Alternative Investment Funds (Category I and II) Distributors

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.

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Sample questions

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

1. Question 1 · Chapter 1: Overview of Alternative Investments

   An alternative investment is defined as a _____ that does not fall into one of the conventional investment categories.

   1. A.mutual fund
   2. B.financial asset
   3. C.personal property
   4. D.financial planning
   Show the answer

   Answer: B. financial asset

   This is the workbook's own sample question. The definition quoted is that an alternative investment is a FINANCIAL ASSET that does not fall into one of the conventional investment categories. Conventional categories include stocks, bonds, and cash. A mutual fund is itself among the conventional categories, and personal property is outside the taxonomy entirely — residential property for living purposes is expressly distinguished even from traditional investments.

2. Question 2 · Chapter 2: Alternative Investment Funds in India

   An AIF that seeks to invest in listed securities on the stock exchange and in foreign currency derivatives belongs to which category?

   1. A.Category I
   2. B.Category II
   3. C.Category III
   4. D.Specified AIF
   Show the answer

   Answer: C. Category III

   This is the workbook's own sample question. Two features point to Category III — investing in listed securities on the stock exchange is on-market secondary investing, and Category III funds explore opportunities in primary and secondary markets through all types of securities including derivatives; and derivatives appear expressly in the definition, which covers funds employing diverse or complex trading strategies that may employ leverage including through investment in listed or unlisted derivatives. Category I focuses on early-stage unlisted ventures and Category II on the unlisted space.

3. Question 3 · Chapter 3: Concepts in Alternative Investment Funds Industry

   Which category of investors is NOT suitable to invest in an AIF?

   1. A.Individuals less than 60 years of age
   2. B.Individuals with no risk-taking capacity
   3. C.Members of a Hindu Undivided Family
   4. D.Partners of a firm
   Show the answer

   Answer: B. Individuals with no risk-taking capacity

   This is the workbook's own sample question. Suitability turns on risk appetite, not on age or legal form. AIF investments in Categories I and II are in unlisted securities, they are illiquid and require long term risk-taking, so investors also need higher risk appetite and risk-taking ability and should therefore typically be high net worth investors. Age, HUF membership and partnership status are all irrelevant to the test.

4. Question 4 · Chapter 4: Regulatory Framework - Indian Context

   Which of the following is the minimum stipulated corpus of an AIF scheme?

   1. A.INR 100 crore
   2. B.INR 20 crore
   3. C.INR 50 crore with a maximum of INR 100 crore
   4. D.INR 10 crore with a maximum of INR 20 crore
   Show the answer

   Answer: B. INR 20 crore

   This is the workbook's own sample question. Each scheme of the AIF shall have a corpus of at least INR 20 crore. Note the words each scheme — a fund running four schemes needs Rs 20 crore in every one. The Rs 100 crore distractor is genuine but belongs elsewhere: each scheme of a special situation fund shall have a minimum corpus of INR 100 crore.

5. Question 5 · Chapter 5: Alternative Investment Fund Structuring

   Which is the most common structure adopted for a domestic AIF in India?

   1. A.Company
   2. B.Partnership
   3. C.Trust
   4. D.NBFC
   Show the answer

   Answer: C. Trust

   This is the workbook's own sample question. Almost all AIFs formed in India follow the trust structure because of its operational advantages and favourable regulatory framework. It reduces the cost of compliance and provides flexibility for the AIF to form its own system of governance and reporting. Note that an NBFC is not a constitutional option for an AIF pool at all — the three alternatives are a trust under the Indian Trusts Act 1882, an LLP under the LLP Act 2008, and a company under the Companies Act 2013.

Frequently asked questions

What is the passing mark for NISM Series XIX-A?

You need 60% to pass NISM-Series-XIX-A: Alternative Investment Funds (Category I and II) Distributors. On a 100-mark paper that is 60 marks.

Is there negative marking in NISM Series XIX-A?

There is negative marking of 10% of the marks for that question, so a wrong answer costs you 0.10 marks on a 1-mark question. Guess only when you can eliminate at least two options.

How long is the NISM Series XIX-A exam?

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

How long is the NISM Series XIX-A 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.