NISM V-A Chapter 9: Investor Services — Practice Questions
Chapter 9 – Investor Services covers the critical mechanisms through which mutual fund distributors engage with and support investors throughout their investment lifecycle. This chapter focuses on Account Opening, KYC (Know Your Customer) compliance, transaction processing, and investor communication standards as mandated by SEBI and industry bodies. Test-takers must master three core concepts: First, the complete KYC process including mandatory documentation, verification requirements, and periodic updation norms—failure to comply attracts penalties. Second, transaction handling procedures including purchase, redemption, and switch requests, alongside settlement timelines and NAV computation rules that govern these operations. Third, investor service standards such as statement delivery, complaint resolution frameworks, and grievance redressal mechanisms under SEBI's Investor Protection guidelines. The chapter emphasizes that quality investor services directly influence customer retention and brand reputation. Distributors must understand their fiduciary responsibility to ensure seamless service delivery while maintaining compliance with regulatory norms. Expect questions on documentation requirements, settlement processes, and service level agreements that define industry benchmarks for mutual fund operations in India.
Q1. What is the maximum period within which a mutual fund must dispatch a redemption cheque or credit the amount to the investor's bank account?
ANSWER
Option A
EXPLANATION
SEBI mandates that redemption proceeds must be dispatched within 3 business days (10 business days for close-ended funds). The standard for open-ended equity and debt is 3 business days.
Q2. An investor submits a purchase application for a liquid fund along with a cheque for ₹2 lakh at 12:00 PM. Which NAV applies?
ANSWER
Option B
EXPLANATION
For liquid funds, purchase cut-off is 1:30 PM. Applications with funds received before 1:30 PM get the previous day's NAV. Since cheque submission at 12 PM is before 1:30 PM, previous day's NAV applies.
Q3. In a mutual fund folio, which of the following is the correct order of holding for joint accounts in terms of redemption authority?
ANSWER
Option C
EXPLANATION
In 'Either or Survivor' mode, any joint holder can redeem independently. In 'Joint' mode, all holders must sign the redemption request. The holding mode governs operational authority.
Q4. What happens to exit load collected from investors in a mutual fund scheme?
ANSWER
Option D
EXPLANATION
As per SEBI regulations, exit load collected from investors is credited back into the scheme corpus. This benefits remaining investors and is not income for the AMC.
Q5. Which of the following is TRUE regarding a switch-out transaction from an equity scheme?
ANSWER
Option A
EXPLANATION
A switch is a redemption of one scheme and purchase of another. It is a taxable event — capital gains tax applies on the switch-out leg based on the applicable holding period.
Q6. An investor wants to invest ₹50,000 in an equity fund at 2:30 PM by RTGS transfer that is credited to the AMC's collection account the same day. Which NAV applies?
ANSWER
Option B
EXPLANATION
For equity funds with amounts ≥ ₹2 lakh (or as applicable), when the application and funds are received before the 3 PM cut-off and funds are credited on the same day, same-day NAV applies.
Q7. What is the minimum SIP installment amount that AMCs are required to offer as per SEBI mandate?
ANSWER
Option C
EXPLANATION
SEBI mandated in 2022 that AMCs must offer SIP installments of as low as ₹250 per month to promote financial inclusion and reach smaller investors.
Q8. What is the minimum number of instalments typically required to start a SIP in a mutual fund?
ANSWER
Option A
EXPLANATION
Most AMCs require a minimum of 6 SIP instalments. However, SEBI's framework mandates that AMCs accept SIPs — the exact minimum number of instalments varies by AMC but 6 is the common industry standard.