Summary of NISM VA - Mutual Fund Distributors | Mock Test 2 | Chapter 7 to 12
Summary of Video:
NISM VA - Mutual Fund Distributors | Mock Test 2 | Chapter 7 to 12
This video is a practice session featuring 50 multiple-choice questions (MCQs) covering chapters 7 to 12 of the NISM Mutual Fund Distributors certification syllabus. The instructor explains each question and its correct answer, often providing reasoning and relevant regulatory or conceptual details. The focus is on mutual fund valuation, taxation, expenses, investor rights, risk assessment, scheme types, and regulatory compliance.
Main Ideas and Concepts Covered:
- Fair Valuation and Disclosure:
- Fair valuation policies must be disclosed in the Statement of Additional Information (SAI).
- NAV calculation includes accrued income, expenses, and investments.
- NAV Calculation:
- NAV = (Total Assets + Accrued Income - Expenses) / Number of Units.
- Lower expenses lead to higher NAV.
- NAV is calculated to 2 decimal places for equity funds and 4 decimal places for index funds.
- Mutual Fund Expenses:
- Custodian, auditor, and rating fees are charged to the scheme.
- GST on fees (except investment and advisory fees) is charged within the total expense ratio (TER) limit.
- Dividend and Taxation:
- Dividends can be paid only out of distributor plus generated by the scheme.
- Dividend income received by investors is taxable.
- Long-term capital gains tax on non-equity funds with 35-65% equity is 20% with indexation.
- Equity Linked Savings Scheme (ELSS) investments qualify for deduction under Section 80C up to Rs. 1.5 lakh.
- Security Transaction Tax (STT) applies on redemption of equity-oriented schemes like multi-cap funds.
- Mutual Fund Rules and Investor Rights:
- Differential exit loads based on investment amount are not allowed; exit load is uniform.
- Investors can nominate up to 3 nominees.
- Joint holders cannot be added or deleted except on death.
- Minor accounts cannot have joint holders.
- Power of attorney holders can transact but cannot change nominations.
- Types of Mutual Funds and Risk:
- Gilt funds are least risky in terms of credit risk.
- Closed-ended funds are less liquid than open-ended funds.
- Liquid funds are preferred for liquidity.
- Riskometer tool is used to indicate risk level of schemes.
- Risk-adjusted returns are better for comparing schemes.
- Negative alpha indicates underperformance by the fund manager.
- Investment Concepts:
- Reinvestment risk: inability to reinvest income at the same rate as principal.
- Value investing: picking stocks priced below intrinsic value.
- Benchmark selection depends on portfolio concentration, investment universe, and scheme type.
- Total return index (TRI) includes dividends, making performance comparisons fairer than price return index (PRI).
- Mutual Fund Operations:
- Scheme reopening date is when investors can repurchase or buy new units.
- Bonus units are issued free of cost to unit holders.
- Investors can remit money from abroad via SWIFT only.
- Mutual funds must disclose performance data including benchmark comparisons on AMFI website.
- The best strategy is not to select funds solely based on past performance.
- Distributors must consider exit loads during redemption advice.
- Miscellaneous:
- Nominal dividend per unit = (Dividend declared / Face value) × 1 unit.
- Simple return calculation: (Final NAV - Initial NAV) / Initial NAV × 100.
- Institutional investors include companies, not individuals like HNIs or NRIs.
- Close-ended debt funds (fixed maturity plans) cannot be redeemed before maturity.
Methodology / Instructional Points:
- NAV Calculation Example:
- Total mobilized funds = Units × Price per unit.
- Add accrued income (dividends, interest), subtract expenses.
- Divide net amount by total units to get NAV.
- Dividend Taxation:
- Dividends are taxable for investors.
- Dividends paid from distributor plus generated by the scheme.
- Exit Load Rules:
- Uniform exit load for all investors, no differential charges allowed.
- Risk Assessment:
- Use SEBI’s Riskometer for quick risk evaluation.
- Compare schemes using risk-adjusted returns, not just absolute returns.
- Investor Rights:
- Joint holders cannot be arbitrarily added or removed.
- Power of attorney holders have limited rights.
- Nomination rules limit number of nominees.
- Investment Strategy:
- Avoid selecting funds solely based on past returns.
- Consider investment objective alignment and risk profile.
- Remittance from Abroad:
- Only SWIFT channel is allowed for foreign remittances to mutual funds.
Speakers
Category
Educational