Investment Advisor NISM Series-X-A: Investment Adviser (Level 1) 2 — Questions and Answers
Question 1: Under SEBI (Investment Advisers) Regulations, 2013, what is the minimum net worth requirement for a non-individual investment adviser?
- INR 25 lakh (Correct answer)
- INR 50 lakh
- INR 1 crore
- INR 2 crore
Correct answer: INR 25 lakh
Non-individual investment advisers must maintain a minimum net worth of INR 25 lakh as per SEBI IA Regulations.
Question 2: Which document must an investment adviser provide to a client before rendering any investment advice?
- Risk profiling questionnaire
- Disclosure document (Correct answer)
- Portfolio statement
- Agreement letter
Correct answer: Disclosure document
SEBI regulations require investment advisers to provide a disclosure document containing details about the adviser, services, fees, and conflicts of interest before advising.
Question 3: An investment adviser recommends a mutual fund scheme in which the adviser's family member holds a significant stake. This is best described as:
- A portfolio strategy
- Insider trading
- A conflict of interest (Correct answer)
- Front running
Correct answer: A conflict of interest
Recommending products where the adviser or related parties have financial interests constitutes a conflict of interest that must be disclosed.
Question 4: The Sharpe Ratio measures portfolio performance by comparing excess return to:
- Beta
- Standard deviation (Correct answer)
- Alpha
- Duration
Correct answer: Standard deviation
The Sharpe Ratio = (Portfolio Return − Risk-Free Rate) / Standard Deviation, measuring return per unit of total risk.
Question 5: Under the Know Your Client (KYC) process, which authority maintains the central KYC registry in India?
- SEBI
- RBI
- CERSAI
- CKYCRR (Correct answer)
Correct answer: CKYCRR
The Central KYC Records Registry (CKYCRR) managed by CERSAI maintains the central repository of KYC records in India.
Question 6: A client with a 2-year investment horizon and low risk tolerance is best suited for which asset allocation?
- 80% equity, 20% debt
- 100% equity
- 20% equity, 80% debt (Correct answer)
- 50% equity, 50% real estate
Correct answer: 20% equity, 80% debt
Short horizons and low risk tolerance call for a predominantly debt-oriented portfolio to preserve capital.
Question 7: Which of the following is NOT a fiduciary duty of a SEBI-registered investment adviser?
- Acting in the client's best interest
- Ensuring client portfolio always generates profit (Correct answer)
- Maintaining confidentiality
- Disclosing conflicts of interest
Correct answer: Ensuring client portfolio always generates profit
Advisers owe fiduciary duties including best-interest advice and disclosure, but cannot guarantee profits as markets involve inherent risk.
Investment Advisor NISM Series-X-A: Investment Adviser (Level 1) 2
Under SEBI (Investment Advisers) Regulations, 2013, what is the minimum net worth requirement for a non-individual investment adviser?