Registrars to an Issue and Share Transfer Agents — Mutual Fund

Syllabus and chapter weightage

Weightages are taken from the official syllabus table published in the NISM workbook, so you can see exactly where the marks are.

Every chapter can be read free, no account needed — tap a chapter to open its plain-English Foundation lesson.

Sample questions

5 questions from the chapter tests, one per chapter. Pick your answer before you open the explanation.

1. Question 1 · Chapter 1: Introduction to Securities

   _______ capital is/are for perpetuity from the point of view of the company.

   1. A.Equity
   2. B.Debt
   3. C.Both debt and equity
   Show the answer

   Answer: A. Equity

   Equity capital cannot be taken out of the firm unless the firm is liquidated. Such capital is for perpetuity.

   Only on liquidation — there is no maturity date.

   The point is repeated as one of equity's five features: equity capital is for perpetuity. It cannot be redeemed and the company does not have an obligation to repay it.

   Contrast debt. Debt has to be repaid by the company after a certain period. The period of repayment may be short-term (less than one year) or long-term (more than one year and may go up to even 30 years or more) and is decided at the time such funds are brought in.

   Even a 30-year bond has an end date — which is why option C is wrong.

   One qualification, which the workbook itself supplies: in special situations, a company may buy-back its own shares from the shareholders. Such shares shall be extinguished by the company.

   A buy-back is optional and exceptional, not an obligation, and the shares are cancelled rather than repaid in the ordinary sense.

   "From the point of view of the company" is the operative phrase in the question. An individual investor is not locked in — after IPO, the shares are listed on the stock exchanges, where they can be traded between investors... Secondary market provides liquidity to the investors.

   But his exit changes nothing for the company: such transactions do not result in change in the capital structure of the company.

   The shareholder can leave; the money cannot.

   Which is why equity carries no obligation of repayment but also no promise of return — there is no guarantee of dividends or capital appreciation on equity capital.

2. Question 2 · Chapter 2: Characteristic of Equities

   _____ rights give the equity investor a say in the management of the company.

   1. A.Voting
   2. B.Dividend
   3. C.Both voting and dividend
   Show the answer

   Answer: A. Voting

   Issuing ordinary equity capital implies that the company is giving ownership rights to the shareholders. Investors are given voting rights that allow them to vote on important decisions taken by the company. The voting rights are in proportion to the number of shares held by the investor and allow them to express their views by voting 'For' or 'Against' a proposal.

   Voting is the instrument of management influence.

   Where it is exercised: the General Body Meeting of shareholders is the highest decision-making authority in a corporate set up. Typically, a company will call a meeting of the shareholders once a year. This meeting is known as the Annual General Meeting (AGM). Shareholders have a right to attend the AGM of the company and participate in the proceedings.

   The general body meeting outranks the board.

   Option B names a financial right, not a governance one. Ownership rights in a company also mean that the investors who hold equity shares are entitled to participate in the profits of the company. This participation will be in the form of dividends that are periodically declared by the company.

   A dividend is a share of profit; it confers no say in how the profit is earned or spent. Indeed the shareholder's only power over the dividend is again a vote — shareholders approve such dividend in an annual general meeting.

   Which is why option C fails. Adding dividend to voting adds nothing on the management side.

   How much say a vote gives depends on size. Voting is in proportion to the number of shares held, and the chapter notes that retail investors, and to a great extent, HNIs are more interested in the returns... rather than in the control and management of the company, while large stakeholders and institutional shareholders actively participate in the affairs of the company and some large institutional investors may be given a seat on the board.

   Chapter 1's formula underlies it all — each equity share carries one vote.

3. Question 3 · Chapter 3: Characteristics of Debt Securities

   _________ of a bond refers to the interest payable on a bond.

   1. A.Coupon
   2. B.Inflation rate on Principal
   3. C.Market Price
   4. D.Face Value
   Show the answer

   Answer: A. Coupon

   The coupon is the rate of interest to be paid by the borrower to the lender. This is a percentage that is applied to the face value or par value of the bond. The periodicity of interest payment (annual, semi-annual, quarterly or monthly) is also specified.

   Coupon is the interest; the other three are quantities it is measured against or has nothing to do with.

   Option D names the base, not the payment. The face value or par value of the debenture is the amount of the principal that is due on each debenture at maturity — usually Rs. 100 or Rs. 1,000. The coupon is applied to it.

   Option C names what the bond trades at. If the debt instrument is traded in the market before its maturity, the value at which such trade is executed is called the market value of the debt instrument, and it may be higher or lower than the face value. The coupon does not change when the market price does — which is why current yield simply compares the coupon of a bond with its market price.

   Option B describes a special structure, not a general feature. Inflation Indexed Bonds (IIB) are a category of floating rate bonds where the benchmark is the inflation rate — one kind of bond among eight.

   The three features together: these terms are referred to as the features of a bond and include the principal, coupon (interest rate) and the maturity date of the bond.

   And a caution about the coupon's meaning: the coupon rate of the bond is not an indicator of the returns on the bond, but merely helps in computing what cash flows would accrue periodically, to the investor.

   For the return, the market uses yield, not coupon rate.

4. Question 4 · Chapter 4: Characteristics of Other Securities

   A warrant is a right to subscribe to the _____ of a company.

   1. A.Equity shares
   2. B.Deposit
   3. C.Debentures
   Show the answer

   Answer: A. Equity shares

   Warrants give the investors the right to buy shares of the company in the future. The number of shares that the warrant entitles the holder to subscribe to at a pre-determined date and price are specified at the time of issue.

   Shares — and the chapter's example is explicit: assume a warrant enables an investor to buy an equity share of a company at Rs.100.

   The consequence confirms it: conversion/ exercise of the warrants results in increase in share capital. Only an issue of shares increases share capital.

   Option C confuses the warrant with the security it may have accompanied. Warrants may be traded on the stock exchange as a security separate from the debenture with which it was issued — issued with a debenture, but conferring a right over shares, and detachable from it.

   Option B names something that is not a security of the company at all.

   When the right is worth using: warrants will be exercised if the share price at the time of exercise is higher than the price at which the investors have the right/ option to buy the shares. Below that, the investor can always buy from the market, rather than use the option to buy the same share at a higher price.

   How warrants are controlled. Issue of warrants is subject to SEBI guidelines and shareholders' approval. The regulations include an upfront payment and a lock-in on conversion — necessary because warrants may be used by promoters to increase their stake in the company, and because exercise dilutes the existing shareholders.

   And their nearest relative: warrants usually have a longer lifetime as compared to options contracts which they closely resemble — an option being a type of derivatives contract that gives buyer the right to exercise the option to buy or sell the underlying security at a pre-defined date and price.

5. Question 5 · Chapter 5: SEBI- Role and Regulations

   The apex regulator of the securities markets in India is ________.

   1. A.Securities and Exchange Board of India (SEBI)
   2. B.Reserve Bank of India (RBI)
   3. C.Association of Mutual Funds in India (AMFI)
   4. D.Ministry of Corporate Affairs (MCA)
   Show the answer

   Answer: A. Securities and Exchange Board of India (SEBI)

   SEBI is the apex regulator of the securities market and also responsible for its orderly growth and protection of the investors' interests.

   Its authority comes from statute. The Securities and Exchange Board of India (SEBI) was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992, its preamble providing for the establishment of a Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market.

   Option B names a regulator with a defined but different role. The RBI, as the manager of public debt, is responsible for the primary issue of government securities, all contracts involving such securities and money market instruments. It is one of the prime regulators — but not the apex body for the securities market.

   Option D names another of the prime regulators. The MCA administers the Companies Act, and created the Investor Education and Protection Fund, but does not regulate the securities market.

   Option C names an industry association, not a regulator at all.

   What being apex means in practice. SEBI has been assigned the powers of recognizing and regulating the functions of a stock market under the Securities Contracts (Regulation) Act (SCRA), requiring representation of SEBI on the board of the stock exchange and rule changes only with the prior approval of SEBI. It registers brokers, R&T agents, depositories, custodians, bankers, merchant bankers, portfolio managers and underwriters. And SEBI and the central government have over-riding powers under the SCRA in all matters relating to the stock markets.

   A consolidation is proposed — the Securities Markets Code Bill, 2025... to consolidate SEBI Act, SCRA, and Depositories Act into a single code, with the aim of strengthening SEBI's powers.

Frequently asked questions

What is the passing mark for NISM Series II-B?

You need 50% to pass NISM-Series-II-B: Registrars to an Issue and Share Transfer Agents — Mutual Fund. On a 100-mark paper that is 50 marks.

Is there negative marking in NISM Series II-B?

There is no negative marking, so never leave a question blank — an uncertain guess costs you nothing.

How long is the NISM Series II-B exam?

The exam runs for 120 minutes and carries 100 marks in total.

How long is the NISM Series II-B certificate valid?

NISM certifications are generally valid for 3 years from the date of passing, after which they must be renewed. Confirm the current position on nism.ac.in before your certificate lapses.