NISM Series V-A · Unit 7 of 12 · about 12% of the paper
Investor service: NISM Series V-A notes and practice questions
This is the practical heart of the exam: how transactions work. Cut-off times, applicable NAV, SIP, STP, SWP, nomination, transmission and statements are all in here.
What to know in Unit 7
- Cut-off times and applicable NAV.
- SIP, STP, SWP and switch.
- Nomination, joint holders, minors and transmission.
- Account statements and redemption timelines.
Key terms, examples and exam traps
Cut-off time
The cut-off time is the time of day by which a valid application with funds must be received to get that day's NAV. For most schemes it is 3:00 pm.
Example. An investor submits an application at 2:30 pm with funds available and gets that day's NAV.
Exam trap. This statement is false: Applications received at 6 pm get the same day's NAV.
Applicable NAV
The NAV applied to a transaction depends on the cut-off time and when the funds are available for use by the scheme, not just when the application is made.
Example. A purchase made before cut-off but with funds credited next day takes the later day's NAV.
Exam trap. This statement is false: The NAV applied is always the one on the day of the cheque.
SIP
A Systematic Investment Plan invests a fixed amount at regular intervals, which averages the purchase cost and builds discipline.
Example. An investor invests ₹5,000 on the 5th of every month into the same scheme.
Exam trap. This statement is false: A SIP guarantees profit at the end of the term.
Rupee cost averaging
Rupee cost averaging means a fixed amount buys more units when NAV is low and fewer when it is high, lowering the average cost per unit over time.
Example. A SIP buys more units during a fall in the market.
Exam trap. This statement is false: Rupee cost averaging ensures there will never be a loss.
STP
A Systematic Transfer Plan transfers a fixed amount at regular intervals from one scheme to another within the same fund house.
Example. An investor moves ₹10,000 monthly from a liquid fund to an equity fund of the same AMC.
Exam trap. This statement is false: An STP moves money to the investor's bank account.
SWP
A Systematic Withdrawal Plan redeems a fixed amount of units at regular intervals, giving the investor a regular cash flow.
Example. A retiree redeems units worth ₹20,000 on the first of every month for expenses.
Exam trap. This statement is false: An SWP is a plan to buy units regularly.
Switch
A switch is moving investment from one scheme to another, or between plans or options in the same scheme; it is treated as redemption and fresh purchase.
Example. An investor shifts from a large-cap fund to a debt fund of the same AMC.
Exam trap. This statement is false: A switch has no tax or load implications.
Nomination
Nomination lets a holder name a person who will receive the units on the holder's death. Nominees are not the legal owners; they hold the proceeds for the legal heirs.
Example. An investor names her spouse so the units pass on smoothly if she dies.
Exam trap. This statement is false: A nominee becomes the permanent legal owner of the units.
Joint holding modes
In 'anyone or survivor' mode, any holder can operate the folio; in 'joint', all must sign. On a holder's death the units go to the survivors.
Example. A couple opens a folio where either can redeem alone.
Exam trap. This statement is false: In 'anyone or survivor' mode all holders must sign each redemption.
Minor investor
A minor's folio is operated by a guardian, and when the minor turns 18 a fresh KYC is needed, and the guardian's operation stops.
Example. A father invests on behalf of his twelve-year-old daughter.
Exam trap. This statement is false: A minor can redeem without a guardian.
Lien
A lien is a charge marked on units, for example when pledged as security for a loan, so they cannot be redeemed until the lien is removed.
Example. An investor's units are marked as security for a loan, and cannot be sold.
Exam trap. This statement is false: A lien means the units have been sold.
Transmission
Transmission is the transfer of units to the legal heirs or surviving holders on the death of a holder, supported by documents like the death certificate.
Example. After the death of a sole holder, the nominee submits the death certificate to claim the units.
Exam trap. This statement is false: Transmission is the same as a switch.
Redemption timeline
Redemption proceeds must generally be paid within three working days of the transaction date for most schemes; liquid funds may be quicker.
Example. An investor sells units today and expects to receive money in a few working days.
Exam trap. This statement is false: Redemption proceeds can take two months.
Consolidated Account Statement (CAS)
A single statement covering all of an investor's mutual fund holdings across AMCs, sent monthly if there were transactions, otherwise half-yearly.
Example. An investor receives one statement showing all her funds from different fund houses.
Exam trap. This statement is false: The CAS covers only one fund house's schemes.
Demat mode
Mutual fund units can be held in dematerialised form with a depository participant, in addition to a statement of account from the AMC.
Example. An investor holds units in the same account as her shares.
Exam trap. This statement is false: Mutual fund units can never be held in demat form.
Folio
A folio is the account number allotted by an AMC to an investor, under which all that investor's units in that fund house are recorded.
Example. An investor quotes her account number with a fund house to check her units.
Exam trap. This statement is false: A folio is a type of scheme.
Dividend or IDCW payout timeline
Payout of IDCW must be dispatched within seven working days of the record date.
Example. An investor expects IDCW proceeds a few days after the declared date.
Exam trap. This statement is false: IDCW can be dispatched any time within six months.
Change of bank details
A change of bank details needs a written request with proof of the new bank and is checked by the RTA; some schemes impose a cooling-off for large redemptions.
Example. An investor updates the registered bank account with supporting proof.
Exam trap. This statement is false: Bank details cannot be changed after the first investment.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which term is described here? A single statement covering all of an investor's mutual fund holdings across AMCs, sent monthly if there were transactions, otherwise half-yearly.
- Consolidated Account Statement (CAS)
- Multi cap fund
- Minor investor
- Professional management
Q2. Which term is described here? A switch is moving investment from one scheme to another, or between plans or options in the same scheme; it is treated as redemption and fresh purchase.
- Switch
- Consolidated Account Statement (CAS)
- XIRR
- Gold
Q3. Which term is described here? Rupee cost averaging means a fixed amount buys more units when NAV is low and fewer when it is high, lowering the average cost per unit over time.
- Equity-oriented fund
- Lien
- Alpha
- Rupee cost averaging
Q4. Which term is described here? The cut-off time is the time of day by which a valid application with funds must be received to get that day's NAV. For most schemes it is 3:00 pm.
- Cut-off time
- Mid cap fund
- Risk in mutual funds
- Professional management
Q5. Which statement best describes “Nomination”?
- TER is the annual percentage of a scheme's average assets charged for management, distribution and operating costs, and it is reflected in the daily NAV.
- Nomination lets a holder name a person who will receive the units on the holder's death. Nominees are not the legal owners; they hold the proceeds for the legal heirs.
- Real estate offers potential for appreciation and rental income but is illiquid, needs large capital and has high transaction costs.
- Professional management means a qualified fund manager and research team select and monitor securities for the scheme, for a fee charged as part of the expense ratio.
Q6. Which statement best describes “SIP”?
- A Systematic Investment Plan invests a fixed amount at regular intervals, which averages the purchase cost and builds discipline.
- SEBI has abolished entry load; no fee can be deducted from the investor's money at the time of purchase.
- Real estate offers potential for appreciation and rental income but is illiquid, needs large capital and has high transaction costs.
- The cut-off time is the time of day by which a valid application with funds must be received to get that day's NAV. For most schemes it is 3:00 pm.
Frequently asked questions
How much of NISM Series V-A comes from Unit 7?
Unit 7 (Investor service) usually carries about 12% of the questions. The whole exam has 100 questions and the pass mark is 50%.
What should I study in NISM Series V-A Unit 7?
Cut-off times and applicable NAV. SIP, STP, SWP and switch. Nomination, joint holders, minors and transmission. Account statements and redemption timelines.
Are these NISM Series V-A practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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