NISM Certifications Mutual Funds and Distribution Syllabus

Mutual Funds and Distribution syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Mutual Funds and Distribution in NISM Certifications, not a summary of it.

1. 1

   Concept and Structure of Mutual Funds

   4 topics

   • Mutual Fund Fundamentals
     • Pooling of funds and unit concept
     • Advantages and limitations
     • Open-ended versus close-ended schemes
   • Legal Structure of Mutual Funds in India
     • Sponsor, trustee, and AMC roles
     • Custodian and Registrar & Transfer Agent (RTA)
     • SEBI (Mutual Funds) Regulations, 1996
   • Categorisation of Schemes
     • Equity, debt, and hybrid categories
     • SEBI scheme categorisation framework
     • Solution-oriented and other schemes
   • New Fund Offers (NFO)
2. 2

   Mutual Fund Products and NAV

   4 topics

   • Equity and Debt Fund Types
     • Large-cap, mid-cap, multi-cap, flexi-cap
     • Liquid, gilt, corporate bond, credit risk funds
     • Index funds and ETFs
   • Net Asset Value Computation
     • NAV calculation methodology
     • Mark-to-market and valuation norms
     • Cut-off timing and applicable NAV
   • Fund Expenses and Total Expense Ratio
     • TER limits and slabs
     • Direct versus regular plans
     • Exit loads and transaction charges
   • Returns and Performance Measurement
     • Absolute, CAGR, and XIRR returns
     • Benchmarking and total return index
     • Risk-adjusted measures
3. 3

   Distribution, Sales and Investor Services

   4 topics

   • Distribution Channels and Commissions
     • AMFI Registration Number (ARN) and EUIN
     • Trail commission model
     • Disclosure of commissions
   • Investment Transactions and Modes
     • Lumpsum, SIP, STP, and SWP
     • Folio creation and KYC requirements
     • Online platforms and MF Utilities
   • Financial Planning and Recommendations
     • Risk profiling and suitability
     • Goal-based investing and asset allocation
     • Model portfolios
   • Taxation of Mutual Funds
     • Capital gains taxation by scheme type
     • Dividend (IDCW) taxation
     • Securities Transaction Tax and TDS
4. 4

   Code of Conduct and Regulatory Compliance

   4 topics

   • AMFI Code of Conduct for Distributors
   • SEBI Advertising Code for Mutual Funds
   • Investor Rights and Obligations
     • Right to information and statements
     • Nomination and transmission
     • Grievance redressal mechanisms
   • Scheme-Related Documents
     • Scheme Information Document (SID)
     • Statement of Additional Information (SAI)
     • Key Information Memorandum (KIM)

Mutual Funds and Distribution flashcards for NISM Certifications

25 of 52 cards from the Mutual Funds and Distribution deck — real questions with worked answers.

1. What is a mutual fund?

   A vehicle that pools money from many investors with a common investment objective and invests it in securities (equity, debt, etc.); the resulting gains/losses are shared by investors in proportion to their holdings (units).

2. What is a 'unit' in a mutual fund?

   The proportionate ownership an investor holds in a mutual fund scheme. Units are issued in exchange for the money invested; the value of one unit is its Net Asset Value (NAV).

3. What are the three main advantages of investing through a mutual fund?

   Professional management, portfolio diversification (lower risk), and economies of scale/affordability; plus liquidity, transparency, regulatory protection and convenience.

4. What is Assets Under Management (AUM)?

   The total market value of all the investments held in a mutual fund scheme (or by an AMC). It changes daily with market movements and net inflows/outflows.

5. What is the three-tier legal structure of a mutual fund in India?

   Sponsor (promoter who sets it up), Trust/Trustees (hold assets in trust for investors), and the Asset Management Company (AMC, which manages the investments). The fund itself is constituted as a Trust under the Indian Trusts Act.

6. Under which regulation are mutual funds in India established and governed?

   The SEBI (Mutual Funds) Regulations, 1996. The mutual fund is set up as a public trust under the Indian Trusts Act, 1882.

7. What is the role of the Sponsor of a mutual fund?

   The sponsor establishes the mutual fund, must have a sound track record (generally 5+ years in financial services and net worth/profit criteria), and contributes to the AMC's net worth. The sponsor appoints the trustees and the AMC.

8. What is the role of the Trustees in a mutual fund?

   Trustees hold the fund's property in trust for the benefit of unit-holders and ensure the AMC operates in investors' interest and in compliance with SEBI regulations. At least two-thirds of trustees must be independent.

9. What is the role of the Asset Management Company (AMC)?

   The AMC manages the scheme's investments, makes investment decisions, and handles day-to-day operations, for a fee. At least 50% of its directors must be independent; it must maintain the SEBI-prescribed minimum net worth.

10. What are the roles of the Custodian and the RTA in a mutual fund?

    The Custodian holds the fund's securities in safekeeping and settles trades. The Registrar and Transfer Agent (RTA) maintains investor records and processes transactions (purchases, redemptions, switches).

11. What distinguishes an open-ended scheme from a close-ended scheme?

    Open-ended schemes are available for ongoing subscription and redemption at NAV (variable corpus, no fixed maturity). Close-ended schemes have a fixed maturity, a fixed corpus, and units are bought/sold on a stock exchange after the NFO.

12. What is an Interval Fund?

    A scheme that combines features of open- and close-ended funds: it is open for subscription/redemption only during specified transaction periods (intervals) at NAV, and otherwise behaves like a close-ended fund.

13. How does SEBI categorise equity schemes (key sub-categories)?

    Large Cap, Large & Mid Cap, Mid Cap, Small Cap, Multi Cap, Flexi Cap, Dividend Yield, Value, Contra, Focused, Sectoral/Thematic, and ELSS (tax-saving).

14. How does SEBI define Large Cap, Mid Cap and Small Cap companies?

    Large Cap = top 100 companies by full market capitalisation; Mid Cap = 101st to 250th companies; Small Cap = 251st company onwards.

15. What is an ELSS (Equity Linked Savings Scheme)?

    A diversified equity scheme that invests at least 80% in equities, offers tax deduction under Section 80C (up to Rs 1.5 lakh), and has a 3-year lock-in (the shortest among 80C options).

16. What is an NFO (New Fund Offer)?

    The first-time subscription offer for a new mutual fund scheme. Units are typically offered at a face value of Rs 10 during the NFO period, after which an open-ended scheme reopens for ongoing transactions at NAV.

17. What is the maximum duration of an NFO period for an open-ended scheme?

    An NFO can remain open for a maximum of 15 days. After closure, an open-ended scheme must reopen for ongoing sale/repurchase within 5 business days of allotment.

18. Name the main types of debt funds by maturity/duration.

    Overnight, Liquid, Ultra-Short Duration, Low Duration, Money Market, Short Duration, Medium Duration, Medium-to-Long Duration, Long Duration, Dynamic Bond, Corporate Bond, Credit Risk, Banking & PSU, Gilt, Gilt with 10-year constant duration, and Floater funds.

19. What is a Liquid Fund and what does it invest in?

    A debt fund investing in money market and debt instruments with residual maturity up to 91 days. It is used to park surplus cash for very short periods with high liquidity and low risk.

20. What is a Gilt Fund?

    A debt fund that invests at least 80% in government securities (G-Secs) across maturities. It carries negligible credit risk but is exposed to interest-rate (price) risk.

21. What is a Hybrid (Balanced) Fund?

    A scheme that invests in a mix of equity and debt (and sometimes gold). SEBI categories include Conservative Hybrid, Balanced Hybrid, Aggressive Hybrid, Dynamic Asset Allocation/Balanced Advantage, Multi-Asset Allocation, Arbitrage, and Equity Savings.

22. What is an Index Fund / ETF?

    A passively managed fund that replicates a market index by holding the same securities in the same proportion. An ETF (Exchange Traded Fund) is listed and traded on the stock exchange like a share, while an index fund is bought/sold at NAV.

23. What is the formula for Net Asset Value (NAV) per unit?

    NAV = (Market value of investments + Receivables + Other assets - Liabilities - Accrued expenses) / Number of units outstanding. In short: Net Assets of the scheme ÷ Number of outstanding units.

24. How frequently must NAV be computed and disclosed?

    NAV must be computed and published every business day. For most schemes NAV is declared up to 4 decimal places; liquid/debt fund NAVs may use more decimals. It must be updated on the AMC and AMFI websites.

25. What is the 'cut-off time' concept for NAV applicability?

    The time by which a valid application (with funds realised, for liquid/overnight; or received, per current rules) must be received to get a particular day's NAV. Applicable NAV now generally depends on when funds are actually realised by the AMC, regardless of amount.

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