NISM Series XIX-A · Unit 13 of 13 · about 5% of the paper
Good practices: NISM Series XIX-A notes and practice questions
Conduct, ethics and the duties of distributors and managers.
What to know in Unit 13
- Distributor conduct.
- Disclosure and suitability.
- KYC and AML.
Key terms, examples and exam traps
Suitability
A distributor must assess a client's financial position, experience, risk appetite and horizon before recommending an AIF.
Example. A distributor declines to sell an AIF to a client who needs funds soon.
Exam trap. This statement is false: Suitability applies only to mutual funds.
Disclosure to investors
A distributor must give investors the PPM and explain risks, fees, lock-in and illiquidity before they invest.
Example. A distributor explains the lock-in and fees upfront.
Exam trap. This statement is false: Risk factors can be skipped if the client is wealthy.
No guaranteed returns
Neither managers nor distributors may promise or guarantee returns on AIFs, and statements must be fair and balanced.
Example. A distributor must not say, 'This fund will give 20% for sure.'
Exam trap. This statement is false: Distributors may guarantee returns for large clients.
Commission disclosure
Distributors must disclose the commissions they receive and ensure that the client knows direct options exist.
Example. A distributor tells the client about the fee she gets.
Exam trap. This statement is false: Commissions need not be disclosed.
KYC and AML
Investors must complete KYC and anti-money laundering checks, and the source of funds should be verified.
Example. The distributor checks identity and the origin of money.
Exam trap. This statement is false: KYC is waived for large investments.
Conflicts of interest
Distributors must avoid or disclose conflicts, such as higher commission on a product, and put client interest first.
Example. A distributor discloses that one fund pays more and recommends the better fit.
Exam trap. This statement is false: A distributor should recommend the highest-commission fund.
Confidentiality
A distributor must protect client information and share it only with consent or as required by law.
Example. A distributor does not share a client's holdings with others.
Exam trap. This statement is false: Client data may be sold to fund managers.
Record keeping
Distributors should maintain records of recommendations, risk profiling, disclosures and communication for the period required.
Example. A file holds the client's risk profile and the PPM acknowledgement.
Exam trap. This statement is false: Records of AIF sales are optional.
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 distributor must protect client information and share it only with consent or as required by law.
- Screening
- IRR and MOIC
- Confidentiality
- Record keeping
Q2. Which term is described here? Investors must complete KYC and anti-money laundering checks, and the source of funds should be verified.
- Side letter
- Disclosure and investor reporting
- KYC and AML
- Allocation of investments
Q3. Which statement best describes “Record keeping”?
- Distributors should maintain records of recommendations, risk profiling, disclosures and communication for the period required.
- Investors should check how the fund values holdings, how often, and who reviews valuations, to avoid inflated NAVs.
- The trust deed sets up the fund as a trust, defining the roles of trustee, sponsor and manager, and the rights of beneficiaries.
- Category I and II AIFs must be closed-ended with a minimum tenure of three years, and extension is allowed with investor consent.
Q4. Which term is described here? Neither managers nor distributors may promise or guarantee returns on AIFs, and statements must be fair and balanced.
- Operational due diligence
- Team stability
- No guaranteed returns
- Sponsor and manager commitment
Q5. Which statement best describes “Suitability”?
- The PPM is the principal disclosure document describing the fund's strategy, terms, fees, risks and governance.
- These regulations govern registration, investment conditions, disclosure and operation of AIFs in India.
- An AIF is a privately pooled investment vehicle that raises money from investors for investing as per a defined policy, regulated by SEBI.
- A distributor must assess a client's financial position, experience, risk appetite and horizon before recommending an AIF.
Q6. Which statement about “Suitability” is correct?
- Suitability applies only to mutual funds.
- A distributor must assess a client's financial position, experience, risk appetite and horizon before recommending an AIF.
- An AIF can only be a trust.
- A promoter buyback is a new fundraising.
Frequently asked questions
How much of NISM Series XIX-A comes from Unit 13?
Unit 13 (Good practices) usually carries about 5% of the questions. The whole exam has 100 questions and the pass mark is 60%.
What should I study in NISM Series XIX-A Unit 13?
Distributor conduct. Disclosure and suitability. KYC and AML.
Are these NISM Series XIX-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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UpperCrust Academy is independent study material from UpperCrust Wealth. It is not affiliated with NISM, SEBI or AMFI. For education only. Not investment advice. Always confirm the latest syllabus and rules on the official NISM website.