NISM V-D Legal and Regulatory Framework — Practice Questions
Questions on SEBI's Mutual Fund Regulations, the role of AMFI, investor rights and obligations, and the framework that now also governs Specialized Investment Funds and their distributors.
41 questions on Legal & Regulatory in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- SEBI Mutual Fund Regulations
- Role of AMFI
- Investor rights and obligations
- The SIF framework
Free sample questions
1. SEBI has regulations pertaining to restrictions on the investment policies of mutual fund schemes for ensuring that _____ .
- A. The mutual scheme can improve their ratings over a period of time
- B. The scheme returns are better than the benchmark returns
- C. The scheme returns are better than the Nifty/Sensex
- D. The mutual fund scheme has a minimum diversification as per the requirements ✅
Answer: D — The mutual fund scheme has a minimum diversification as per the requirements
Why: The investors have no control, over the investment management of the mutual fund. It is in this context that SEBI has laid down regulations pertaining to investment universe, restrictions and portfolio diversification for investment by mutual fund schemes. Such regulations intend to control the risks taken by the mutual fund managers.
💡 SEBI investment restrictions ensure MINIMUM diversification -> controls fund manager risk.
2. If a mutual fund enters into a transaction for purchase or sale of securities with any of its associates, then the members of Asset Management Company of the mutual fund have to ________ .
- A. Inform the mutual fund unitholders of the intent to undertake the transaction before it is done
- B. Justify the fairness of the transaction to the Board of Trustees ✅
- C. Make certain that the transactions happens at a price that is better than the closing market price
- D. Take the approval of the trustees before undertaking the transactions
Answer: B — Justify the fairness of the transaction to the Board of Trustees
Why: As per the AMFI Code of Ethics for Mutual Funds : Members shall in respect of transactions of purchase and sale of securities entered into with any of their associates or any significant unitholder : 1. Submit to the Board of Trustees details of such transactions, justifying its fairness to the scheme 2. Disclose to the unitholders details of the transaction in brief through annual and half yearly reports
💡 Associate-transaction: AMC must justify its fairness to the Board of Trustees (AMFI ethics).
3. Mutual funds must publish their unaudited accounts once every six months _________ .
- A. on the AMC website ✅
- B. on the AMFI website
- C. in atleast two English newspaper
- D. on the SEBI website
Answer: A — on the AMC website
Why: According to SEBI regulations, mutual funds must publish their unaudited half-yearly financial results: On the website of the Asset Management Company (AMC) On the AMFI website (optional but common practice) Additionally, they must issue a public notice in at least one national English daily and one regional language newspaper to inform investors that the results are available online. Thus, publishing on AMC website is mandatory. Publishing on AMFI is not mandatory but generally done.
💡 Unaudited half-yearly results MUST be published on the AMC website (AMFI optional).
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Other NISM V-D topics
Investment LandscapeConcept & Role of Mutual FundsLegal StructureScheme Related InformationDistribution & ChannelsNAV, 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