Investment Advisor NISM Series X-B — Investment Adviser (Level 2) 3

Question 1

Which document must an investment adviser mandatorily provide to a new client BEFORE rendering any investment advice?

Accepted Answer

Disclosure document as specified by SEBI

Answer

SEBI regulations require investment advisers to furnish a SEBI-prescribed disclosure document to clients before the advisory relationship begins.

Question 2

The Treynor Ratio differs from the Sharpe Ratio primarily because it uses which denominator?

Accepted Answer

Beta of the portfolio

Answer

The Treynor Ratio uses beta (systematic risk) in the denominator, while the Sharpe Ratio uses standard deviation (total risk).

Question 3

Under SEBI guidelines, an investment adviser registered as an individual can have a maximum of how many clients?

Accepted Answer

100

Answer

Individual investment advisers registered with SEBI may advise a maximum of 150 clients at any given time per regulatory guidelines.

Question 4

A client's portfolio earns 12% while the benchmark returns 9%. The portfolio's tracking error is 3%. The Information Ratio is:

Accepted Answer

1.0

Answer

Information Ratio = (Portfolio return − Benchmark return) / Tracking error = (12% − 9%) / 3% = 1.0.

Question 5

Which of the following constitutes a conflict of interest that an investment adviser MUST disclose to clients?

Accepted Answer

Receiving distribution commissions from a mutual fund house

Answer

Receiving distribution commissions creates a conflict of interest because it may bias advice toward higher-commission products, and must be disclosed.

Investment Advisor Practice Test

Investment Advisor Practice Test

Investment Advisor NISM Series X-B — Investment Adviser (Level 2) 3