Fund Distribution and Channel Management Practices
4 questions. Each answer is explained.
Question 1 of 4Practice · Series V-D — Mutual Fund - Specialized Investment Fund Distributors
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Learn these topics
More units in NISM Series V-D
- The Investment Landscape5
- Concept & Role of a Mutual Fund4
- Legal Structure of Mutual Funds in India3
- Legal and Regulatory Framework7
- Scheme Related Information7
- Net Asset Value, Total Expense Ratio and Pricing of Units5
- Taxation3
- Investor Services10
- Risk, Return and Performance of Funds5
- Mutual Fund Scheme Performance5
- Mutual Fund Scheme Selection10
- Basics of Derivatives10
- Understanding Index5
- Introduction to Forwards and Futures15
- Introduction to Options13
- Strategies Using Equity Futures and Equity Options9
- Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets6
- Interest Rate Derivatives2
- Exchange Traded Interest Rate Futures10
- Exchange Traded Interest Rate Options6
- Strategies Using Interest Rate Derivatives6
Exam format
| Questions | 150 · 1 mark each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 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 | 4 of 150 marks (2.7%) |
Source: July 2026 Annexure I, Chapter 6: Fund Distribution and Channel Management Practices
NISM Series V-D Mutual Fund - Specialized Investment Fund Distributors
Exam rules read on NISM's site on 30 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 30 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 4 questions on Fund Distribution and Channel Management Practices, with answers
Q1For a fictional distributor agreement, annual trail commission equals 0.60% of the average eligible assets retained for the full year. If those average assets are ₹80 lakh, what is the commission before GST or other deductions? Assumptions: Rate and base are hypothetical agreement terms. GST and deductions are excluded.
Option A. ₹48,000 — Correct answer
Option B. ₹4,80,000
Why it is wrong: This applies 6% instead of 0.60%.
Option C. ₹4,800
Why it is wrong: This applies 0.06% instead of 0.60%.
Option D. ₹80,000
Why it is wrong: This incorrectly applies a 1% rate.
Answer: A. Commission = ₹80,00,000 × 0.006 = ₹48,000. The agreement’s stated eligible-asset base and measurement period control the calculation. Remember: Read the commission rate together with its base and time period.
Hint, shown before you answer in practice mode: Convert 0.60% to 0.006 before multiplying.
V-D-027mediumnumerical
Q2A client asks how a distributor is paid for a recommended regular-plan investment. What is the most appropriate response?
Option A. State that a higher commission proves better investment quality
Why it is wrong: Commission level is not proof of suitability or future performance.
Option B. Say the service has no economic cost because the client does not receive a separate invoice
Why it is wrong: Indirect compensation can still be economically relevant.
Option C. Refuse because compensation can never influence a recommendation
Why it is wrong: Potential incentives should be addressed rather than denied.
Option D. Explain the applicable remuneration and relevant conflicts clearly — Correct answer
Answer: D. The client should understand how the distributor is compensated and any relevant conflict. Clear disclosure supports an informed decision without replacing the suitability assessment. Remember: Explain both the product and the incentives surrounding its sale.
Hint, shown before you answer in practice mode: Transparency concerns the economic arrangement, not just whether an invoice is issued.
V-D-028easyapplication
Q3Which statement is most accurate when explaining the difference between mutual-fund distribution and a broader investment-advisory service?
Option A. Their role, scope of service, remuneration and applicable regulatory obligations need to be distinguished — Correct answer
Option B. A distribution arrangement automatically authorises every form of paid investment advice to clients
Why it is wrong: One role should not be assumed to confer all permissions associated with another.
Option C. Anyone selling a fund must describe themselves as an independent investment adviser to every client
Why it is wrong: The description should accurately reflect the person’s actual role and authorisation.
Option D. Disclosure of the service role is irrelevant if an investment performs well for the client over time
Why it is wrong: The client’s understanding of the service and conflicts matters regardless of the outcome.
Answer: A. A client should understand what service is being provided, how the intermediary is paid and what obligations apply. Appropriate product discussion within distribution should not be confused with claiming a different regulated status. Remember: Use an accurate description of the intermediary’s actual role.
Hint, shown before you answer in practice mode: Do not treat different service models as interchangeable labels.
V-D-029mediumconceptual
Q4A digital distributor accepts client orders online. Which control most directly improves the reliability of the sales and transaction record?
Option A. Retaining the product version shown, client instruction and transaction confirmation with timestamps — Correct answer
Option B. Deleting earlier product disclosures whenever the website is updated, to keep the records simple
Why it is wrong: That removes evidence of what the client was shown.
Option C. Allowing staff to alter consent records later without any audit trail of who changed them
Why it is wrong: Uncontrolled edits undermine the evidential value of the records.
Option D. Recording only the total daily sales amount, without the individual client instructions
Why it is wrong: An aggregate total does not show the individual instruction or disclosures.
Answer: A. Timestamped disclosure, instruction and confirmation records create a traceable transaction history. This helps resolve errors and complaints and supports effective oversight. Remember: Digital convenience should be supported by reliable evidence and controls.
Hint, shown before you answer in practice mode: A reviewer should be able to reconstruct what was shown and what was authorised.
V-D-030mediumconceptual
Fund Distribution and Channel Management Practices: common questions
How many practice questions are there on Fund Distribution and Channel Management Practices?
4 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 22 practice topics for NISM Series V-D, which has 150 questions in total.
Are these real NISM Series V-D questions on Fund Distribution and Channel Management Practices?
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 V-D exam is Fund Distribution and Channel Management Practices?
NISM's published syllabus outline gives it 4 of the paper's 150 marks, or 2.7% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: July 2026 Annexure I, Chapter 6: Fund Distribution and Channel Management Practices
Does negative marking apply to NISM Series V-D?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
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