Unit study guide · NISM Series II-B
Operational Concepts of Mutual Funds
14 questions in this unit
What this unit covers
- What does NFO stand for in mutual fund operations?
- Why is cash reconciliation important during an NFO?
- A scheme has assets ₹5 crore, liabilities ₹20 lakh and 24 lakh units. What is NAV?
- What determines which transaction receipt time is used for applicable NAV eligibility?
- Why is a purchase receipt time insufficient by itself for some NAV determinations?
- What is the purpose of time stamping incoming mutual fund transactions?
- What is a business day for mutual fund transaction processing?
- Why do investors sometimes hold mutual fund units in dematerialised form?
- A purchase application is recorded but the bank shows a failed transfer. What should the RTA do?
- Which term describes tax withheld by a payer when required by law?
- What is the purpose of FATCA and CRS information collected from certain investors?
- A fund has net assets ₹7.5 crore and NAV ₹15. How many units are outstanding?
- An operator backdates a request to before the cut-off time after it was actually received later. What is the core issue?
- A mutual fund purchase is submitted before cut-off, but required funds arrive after the relevant deadline. What should decide NAV?
Key ideas
From the practice bank · 1
What does NFO stand for in mutual fund operations?
NFO means New Fund Offer, the initial period when a scheme offers units to investors.
Hint Recall the initial offer of a new scheme.
II-B-092From the practice bank · 2
Why is cash reconciliation important during an NFO?
NFO reconciliation checks investor subscription records against actual collections.
Hint Match application totals with real cleared money.
II-B-093From the practice bank · 3
A scheme has assets ₹5 crore, liabilities ₹20 lakh and 24 lakh units. What is NAV?
Net assets equal ₹5 crore − ₹20 lakh = ₹4.8 crore, and ₹4.8 crore ÷ 24 lakh units = ₹20.
Hint Deduct liabilities before dividing by outstanding units.
II-B-094From the practice bank · 4
What determines which transaction receipt time is used for applicable NAV eligibility?
Applicable NAV depends on valid receipt timing and the scheme's applicable cut-off and funds rules.
Hint Think about recorded request time and required funds availability.
II-B-095From the practice bank · 5
Why is a purchase receipt time insufficient by itself for some NAV determinations?
Purchase NAV eligibility may depend on both valid request receipt and availability of realised funds.
Hint Remember money and paperwork are separate inputs.
II-B-096From the practice bank · 6
What is the purpose of time stamping incoming mutual fund transactions?
Time stamping preserves evidence of the transaction's authorised receipt time.
Hint Think about traceable submission time.
II-B-097From the practice bank · 7
What is a business day for mutual fund transaction processing?
A business day is defined by the scheme's relevant operational calendar and rules.
Hint Think about market and scheme operating calendars.
II-B-098From the practice bank · 8
Why do investors sometimes hold mutual fund units in dematerialised form?
Dematerialised mutual fund units are held and serviced through the depository system.
Hint Think about the custody format of units.
II-B-099From the practice bank · 9
A purchase application is recorded but the bank shows a failed transfer. What should the RTA do?
The RTA must verify collections and resolve payment failure before treating an application as funded.
Hint Check actual money rather than the application alone.
II-B-100From the practice bank · 10
Which term describes tax withheld by a payer when required by law?
Tax Deducted at Source is tax withheld and remitted by the payer where the law requires it.
Hint Think about a tax amount deducted before payment.
II-B-101From the practice bank · 11
What is the purpose of FATCA and CRS information collected from certain investors?
FATCA and CRS declarations support tax-residency checks and applicable financial-account reporting.
Hint Think about international tax information exchange.
II-B-102From the practice bank · 12
A fund has net assets ₹7.5 crore and NAV ₹15. How many units are outstanding?
Outstanding units equal ₹7.5 crore ÷ ₹15 = 50 lakh units.
Hint Reverse the usual NAV calculation.
II-B-103From the practice bank · 13
An operator backdates a request to before the cut-off time after it was actually received later. What is the core issue?
Backdating misrepresents request receipt and can cause improper application of NAV rules.
Hint Focus on integrity of transaction timing.
II-B-104From the practice bank · 14
A mutual fund purchase is submitted before cut-off, but required funds arrive after the relevant deadline. What should decide NAV?
The applicable NAV must be determined under the relevant timing and funds-availability conditions.
Hint Do not treat submission time as the only condition.
II-B-105