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NISM Series II-B (RTA Mutual Fund) study materials
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NISM Series II-B (RTA Mutual Fund) practice questions

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Question 1Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Under SEBI's mutual fund regulations, within how many working days from the date of receipt must a Mutual Fund/RTA dispatch the account statement after an initial purchase of units?

  1. Thirty working days
  2. Five working days Correct answer.
  3. Ten working days
  4. Fifteen working days

Explanation

SEBI mandates that the account statement for the initial purchase be dispatched within five working days of the receipt of the request, after the units are allotted and the NAV is applied. This tight timeline ensures the investor promptly receives written confirmation of the holding and the price at which units were allotted.

Question 2Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a redemption request for units held in physical (non-demat) form. Which detail is essential for the RTA to process the request validly?

  1. A fresh KYC acknowledgement from the intermediary
  2. The original purchase confirmation slip
  3. The folio number along with the unit holder's signature matching the recorded signature Correct answer.
  4. The bank account statement of the previous financial year

Explanation

A redemption request must identify the folio and carry the signature of the unit holder as recorded with the RTA, so the signature can be verified before processing. Without a valid folio reference and signature match, the RTA cannot authenticate the instruction and must reject or seek clarification.

Question 3Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor's purchase application is received at an official collection point at 2:00 p.m. on a business day and the applicable NAV is that day's NAV. What is the standard basis for this NAV cut-off treatment?

  1. Applications always get the previous day's NAV regardless of time
  2. Applications get the NAV of the day the funds are credited to the scheme
  3. Applications get the NAV of the next business day by default
  4. Applications received before the cut-off time on a business day get that day's NAV Correct answer.

Explanation

For purchases, the closing NAV of the day on which the application is received before the cut-off time (normally 3:00 p.m.) at an official point of acceptance applies. Applications received after cut-off attract the NAV of the next business day, so time-stamping at the collection point is operationally critical.

Question 4Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which register maintained by the RTA records every allotment and redemption of units for each folio?

  1. The compliance breach register
  2. The register of unit holders Correct answer.
  3. The dividend distribution register
  4. The brokerage register

Explanation

The register of unit holders is the master record showing each holder's folio, units allotted, units redeemed and the resulting balance. It is the primary source against which statements, NAV valuations and reconciliations are verified.

Question 5Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following best describes the role of the Registrar and Transfer Agent (RTA) in mutual fund operations?

  1. Setting the NAV of the scheme each business day
  2. Managing the scheme's investment portfolio and stock selection
  3. Maintaining investor folios and processing transactions on behalf of the AMC Correct answer.
  4. Auditing the AMC's financial statements annually

Explanation

The RTA acts as the record-keeper and processing agent for the AMC, handling folio maintenance, subscriptions, redemptions, and investor servicing. Investment decisions and NAV computation are the AMC's responsibility, not the RTA's.

Question 6Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor wants to change the bank account registered in a folio for future redemption payouts. What must the RTA typically obtain to effect this change?

  1. A fresh purchase application in the same folio
  2. A written request signed by the unit holder with the new bank details and supporting proof Correct answer.
  3. Approval from the scheme's fund manager
  4. Verbal confirmation over the recorded phone line only

Explanation

Bank mandate changes require a signed written request from the unit holder, along with documentary proof of the new account, so the RTA can update the payout instruction securely. Verbal instructions and fund manager approvals are not the accepted mechanism for changing bank details.

Question 7Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

What does 'KYC compliant' status of a folio primarily enable the RTA to do?

  1. Waive the exit load on early redemption
  2. Accept and process purchase and redemption transactions for the investor Correct answer.
  3. Guarantee a minimum return on the investment
  4. Allow the investor to skip signature verification

Explanation

KYC compliance establishes the investor's identity and is a precondition for the RTA to process transactions in the folio. It does not affect returns, loads or signature checks, which follow separate rules.

Question 8Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which document must the RTA issue to an investor who redeems all units in a folio, confirming that the folio is closed?

  1. A redemption statement showing the units redeemed and the amount payable Correct answer.
  2. A fresh account statement showing a zero balance without any redemption detail
  3. A scheme information document
  4. A dividend reinvestment advice

Explanation

On full redemption, the RTA issues a redemption statement that records the units redeemed, the applicable NAV and the amount payable to the investor. This confirms the transaction and the closure of the holding, distinct from routine periodic statements.

Question 9Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a purchase application at 4:30 p.m. on a business day when the cut-off is 3:00 p.m. and the next day is also a business day. Which NAV will normally apply?

  1. The NAV of the same business day
  2. The highest NAV of the preceding week
  3. The NAV of the next business day Correct answer.
  4. The NAV of the previous business day

Explanation

Applications received after the cut-off time are treated as received on the next business day for NAV purposes, so the next business day's NAV applies. This rule protects existing unit holders from late applicants gaining an advantage from information available after cut-off.

Question 10Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor redeems part of a holding from a folio that has units purchased on several different dates. How is the exit load typically determined?

  1. On the average holding period of all units in the folio
  2. On the basis of the folio's opening date only
  3. On a last-in-first-out basis, applying the load to the most recent lot first
  4. On a first-in-first-out basis, applying the load period to each purchase lot Correct answer.

Explanation

Exit load is normally computed on a first-in-first-out basis, so units acquired earliest are treated as redeemed first and the load period is measured from each lot's purchase date. This prevents investors from avoiding load by selectively redeeming newer units.

Question 11Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

A nominee registered in a folio dies before the original unit holder. What is the RTA's typical course of action on the nominee's death?

  1. Close the folio and redeem all units at the prevailing NAV
  2. Transfer the units to the AMC's own account
  3. Transfer the units to the nominee's legal heirs immediately
  4. Record the nomination as void and process the folio per the unit holder's instructions or legal heirs Correct answer.

Explanation

A nomination lapses if the nominee predeceases the unit holder, so the nomination becomes void and the folio is dealt with according to the unit holder's instructions or the applicable succession route. The RTA does not transfer units to the nominee's heirs or close the folio automatically.

Question 12Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a request to switch units from one scheme to another within the same fund house. How does the RTA treat the switch for transaction purposes?

  1. As a fresh purchase only, with no redemption leg
  2. As a single transaction that attracts no NAV or load implications
  3. As a redemption from the source scheme and a purchase into the destination scheme Correct answer.
  4. As a transfer of units without any NAV application

Explanation

A switch is processed as a redemption from the source scheme and a purchase into the destination scheme, each attracting the relevant NAV and applicable loads. This dual treatment ensures the correct price and load are applied on both legs.

Question 13Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

What is the significance of the 'record date' in a dividend distribution by a mutual fund scheme?

  1. It determines which unit holders are entitled to receive the declared dividend Correct answer.
  2. It is the date on which the scheme's NAV is reset to face value
  3. It is the last date for submitting redemption requests
  4. It is the date on which the AMC declares the dividend amount

Explanation

The record date fixes entitlement: unit holders on the register as of that date receive the dividend. Purchases after the record date do not carry the dividend entitlement, which is why the cum-dividend and ex-dividend NAVs differ.

Question 14Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor's cheque for a fresh purchase is dishonoured on presentation. What should the RTA do with the units already allotted against that application?

  1. Cancel the allotment and reverse the units, treating the application as invalid Correct answer.
  2. Charge an exit load and let the units remain
  3. Transfer the units to another folio of the same investor
  4. Retain the units and allow the investor to pay later without adjustment

Explanation

When the payment instrument is dishonoured, the allotment is not backed by cleared funds, so the RTA cancels the units and reverses the transaction. The application is treated as invalid, and the investor's folio is restored to its prior position.

Question 15Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following is a core reconciliation the RTA must perform to ensure folio records match the scheme's books?

  1. Reconciling units outstanding per the register with the AMC's unit capital records Correct answer.
  2. Reconciling the AMC's share price with the scheme NAV
  3. Reconciling the fund manager's salary with the scheme expense ratio
  4. Reconciling the distributor's marketing spend with the AUM

Explanation

Unit reconciliation between the RTA's register and the AMC's unit capital records confirms that the number of units outstanding is consistent across systems. Discrepancies must be identified and resolved promptly to keep NAV and investor balances accurate.

Question 16Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor wants to update the registered nominee in a folio. Which requirement applies to a nomination change?

  1. Approval from the existing nominee before any change
  2. A signed nomination form from the unit holder, duly witnessed as prescribed Correct answer.
  3. A fresh KYC submission by the proposed nominee
  4. An affidavit from the AMC's compliance officer

Explanation

A nomination change is effected through a properly completed and signed nomination form, witnessed as required by the regulations. The existing nominee's consent, fresh KYC of the nominee and compliance affidavits are not conditions for changing a nomination.

Question 17Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

A systematic withdrawal plan (SWP) instruction is active in a folio, but the unit balance falls below the amount required for the next instalment. What should the RTA do?

  1. Suspend the folio permanently without notice
  2. Convert the shortfall into a purchase transaction
  3. Continue the SWP by creating a negative balance in the folio
  4. Process the instalment only up to the available balance and then stop the SWP Correct answer.

Explanation

An SWP cannot redeem more units than are available, so the RTA processes the instalment to the extent of the balance and discontinues the plan once units are exhausted. A folio cannot carry negative units, and the shortfall cannot be converted into a purchase.

Question 18Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following best describes the treatment of a lock-in period applicable to units allotted under a specified scheme category?

  1. The lock-in applies only to the dividend option of the scheme
  2. The lock-in can be waived at the investor's written request
  3. The units cannot be redeemed until the lock-in expires, though the folio continues to accrue NAV movements Correct answer.
  4. The units can be redeemed anytime but with a higher exit load

Explanation

A lock-in restricts redemption of the units until the specified period ends, while the units remain in the folio and their value continues to move with the scheme's NAV. It cannot be waived by investor request, and it applies to the units allotted, not merely to one option.

Question 19Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a redemption request and then, before the units are actually redeemed, requests cancellation of that redemption. How should the RTA handle this?

  1. Accept the cancellation if received before the redemption is processed, and confirm in writing Correct answer.
  2. Charge an exit load and cancel the redemption without confirmation
  3. Process the redemption and issue a fresh purchase for the same units
  4. Reject all cancellation requests once a redemption form is submitted

Explanation

A redemption request can be cancelled if the cancellation reaches the RTA before the redemption is processed. The RTA should act on the timely cancellation and confirm the outcome to the investor in writing, since the transaction has not yet been effected.

Question 20Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor holds units in a folio where the address on record is outdated, and a dividend cheque is returned undelivered. What is the RTA's appropriate step?

  1. Credit the dividend to the AMC's account
  2. Retain the dividend indefinitely without any follow-up
  3. Update the address on a signed request and reissue the payment to the corrected address Correct answer.
  4. Cancel the dividend entitlement permanently

Explanation

When a dividend payment is returned, the RTA should obtain a signed address update and reissue the payment to the corrected address. The entitlement is not cancelled, and the amount is not diverted to the AMC.

Question 21Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

In a folio held jointly by two holders with the 'either or survivor' mode of holding, how may a redemption request be validly signed?

  1. Only by the second-named holder
  2. Only by both holders signing together
  3. By either of the joint holders acting alone Correct answer.
  4. Only by the first-named holder

Explanation

Under 'either or survivor', either joint holder is competent to give instructions and sign a redemption request on the folio. The 'jointly' mode would require both signatures, and the first-named holder has no exclusive authority under this mode.

Question 22Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An AMC declares a dividend with a record date of 10 June. An investor purchases units on 9 June and the purchase is processed with the 9 June NAV. Which statement is correct about dividend entitlement?

  1. The investor is entitled to the dividend because the units are on the register as of the record date Correct answer.
  2. The investor is entitled to half the dividend as a pro-rata benefit
  3. The investor is not entitled because purchases must settle before the declaration date
  4. The investor is entitled only if the purchase was made in demat form

Explanation

Entitlement depends on holding units on the register as of the record date. Units allotted on 9 June are on the register before the 10 June record date, so the investor qualifies for the dividend, and the purchase NAV would reflect the cum-dividend position.

Question 23Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a redemption request for units that are pledged in favour of a lender. What is the RTA's correct response?

  1. Redeem the units and split the proceeds equally
  2. Redeem the units and pay the proceeds to the investor directly
  3. Decline to redeem until the pledge is released by the pledgee Correct answer.
  4. Redeem the units and pay the proceeds to the AMC

Explanation

Pledged units are encumbered in favour of the pledgee, so the RTA cannot redeem them on the unit holder's instruction alone. The pledge must first be released by the pledgee before the units become available for redemption.

Question 24Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor's folio shows a purchase of units where the application was received before cut-off but the funds were realised two days later. How should the RTA generally treat the NAV for this purchase?

  1. Apply the NAV of the day the funds were realised in all cases
  2. Apply the NAV of the day the units were actually allotted manually
  3. Apply the NAV of the day the application was received before cut-off, provided the payment is realised within the permitted period Correct answer.
  4. Apply the higher of the two NAVs to protect the investor

Explanation

Where a compliant application is received before cut-off and payment is realised within the permitted timeframe, the NAV of the application day applies. The realisation date does not shift the NAV as long as the payment condition is met, which is why tracking realisation is a key RTA control.

Question 25Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

A unit holder dies leaving a nomination in favour of a minor. How should the RTA generally handle transmission of units?

  1. Transmit the units to the nominee, with the guardian acting on behalf of the minor until majority Correct answer.
  2. Transmit the units only after the minor attains majority in all cases
  3. Reject the transmission because a minor cannot hold units
  4. Transmit the units to the AMC pending the minor attaining majority

Explanation

A minor can hold units through a guardian, so transmission is effected in the nominee's name with the guardian operating the folio until the minor reaches majority. The RTA does not reject the transmission or park the units with the AMC.

Question 26Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Under SEBI's cut-off rules, an investor's purchase application for an open-ended equity scheme is received at 2:00 p.m. on a business day and the funds are credited to the scheme's bank account on the same day before 3:00 p.m. Which NAV applies to the allotment?

  1. The NAV of the same business day, since both the application and the funds were received before cut-off Correct answer.
  2. The NAV declared at the end of the week in which the application was received
  3. The NAV of the previous business day, as published in the newspaper
  4. The NAV of the next business day, because equity scheme purchases always use forward pricing

Explanation

For purchases of open-ended schemes, the applicable NAV is the same business day's NAV when the application is received before the cut-off and the funds are realised into the scheme account before the cut-off. Forward pricing means the investor does not know the NAV at the time of application, but the date used is still the same business day when both conditions are met.

Question 27Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following best describes the role of the Registrar and Transfer Agent in a mutual fund?

  1. It audits the AMC's accounts and certifies the scheme's annual returns
  2. It acts as the custodian of the scheme's securities and settles trades with brokers
  3. It manages the investment portfolio and takes buy/sell decisions for the scheme
  4. It maintains investor records, processes transactions and services folios on behalf of the AMC Correct answer.

Explanation

The RTA is appointed by the AMC to handle investor servicing and record-keeping: processing purchases, redemptions and switches, maintaining the register of unit holders, and issuing statements. Portfolio management and custody are separate functions performed by the AMC's investment team and the custodian respectively.

Question 28Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor's folio carries a 'lien' marked in favour of a bank for a loan. What does this lien mean for the RTA's records?

  1. The units are frozen and cannot be redeemed or switched until the lien is released Correct answer.
  2. The lien converts the investor's holding into a pledge of the AMC's own units
  3. The lien only blocks dividend payment but not redemption of units
  4. The units are automatically redeemed to repay the bank on the due date

Explanation

A lien marks a charge on the units in favour of a third party, so the RTA blocks redemption, switch-out and transmission of those units until a release instruction is received. Dividend payouts may still be credited to the unit holder unless the lien specifically covers them.

Question 29Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

In a folio held under the 'any one or survivor' mode, the second holder submits a redemption request signed only by himself. How should the RTA treat this request?

  1. Accept it, because any one holder can operate the folio under this mode Correct answer.
  2. Accept it only after the first holder's signature is obtained separately
  3. Accept it only if supported by a power of attorney from the first holder
  4. Reject it, because both holders must always sign a redemption

Explanation

Under the 'any one or survivor' mode, any one of the joint holders is competent to give instructions for redemption, switch or other transactions. The RTA therefore accepts the request signed by the second holder alone.

Question 30Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which document does the RTA primarily rely on to verify an investor's identity and address at the time of opening a folio?

  1. The KYC records registered with a SEBI-recognised KYC Registration Agency Correct answer.
  2. The custodian's trade confirmation
  3. The scheme's Scheme Information Document
  4. The AMC's board resolution authorising the scheme

Explanation

Identity and address verification for mutual fund folios is done through the KYC records maintained by a SEBI-registered KRA, which the RTA accesses using the investor's PAN. The SID describes the scheme and is not an identity document.

Question 31Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor redeems all units in a folio and the RTA processes the full redemption. What is the standard effect on the folio account?

  1. The folio is transferred to the AMC's own name
  2. The folio remains open with a zero balance for future purchases
  3. The folio is merged with another folio of the same investor automatically
  4. The folio is closed and the RTA may issue a statement showing nil balance as closure confirmation Correct answer.

Explanation

When the entire holding is redeemed, the folio is closed and the RTA records the closure in its system, issuing a final statement showing a nil balance. A fresh folio is opened if the investor returns later.

Question 32Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following is a valid way for an investor to hold units in a mutual fund scheme?

  1. In dematerialised form through a depository participant Correct answer.
  2. Only in the name of a company, not an individual
  3. Only in physical form, since units cannot be dematerialised
  4. Only jointly with a nominee as a joint holder

Explanation

Mutual fund units may be held in physical (statement) form or in dematerialised form through a depository, subject to the scheme being enabled for demat. The RTA reconciles demat holdings with the depository records.

Question 33Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

What does a 'non-business day' mean for the purpose of NAV applicability in a mutual fund?

  1. A day on which the scheme's NAV is not declared, such as a weekend or a day the stock markets are closed Correct answer.
  2. A day on which the AMC's office is closed for a public holiday but banks function
  3. A day on which the RTA processes only switch transactions
  4. A day on which the scheme declares a dividend

Explanation

A non-business day is one on which the scheme does not declare an NAV, typically a Saturday, Sunday or market holiday. Applications received on such a day are treated as received on the next business day for NAV purposes.

Question 34Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a switch request from a debt scheme to an equity scheme of the same fund house. For NAV purposes, how is the switch generally treated?

  1. As a redemption from the debt scheme and a purchase into the equity scheme, each with its own applicable NAV Correct answer.
  2. As a single transaction using the equity scheme's NAV only
  3. As a purchase into the equity scheme at the previous day's NAV
  4. As a transfer of units at the original cost price

Explanation

A switch is processed as two legs: a redemption from the source scheme and a purchase into the destination scheme. Each leg attracts the NAV applicable to it under the cut-off rules for that scheme.

Question 35Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An AMC declares a dividend under a scheme with a record date of 15 July. An investor purchases units on 14 July and the units are allotted with that date. Will the investor receive the dividend?

  1. No, because dividend eligibility depends on holding for at least 30 days
  2. Yes, because the investor is a unit holder on the record date Correct answer.
  3. No, because units purchased before the record date never qualify
  4. Yes, but only if the investor opts for the dividend option in writing after allotment

Explanation

Entitlement to a dividend is determined by the unit holder's position on the record date. Units allotted on 14 July make the investor a holder on 15 July, so the dividend is payable, provided the folio is under the dividend option.

Question 36Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

The RTA receives a redemption request from a folio where the unit holder's signature does not match the specimen signature on record. What is the appropriate action?

  1. Process the redemption and note the discrepancy for later review
  2. Reject the request and seek a properly signed application or additional verification Correct answer.
  3. Forward the request to the custodian for approval
  4. Process half the amount as a precaution

Explanation

Signature verification is a core RTA control; a mismatch means the instruction is not authenticated. The RTA should reject or hold the request and obtain a valid signature or other verification before processing.

Question 37Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following best describes the purpose of the daily reconciliation between the RTA's unit capital records and the AMC's scheme accounts?

  1. To fix the NAV of the scheme for the next day
  2. To determine the scheme's expense ratio for the previous year
  3. To ensure that units allotted and redeemed agree with the cash received and paid, and that the unit capital is correct Correct answer.
  4. To compute the fund manager's performance bonus

Explanation

Reconciliation confirms that units issued and cancelled match the money received and paid into the scheme, keeping the unit capital accurate. It is a control over record integrity, not a performance or NAV-setting exercise.

Question 38Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor wants to change the bank account registered for redemption payouts. Which requirement does the RTA typically impose?

  1. A request signed only by the nominee
  2. A written request signed by all holders, with bank details verified, and the change applied only to future payouts Correct answer.
  3. An oral instruction confirmed by the distributor
  4. Automatic updating based on the last dividend cheque encashed

Explanation

A bank mandate change requires a signed request from the holder(s) with supporting bank verification, and it operates prospectively so that already-issued payouts are unaffected. This protects the folio against unauthorised diversion of redemption proceeds.

Question 39Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor submits a purchase application without quoting the scheme's PAN or with a PAN that fails validation. How should the RTA handle the application?

  1. Reject the application, since PAN is mandatory for mutual fund investments Correct answer.
  2. Accept it and allot units under a temporary folio
  3. Allot units and ask for the PAN later
  4. Accept it if the amount is below the threshold for PAN

Explanation

PAN is mandatory for investments in mutual funds, and the RTA validates it against KYC records before allotment. An application without a valid PAN fails the mandatory check and is rejected.

Question 40Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

What is the significance of the 'date of allotment' recorded by the RTA in a folio?

  1. It is the date on which the AMC declared the scheme's first NAV
  2. It is the date on which the investor first enquired about the scheme
  3. It is the date on which the distributor's commission is paid
  4. It is the date on which units are credited to the folio and from which holding-period and exit-load calculations are measured Correct answer.

Explanation

The allotment date is when units are credited to the investor's folio and serves as the reference point for holding periods, exit load and tax treatment. It is distinct from the application date and the NAV date in some cases.

Question 41Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

A systematic investment plan (SIP) instalment fails because the investor's bank account has insufficient funds. What does the RTA typically do with that instalment?

  1. Allot units at the next day's NAV and charge a penalty
  2. Cancel the entire SIP permanently after the first failure
  3. Treat the instalment as not received, with no units allotted, and continue the SIP for subsequent instalments subject to the AMC's policy Correct answer.
  4. Allot units on credit and recover the amount from the next instalment

Explanation

A failed SIP debit means no funds have been realised, so no units are allotted for that instalment. The RTA records the failure and the AMC's policy governs whether the mandate continues or is discontinued after repeated failures.

Question 42Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

Which of the following statements about the register of unit holders maintained by the RTA is correct?

  1. It records only the aggregate units outstanding for the scheme
  2. It is maintained by the custodian on the RTA's behalf
  3. It records the name, address, bank details, holdings and lien/nomination particulars of each folio Correct answer.
  4. It is open to public inspection without restriction

Explanation

The register of unit holders is the master record of each folio, capturing holder details, holdings, bank mandate, nomination and any lien. It is maintained by the RTA and is confidential, accessible only as permitted by law.

Question 43Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor requests transmission of units following the death of the sole holder, and the nominee is a minor. How should the RTA generally proceed?

  1. Transfer units directly to the minor, who signs the forms personally
  2. Transfer units to the guardian of the minor on production of guardianship evidence and KYC of the guardian Correct answer.
  3. Refuse transmission until the minor attains majority
  4. Transfer units to the deceased holder's legal heirs instead of the nominee

Explanation

Where the nominee is a minor, the RTA transmits units to the guardian named by the holder or, absent that, to a court-appointed guardian, supported by guardianship documents and the guardian's KYC. The minor cannot operate the folio personally.

Question 44Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

What is the primary purpose of the annual account statement that the RTA sends to unit holders?

  1. To provide a consolidated record of transactions, holdings and closing unit balance for the period Correct answer.
  2. To offer the investor a chance to change the scheme's investment objective
  3. To disclose the fund manager's personal trading in the scheme
  4. To certify the scheme's audited financial results

Explanation

The account statement is a record of the investor's transactions and unit balance for the period, helping the holder verify the RTA's records. It is not a disclosure of portfolio decisions or audited accounts.

Question 45Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor holds units purchased on several dates. On a partial redemption, which cost basis does the RTA normally adopt for computing exit load and capital gains?

  1. First-in, first-out, so the earliest units are treated as redeemed first Correct answer.
  2. Average cost across all units, regardless of purchase date
  3. The highest-cost units are always redeemed first
  4. Last-in, first-out, so the most recent units are redeemed first

Explanation

Indian mutual fund practice follows first-in, first-out for partial redemptions, so units acquired earliest are treated as redeemed first. This affects the holding period and exit load applicable to the redeemed units.

Question 46Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

The RTA receives a request to register a nomination in a folio. Which statement about nomination in mutual fund folios is correct?

  1. A nomination requires the consent of the AMC's board
  2. A nomination can be made only by a corporate holder
  3. A nomination automatically transfers ownership during the holder's lifetime
  4. A nomination may be made by an individual holder, and a non-individual folio cannot nominate Correct answer.

Explanation

Nomination is a facility available to individual unit holders, allowing them to name a person to receive units on death. Non-individual holders such as companies cannot make a nomination in the same way.

Question 47Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

A purchase application is received before cut-off, but the funds are realised into the scheme account after cut-off on the same day. Which NAV should the RTA apply?

  1. The NAV of the same business day, because the application was in time
  2. The NAV at which the AMC's own investment was made
  3. The NAV of the previous business day
  4. The NAV of the next business day on which funds are realised, subject to the scheme's cut-off rules Correct answer.

Explanation

When funds are realised after the cut-off, the purchase is treated as having been received on the next business day for NAV purposes, even if the form arrived earlier. The RTA must match the realisation date with the cut-off rule before allotting units.

Question 48Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An investor's cheque for a fresh purchase is dishonoured after units have been allotted. What is the RTA's correct course of action?

  1. Leave the units in the folio and recover the amount from future redemptions
  2. Cancel the allotment, reverse the units and recover any loss from the investor, reporting the matter as required Correct answer.
  3. Allot additional units as compensation for the inconvenience
  4. Transfer the units to the distributor who sourced the investment

Explanation

Allotment made on a dishonoured cheque is without consideration, so the RTA cancels the units, reverses the transaction and may recover losses. The incident is also reported in line with the AMC's policy and regulatory requirements.

Question 49Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

An AMC changes a scheme's exit load structure with effect from a specified date. How should the RTA apply the new load to a redemption request received after that date for units allotted before it?

  1. Apply no load, since the units were purchased under the old structure
  2. Apply whichever load is lower of the two
  3. Apply the load prevailing on the date of allotment of those units
  4. Apply the load structure in force on the date of the redemption request, as disclosed in the scheme documents Correct answer.

Explanation

Exit load is generally determined by the load structure in force on the date the redemption request is processed, subject to the transitional provisions disclosed by the AMC. The RTA must apply the disclosed structure rather than the load at the time of original purchase.

Question 50Mutual Fund Operations and RTA Functions (source does not enumerate official domains; provisional split)

The RTA identifies that units were allotted to an investor at a NAV declared for the wrong date, overstating the holding. What is the appropriate corrective action?

  1. Reverse the erroneous allotment, re-allot at the correct NAV, and inform the investor and AMC of the correction Correct answer.
  2. Deduct the excess units from another folio of the same investor
  3. Adjust the error against the scheme's future dividend distributions
  4. Leave the record unchanged to avoid inconvenience to the investor

Explanation

A NAV error in allotment must be corrected at source: the erroneous units are reversed and the correct number allotted, with the investor and AMC informed. Errors cannot be netted against dividends or other folios.