NISM Series II-B: Registrar and Transfer Agents (MF) Mock Test – Free Demo

Explanation:

The Asset Management Company (AMC) and directors are answerable to the Board of Trustees. In the context of mutual funds, the Board of Trustees is responsible for overseeing the operations of the mutual fund and ensuring that it operates in the best interests of the unit holders. The AMC, as the entity managing the mutual fund, and its directors are accountable to the Board of Trustees for their actions and decisions regarding the management of the fund. Therefore, the Board of Trustees holds ultimate responsibility for overseeing the activities of the AMC and its directors.

Explanation:

Indian Permanent Account Number (PAN) is necessary for investments by Non-Resident Indians (NRIs) in India. PAN is a unique identification number assigned to individuals and entities in India for various financial transactions, including investments. NRIs are required to obtain a PAN if they wish to invest in India, as it serves as an essential document for tax purposes and helps the authorities track financial transactions. Therefore, having a PAN is necessary for NRIs to make investments in India.

Explanation:

When shares are held in dematerialized (demat) format, the depository shall maintain all records of the individual shareholder. Depositories are institutions responsible for holding securities in electronic form and facilitating their transfer between investors. They maintain records of share ownership, track changes in shareholding, and ensure the smooth transfer of shares during transactions. Therefore, the depository maintains all records of individual shareholders when shares are held in demat format.

Explanation:

A Depository Receipt (DR) is a financial instrument that represents ownership of shares in a foreign publicly listed company. It is traded on a local stock exchange but represents securities issued by a foreign company. DRs allow investors in one country to invest in shares of a foreign company without directly purchasing the shares in the foreign market.

Explanation:

A Power of Attorney (PoA) typically involves two parties: the grantor (or donor) who grants the authority and the grantee (or donee) who receives the authority to act on behalf of the grantor. The PoA document outlines the scope and limitations of the authority granted by the grantor to the grantee. Therefore, there are only two parties involved in a Power of Attorney arrangement, not three.

Explanation:

Even after granting a Power of Attorney (PoA) to another individual or entity, an investor can still directly operate their account. A PoA grants authority to the appointed individual or entity to act on behalf of the investor, but it does not revoke the investor’s own authority to operate their account. Therefore, the investor retains the ability to manage their account directly, in addition to allowing the appointed individual or entity to act on their behalf as per the terms of the PoA.

Explanation:

Post-demise transmission of units, which refers to the transfer of investment holdings after the demise of the investor, is facilitated through the nomination process. When investors nominate someone, typically a family member, to receive their investment holdings in the event of their demise, it allows for a smooth transfer of assets without the need for lengthy legal procedures. Therefore, nomination is the mechanism through which post-demise transmission of units is facilitated.

Explanation:

SEBI allows the creation of segregated portfolios in the case of mutual funds facing default or downgrade of part of its portfolio, particularly in the case of debt instruments such as debentures. When there is a default or downgrade in the credit rating of specific debt instruments held by a mutual fund, SEBI permits the mutual fund to segregate those assets into a separate portfolio, known as a segregated portfolio or side pocket. This helps protect the interests of investors in the main portfolio and allows for the orderly resolution of distressed assets. Therefore, segregated portfolios are allowed by SEBI in case of default or downgrade of debentures held by mutual funds.

Explanation:

If the investor holds accounts in the same bank as that of the mutual fund, then the cheque only involves a transfer of funds within the same bank. This means that the funds are transferred internally within the bank’s accounts without the need for interbank clearing or processing. Therefore, the transaction is simplified and does not require funds to be transferred to another bank or clearing member.

Explanation:

In the case of mutual funds, inflow and outflow resulting from transactions are reported to the Asset Management Company (AMC) Treasury. The AMC Treasury is responsible for managing the funds and liquidity of the mutual fund scheme. It oversees the cash flows, investments, and other financial activities of the fund. Therefore, transactions related to inflows and outflows are reported to the AMC Treasury for proper management and monitoring.

Explanation:

The registrar to an issue determines the basis of allotment of securities in consultation with the stock exchange. This process ensures transparency and fairness in the allocation of securities to investors during an initial public offering (IPO) or other securities issuance. The stock exchange plays a crucial role in overseeing the allocation process and ensuring compliance with regulatory requirements. Therefore, the registrar to an issue consults with the stock exchange to determine the basis of allotment of securities.

Explanation:

To calculate the number of units issued against the investment, we divide the total amount invested by the price per unit:

Number of units = Total amount invested / Price per unit

Number of units = Rs. 20,000 / Rs. 10.225

Number of units ≈ 1955.99 units

Therefore, the number of units issued against this investment is approximately 1955.99 units.

Explanation:

A Gold Exchange-Traded Fund (ETF) typically buys physical gold and stores it securely with a custodian. The custodian is responsible for safekeeping the physical gold holdings of the ETF, ensuring their security and integrity. Investors in the Gold ETF indirectly own a portion of the physical gold held by the ETF through their investment in ETF units. Therefore, the statement is true: a Gold ETF buys physical gold which is preserved safely by the custodian.

Explanation:

Investing on a repatriable basis means that the investor, typically a Non-Resident Indian (NRI), can repatriate or transfer the sale proceeds of their investments abroad. In the context of mutual funds, investing on a repatriable basis allows NRIs to invest in mutual funds and transfer the sale proceeds, including capital gains, back to their country of residence or any other foreign country.

Explanation:

Foreign currency convertible bonds (FCCBs) allow Indian companies to raise debt at lower rates abroad. FCCBs are bonds issued by Indian companies in foreign currencies, typically with a lower interest rate compared to domestic borrowing. These bonds also provide an option for conversion into equity shares of the issuing company at a predetermined price. By accessing lower interest rates in international markets, Indian companies can raise funds more cost-effectively, thereby reducing their borrowing costs. Therefore, FCCBs enable Indian companies to raise debt at lower rates abroad.

Explanation:

SEBI (Securities and Exchange Board of India) regulations specify both net worth and infrastructure requirements for intermediaries operating in the securities market. Net worth requirements ensure that intermediaries have sufficient financial strength and stability to conduct their business activities effectively and responsibly. Infrastructure requirements encompass the necessary systems, technology, and resources that intermediaries must have in place to facilitate their operations and provide services to clients in a reliable and efficient manner. Therefore, SEBI regulations cover both net worth and infrastructure requirements for intermediaries in the securities market.

Explanation:

The segregated portfolio, also known as a side pocket, is a mechanism used in close-ended funds where a portion of the main fund’s assets is segregated to deal with specific issues or distressed assets. This separate portfolio is created to isolate problematic or illiquid assets from the main fund, thereby protecting the interests of investors in the main fund. Therefore, the segregated portfolio is essentially a portion carved out of the main fund in close-ended funds

Explanation:

The Market Infrastructure Institutions (MII) framework is extended to the registrar and transfer agents (RTAs) servicing more than 2 crore folios. This framework aims to regulate and monitor entities involved in the securities market infrastructure to ensure the efficiency, transparency, and integrity of market operations. By extending the framework to RTAs servicing a significant number of folios, regulatory oversight can be enhanced to safeguard the interests of investors and maintain the integrity of the market infrastructure. Therefore, RTAs servicing more than 2 crore folios are brought under the purview of the MII framework.

Explanation:

Zero coupon bonds are suitable for financing projects with long gestation periods because they do not make periodic interest payments like traditional bonds. Instead, they are issued at a discount to their face value and redeemed at face value upon maturity, allowing the issuer to defer the payment of interest until the bond matures. This structure is beneficial for projects with long gestation periods as it reduces the burden of making periodic interest payments and provides flexibility in managing cash flows. Therefore, zero coupon bonds are well-suited for financing projects with long gestation periods.

Explanation:

There is indeed a cut-off time by which an investment has to be made to be eligible for that day’s Net Asset Value (NAV) in mutual funds. This cut-off time is typically set by the fund house and is usually around 3:00 to 3:30 PM on each business day. Investments made before this cut-off time will be processed at the NAV of that day, while investments made after the cut-off time will be processed at the NAV of the next business day. This cut-off time ensures that all investors receive the same NAV for their investments made on a particular day and helps maintain fairness and transparency in mutual fund transactions.