NISM V-D Fund Distribution and Channel Management — Practice Questions
Practise the distribution chapter: who may distribute mutual funds and SIFs, ARN and EUIN, commission structures, direct versus regular plans and the conduct rules for distributors.
29 questions on Distribution & Channels in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- ARN and EUIN
- Commission and trail
- Direct vs regular plans
- Distributor conduct rules
Free sample questions
1. An ABC Mutual Fund distributor wishes to conduct an investor awareness drive using printed pamphlets that describe the fund's schemes. Which of the following statements holds true ?
- A. The pamphlet material must be approved in advance by the AMC ✅
- B. The pamphlet material requires prior approval from SEBI’s advertising committee
- C. The pamphlet content must receive prior approval from AMFI
- D. The distributor is free to distribute the pamphlets as long as the details mentioned are factually correct
Answer: A — The pamphlet material must be approved in advance by the AMC
Why: As per SEBI regulations and AMFI guidelines, any marketing, advertising, or promotional material related to a mutual fund scheme — including pamphlets, brochures, presentations, and leaflets — must be pre-approved by the Asset Management Company (AMC) before a distributor can use or distribute it. The AMC is responsible for ensuring all communication about its schemes is fair, accurate, and not misleading to investors.
💡 MF marketing/pamphlet material -> must be pre-approved by the AMC before a distributor uses it.
2. Mutual fund distributors receive compensation from _____ after the removal of transaction charges by SEBI.
- A. SEBI or AMFI
- B. Stock exchanges
- C. Investors themselves
- D. Asset Management Companies (AMCs) ✅
Answer: D — Asset Management Companies (AMCs)
Why: After the withdrawal of transaction charges in 2025, mutual fund distributors are mainly compensated through commissions paid by the AMC. These commissions are paid from the scheme expenses within SEBI-prescribed limits.
💡 Post-2025 (no transaction charges) -> MF distributors paid mainly via AMC commissions from scheme expenses.
3. Identify from the following practices, which is/are NOT an approved practice by a registered mutual fund distributor?
- A. Not levying transaction charges on investors based on the value of their investments
- B. Attracting new investors by offering them monetary incentives ✅
- C. Both of the above
- D. None of the above
Answer: B — Attracting new investors by offering them monetary incentives
Why: Not levying transaction charges : This is perfectly allowed. Distributors may choose not to levy transaction charges; it’s optional. Offering monetary incentives to attract investors : This is not permitted. SEBI regulations prohibit distributors from offering cash or monetary benefits to lure investors, as it can lead to mis-selling. Therefore, the practice that is NOT approved is offering monetary incentives.
💡 Luring investors with monetary incentives = NOT approved (mis-selling); waiving txn charges is OK.
Practise all 29 Distribution & Channels questions
Plus the full 853-question NISM V-D bank and real-feel mock exams.
Other NISM V-D topics
Investment LandscapeConcept & Role of Mutual FundsLegal StructureLegal & RegulatoryScheme Related InformationNAV, TER & PricingTaxationInvestor ServicesRisk, Return & PerformanceScheme PerformanceScheme SelectionBasics of DerivativesUnderstanding the IndexForwards & FuturesOptionsEquity Derivative StrategiesInterest Rates & Fixed IncomeInterest Rate DerivativesInterest Rate FuturesInterest Rate OptionsInterest Rate Strategies