you answer in practice mode: Common mistake: Treating an exit-load waiver as either a repayment guarantee or a tax waiver.
VA-088mediumregulatory
Q10A distributor says a scheme is suitable for every investor because its SID has been filed with SEBI. Which response best addresses that claim?
Option A. SEBI’s acceptance of the filing establishes that the scheme suits every investor category.
Why it is wrong: Filing a document is not a regulator’s determination that the scheme is suitable for every investor.
Option B. The filing transfers the investor-specific suitability assessment from the distributor to SEBI.
Why it is wrong: The filing does not move an investor-specific suitability decision to SEBI.
Option C. SEBI’s absence of comments is an investment recommendation for the scheme’s stated audience.
Why it is wrong: Regulatory review or an absence of comments must not be presented as an investment recommendation.
Option D. Filing the SID does not mean SEBI recommends the investment or certifies its suitability. — Correct answer
Answer: D. The prescribed caveat distinguishes the regulatory document process from approval or recommendation of the investment. The claim moves from a regulatory process to a conclusion about every investor. That conclusion does not follow. The prescribed SID wording distinguishes filing from approval or recommendation by SEBI. An investor must still consider the scheme’s characteristics and the investor’s own needs. Neither expected performance nor individual suitability is established by filing alone. Remember: Regulation is not a recommendation to buy a particular scheme.
Hint, shown before you answer in practice mode: Common mistake: Using “filed with SEBI” as a shortcut for “appropriate for everyone”.
VA-089easyapplication
Q11An individual distributor has a valid ARN and the required certification but is not empanelled with a particular AMC. Under AMFI’s January 2026 distributor master circular, what additional step is required before procuring business for that AMC?
Option A. Obtain a new ARN instead of entering the AMC’s empanelment process.
Why it is wrong: A new ARN does not meet that AMC's separate empanelment requirement.
Option B. Treat the valid ARN as automatic authorisation from every AMC.
Why it is wrong: The circular says AMFI registration and AMC empanelment are two different things.
Option C. Begin procuring business and complete empanelment only when commission is claimed.
Why it is wrong: Empanelment must come before bringing in business for that AMC, not only before claiming commission.
Option D. Complete the formal empanelment process with that AMC. — Correct answer
Answer: D. The distributor must first complete that AMC's formal empanelment process. AMFI's circular says an ARN does not automatically empanel a distributor with any AMC. The ARN and the certificate are already in place, so they are not the missing step. Remember: Do not confuse having an ARN with being empanelled by every AMC.
Hint, shown before you answer in practice mode: Common mistake: Assuming an industry registration automatically authorises distribution for every fund house.
VA-098easyregulatory
Q12For this calculation only, trail commission is 0.60% a year on the stated eligible asset base using actual days divided by 365. The base is ₹20 lakh for 10 days, ₹18 lakh for 10 days and ₹25 lakh for 11 days. What is the 31-day commission, ignoring taxes and other adjustments?
Option A. ₹1,273.97
Why it is wrong: This applies the last ₹25 lakh base to all 31 days and ignores the earlier lower bases.
Option B. ₹1,070.14
Why it is wrong: This uses the unweighted average of the three balances. The final balance applies for 11 days, not 10.
Option C. ₹1,076.71 — Correct answer
Option D. ₹1,091.67
Why it is wrong: This uses the same asset-days but divides by 360 rather than the expressly stated 365.
Answer: C. The day-weighted asset base, 0.006 annual rate and 365-day divisor give ₹1,076.71. The annual rate as a decimal is 0.60 ÷ 100 = 0.006. The three periods total 10 + 10 + 11 = 31 days. Asset-days = ₹20,00,000 × 10 + ₹18,00,000 × 10 + ₹25,00,000 × 11 = 6,55,00,000 rupee-days. Commission = 6,55,00,000 × 0.006 ÷ 365 = ₹1,076.712328… Rounded to the nearest paise, the commission is ₹1,076.71. The stated day basis is 365, not 360. Remember: Use the stated eligible base, period weights and annual day-count denominator together.
Hint, shown before you answer in practice mode: Common mistake: Applying the closing balance to the whole month or silently changing the day-count convention.
VA-100mediumnumerical
Q13Under SEBI’s March 2026 mutual fund master circular, an employee of a corporate distributor interacts with an investor during a sale. Apart from the distributor’s ARN, which identifier is intended to identify that employee in the application?
Option A. The AMC’s registration identifier
Why it is wrong: The AMC’s identity does not identify the employee of the distributor who interacted with the investor.
Option B. The employee’s EUIN — Correct answer
Option C. The scheme’s ISIN
Why it is wrong: An ISIN identifies a security or unit issue. It does not identify the selling employee.
Option D. The investor’s folio number
Why it is wrong: A folio number identifies the investor’s account relationship. It is not the employee identifier.
Answer: B. EUIN identifies the relevant employee or salesperson separately from the distributor’s ARN. The ARN identifies the distributor. A corporate distributor can have multiple employees involved in selling its products. The cited section provides for a unique identifier for the employee, relationship manager or salesperson and an application field alongside ARN. The employee’s EUIN identifies that person. It does not replace the distributor’s ARN or the investor’s account identifier. Remember: Use ARN to identify the distributor and EUIN to identify the relevant employee involved in the sale.
Hint, shown before you answer in practice mode: Common mistake: Assuming the organisation’s ARN identifies every individual who dealt with the investor.
VA-118mediumregulatory
Q14An investor submits a valid instruction to change the mutual fund distributor. The AMC insists on a no-objection certificate from the existing distributor solely because the distributor is changing. Under SEBI’s March 2026 mutual fund master circular, is that insistence correct?
Option A. No. The AMC must not compel the investor to obtain that NOC — Correct answer
Option B. Yes. Every distributor change requires the existing distributor’s consent
Why it is wrong: The rule specifically prevents treating the old distributor’s NOC as a compulsory condition.
Option C. Yes. The NOC is compulsory whenever units remain invested
Why it is wrong: Keeping units invested does not create the claimed NOC requirement in the cited provision.
Option D. No. An NOC is unnecessary only when the entire holding is redeemed
Why it is wrong: The right described is not limited to cases in which all units have first been redeemed.
Answer: A. This matches the cited rule and addresses the only missing document described in the stem. The question states that the instruction is otherwise valid. The only reason given for rejecting it is the missing old-distributor NOC. the circular requires the AMC to act on the investor’s wish without compelling that NOC. This removes the stated NOC condition. It does not remove other genuine identity, signature or instruction-validity checks. Remember: A valid distributor-change instruction should not be blocked solely for want of the old distributor’s NOC.
Hint, shown before you answer in practice mode: Common mistake: Confusing checks on the investor’s valid instruction with permission from the outgoing distributor.
VA-119easyregulatory
Q15An equity scheme has existed for eight months at the relevant preceding month-end. Under SEBI’s March 2026 mutual fund master circular, which performance basis applies to its advertisement?
Option A. Compound annual growth rate (CAGR) for the past six months and since inception
Why it is wrong: The specified age-band provision calls for simple annualisation, not compound annualisation by CAGR.
Option B. Only the latest one-month absolute return, shown without annualising
Why it is wrong: One month alone does not supply the six-month and since-inception measures required by the cited paragraph.
Option C. Simple annualised growth for the past six months and since inception — Correct answer
Option D. No past performance at all until the scheme completes one full year
Why it is wrong: The prohibition in that paragraph concerns schemes with less than six months of history, not every scheme younger than one year.
Answer: C. This is the method and pair of periods specified for a scheme in the stated age band. Eight months places the scheme above six months and below one year. For that age band, the cited provision uses simple annualised growth for the past six months and since inception, using the prescribed preceding month-end. This differs from CAGR and from a blanket prohibition until the first anniversary. The figure is a historical presentation method, not a forecast of a full year’s return. Remember: Check the scheme-age band and the required return convention before selecting an advertising figure.
Hint, shown before you answer in practice mode: Common mistake: Applying a remembered one-year restriction without checking the particular provision and return convention.
VA-120mediumregulatory
Q16A distributor offers an investor a cash payment equal to one-quarter of the commission earned on a new investment, solely to attract that investment. Under the Code of Conduct in AMFI’s January 2026 master circular, how is this offer treated?
Option A. It is permitted whenever the rebate is disclosed
Why it is wrong: Disclosure does not remove the code’s prohibition on this commission rebate.
Option B. It is permitted if it comes from the distributor’s own account
Why it is wrong: Paying from a personal or business bank account does not change its link to commission.
Option C. It is a prohibited rebate or pass-back of commission — Correct answer
Option D. It is permitted if the investor signs a consent form
Why it is wrong: The code does not create the proposed consent-based exception.
Answer: C. The offer is the commission pass-back described by the prohibition. The proposed payment is tied to the commission and is offered to attract the investment. The named code prohibits rebating or passing back commission. The account used, a disclosure and a consent form do not change the nature of that offer. Remember: Check whether a practice is prohibited before assuming disclosure can cure it.
Hint, shown before you answer in practice mode: Common mistake: Confusing transparent conduct with conduct that is permitted in the first place.
VA-145mediumregulatory
Q17A mutual fund distributor’s group company asks for identifiable client holdings and contact details to sell an unrelated product. There is no legal disclosure requirement. Under the Code of Conduct in AMFI’s January 2026 master circular, which response applies to the proposed cross-marketing use?
Option A. Do not share the client data for that group-company cross-marketing — Correct answer
Option B. Share it because both companies have common ownership
Why it is wrong: Common ownership is not the exception asserted by this option.
Option C. Share it as long as the group company signs a secrecy agreement
Why it is wrong: A secrecy agreement does not by itself authorise the prohibited purpose.
Option D. Share it after replacing each name with a client number
Why it is wrong: A client number can still link holdings and contacts to an identifiable person. Renaming records does not change the stated use.
Answer: A. This answer follows the specific group-company cross-marketing restriction. The purpose is cross-marketing by a group company, not a legally required disclosure. The named code expressly addresses that use. A confidentiality promise or a re-identifiable client number does not change the cross-marketing purpose. Remember: Consider the purpose of sharing, not just the recipient’s relationship with the distributor.
Hint, shown before you answer in practice mode: Common mistake: Treating every transfer inside a corporate group as an internal use of investor data.
VA-146mediumregulatory
Q18A principal distributor’s ARN is valid, but a sub-distributor’s ARN has become invalid. Under the Code of Conduct in AMFI’s January 2026 master circular, may the principal continue to engage that sub-distributor to procure fresh mutual fund business while the ARN remains invalid?
Option A. Yes, if only the principal’s valid ARN appears on the application
Why it is wrong: Displaying a different ARN does not cure the sub-distributor’s invalid registration.
Option B. Yes, if the principal withholds the sub-distributor’s commission
Why it is wrong: Withholding remuneration does not restore permission to continue the engagement.
Option C. Yes, if the client knows about the invalid ARN
Why it is wrong: Client awareness does not supply a registration exception under the stated provision.
Option D. No, the principal must not continue that engagement while it is invalid — Correct answer
Answer: D. The prohibition applies while the sub-distributor’s ARN remains invalid. The question states that the sub-distributor’s ARN is already invalid, not merely approaching expiry. The named code requires sub-distributors to have valid ARNs and says the principal should not engage or continue to engage one whose ARN is invalid. This question is about continued engagement for new business. It does not determine treatment of past commission or the processing of an application already submitted. Remember: Check registration validity at each relevant distributor level.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a principal’s valid registration automatically covers an unregistered or invalidly registered intermediary.
VA-147mediumregulatory
Q19An investor selects a regular-plan transaction independently and has no interaction with the distributor’s employee or salesperson about it. The EUIN box is intentionally left blank. Under AMFI’s January 2026 distributor master circular, what is needed for the stated no-interaction exception?
Option A. An execution-only label added by the distributor, without investor confirmation
Why it is wrong: A label added by the distributor does not replace the investor's own signed declaration.
Option B. The prescribed declaration separately signed by the investor — Correct answer
Option C. The first holder’s PAN entered in the EUIN box
Why it is wrong: A PAN identifies the investor. It cannot replace the employee's code.
Option D. Automatic conversion to a direct plan solely because EUIN is blank
Why it is wrong: The exception does not turn the purchase into a direct plan because the box is blank.
Answer: B. The investor must sign a separate declaration in the prescribed form. AMFI's circular asks for it when the investor chose the scheme with no help from the distributor's staff. Calling a sale execution-only is not that declaration. In other cases the EUIN must be given. Remember: Apply the conditions and documentation of an exception, not just its label.
Hint, shown before you answer in practice mode: Common mistake: Assuming “execution-only” automatically means no employee identification or declaration is needed.
VA-148hardregulatory
Legal and Regulatory Environment: common questions
How many practice questions are there on Legal and Regulatory Environment?
19 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 8 practice topics for NISM Series V-A, which has 150 questions in total.
Are these real NISM Series V-A questions on Legal and Regulatory Environment?
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 V-A?
No. NISM applies no negative marking to Series V-A. 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.
Scheme Selection
18 questions on Scheme Selection. Its quiz opens on that unit.
Open Scheme Selection