Question 1

Under the Pension Fund Regulatory and Development Authority (PFRDA), the National Pension System (NPS) allows individuals to invest in which of the following asset classes?

Accepted Answer

The National Pension System (NPS), regulated by PFRDA, allows individuals to invest in a diversified portfolio comprising equities, government securities (G-secs), corporate bonds, and alternative investments through designated fund managers. NPS offers multiple fund choices (E-Equity, C-Corporate Bonds, G-Government Securities, A-Alternative Investments, F-Fixed Income) allowing subscribers to customize their asset allocation based on risk appetite. Therefore, answer is C.

Question 2

Which of the following regulatory bodies is responsible for regulating and supervising the insurance sector in India, including life insurance, general insurance, and health insurance?

Accepted Answer

The Insurance Regulatory and Development Authority of India (IRDAI) is the statutory body established under the Insurance Regulatory and Development Authority Act, 1999, with the mandate to regulate, promote, and ensure orderly growth of the insurance industry in India. IRDAI oversees life insurance, general insurance, and health insurance sectors. It was established on 1st April 2000. Therefore, answer is B.

Question 3

Under SEBI regulations, mutual funds are required to maintain a minimum Net Asset Value (NAV) and follow specific portfolio composition norms. Which of the following best describes SEBI's role in mutual fund regulation?

Accepted Answer

SEBI regulates mutual funds under the SEBI (Mutual Funds) Regulations, 1996 (as amended). SEBI's regulatory framework for mutual funds includes prescribing portfolio composition norms (such as equity exposure limits, debt exposure limits, and diversification requirements), ensuring transparency through regular NAV disclosures, regulating fund managers and custodians, and protecting investor interests. SEBI does not set minimum NAV thresholds for mutual funds to operate — rather, SEBI focuses on portfolio composition, risk management, and disclosure norms. RBI does not regulate mutual funds (that is SEBI's role), and IRDAI regulates insurance-linked mutual funds. Therefore, the answer is B.

Question 4

Under SEBI's regulatory framework, which of the following activities requires registration as a Category I Merchant Banker?

Accepted Answer

SEBI categorizes merchant bankers into different categories based on the scope and nature of services they provide. Category I merchant bankers are permitted to undertake all merchant banking activities including issue management, underwriting, portfolio management, and corporate advisory services without any restrictions on the value of transactions. Category II and III merchant bankers have restrictions on transaction values and scope of services. Therefore, the correct answer is Option B.

Question 5

Which of the following statements correctly describes the primary regulatory mandate of PFRDA (Pension Fund Regulatory and Development Authority)?

Accepted Answer

PFRDA was established in 2003 as a statutory body to regulate, promote, and develop the pension fund industry in India. Its core mandate is to oversee the National Pension System (NPS), which provides voluntary retirement savings accounts to individuals. PFRDA regulates pension fund managers, custodians, and intermediaries operating under NPS. It does NOT regulate insurance products (that is IRDAI's role) or securities markets (that is SEBI's role). Therefore, the correct answer is Option B.

Question 6

Which of the following is NOT a function of SEBI as per the Securities and Exchange Board of India Act, 1992?

Accepted Answer

SEBI's functions include regulating stock exchanges, mutual funds, brokers, and ensuring investor protection in securities markets. However, SEBI does not have the authority to regulate insurance products or insurance companies — this is IRDAI's exclusive domain. SEBI also does not regulate banking institutions or conduct monetary policy, which are RBI's responsibilities. Therefore, answer is C.

Question 7

PFRDA (Pension Fund Regulatory and Development Authority) was established as a statutory body in which year, and under which act?

Accepted Answer

The Pension Fund Regulatory and Development Authority (PFRDA) was established as a statutory body on 1st January 2015 under the Pension Fund Regulatory and Development Authority Act, 2013. Prior to 2015, PFRDA functioned as a non-statutory body. PFRDA regulates the National Pension System (NPS) and manages pension fund investments for Indian citizens. Therefore, answer is A.

Question 8

Which regulatory authority in India has the mandate to regulate Alternative Investment Funds (AIFs) and ensure compliance with know-your-customer (KYC) norms for securities market participants?

Accepted Answer

SEBI (Securities and Exchange Board of India) is the regulatory authority responsible for regulating Alternative Investment Funds (AIFs) under the SEBI (Alternative Investment Funds) Regulations, 2012. SEBI also prescribes and enforces KYC (Know-Your-Customer) norms for all securities market participants, including brokers, mutual funds, and investment advisors. These KYC requirements are detailed in the SEBI (Know Your Client) Regulations, 2015. RBI regulates KYC for banking operations, IRDAI for insurance, and PFRDA for pension schemes, but SEBI is the primary regulator for securities market KYC and AIFs. Therefore, the answer is A.

Question 9

The Pension Fund Regulatory and Development Authority (PFRDA) was established to regulate which of the following schemes in India?

Accepted Answer

PFRDA (Pension Fund Regulatory and Development Authority) was established on October 22, 2003, under the Pension Fund Regulatory and Development Authority Act, 1996. PFRDA's primary mandate is to regulate and develop the National Pension System (NPS), which is a voluntary, defined-contribution pension scheme. NPS is open to all Indian citizens and includes the NPS-Tier I (retirement account) and NPS-Tier II (savings account). PFRDA also regulates Atal Pension Yojana (APY), a government-backed pension scheme for unorganized sector workers. PFRDA does not regulate insurance schemes (IRDAI's role) or securities markets (SEBI's role). Therefore, the answer is B.

Question 10

Under the Insurance Regulatory and Development Authority Act, 2015, which of the following is NOT a primary function of IRDAI?

Accepted Answer

IRDAI (Insurance Regulatory and Development Authority of India) was established on September 26, 2000, and was reconstituted under the IRDAI Act, 2015. IRDAI's primary functions include regulating insurance companies, protecting policyholder interests, promoting insurance sector development, and issuing licenses to insurers and intermediaries. However, IRDAI does NOT regulate pension funds — that is the responsibility of PFRDA (Pension Fund Regulatory and Development Authority). IRDAI also does not regulate securities markets (SEBI's role) or banking operations (RBI's role). Therefore, the answer is C.

Question 11

Which of the following statements best describes the primary regulatory objective of SEBI under the Securities and Exchange Board of India Act, 1992?

Accepted Answer

SEBI (Securities and Exchange Board of India) was established on April 12, 1992, as the primary regulator of securities markets in India. Under the SEBI Act, 1992, SEBI's core mandate is to protect the interests of investors in securities and to promote the development of the securities market. This includes regulating stock exchanges, mutual funds, brokers, and listed companies. SEBI does not regulate banking operations (that is RBI's role) nor does it regulate insurance (IRDAI's role). Therefore, the answer is B.

Question 12

Which of the following statements correctly describes the primary regulatory objective of SEBI (Securities and Exchange Board of India)?

Accepted Answer

SEBI's primary objective, as defined under the Securities and Exchange Board of India Act, 1992, is to protect the interests of investors in securities and to promote the development of the securities market. SEBI regulates stock exchanges, mutual funds, brokers, and other market participants to ensure fair, transparent, and efficient functioning of capital markets. Therefore, answer is B.

Question 13

Under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, which of the following constitutes 'insider trading' as per the primary definition?

Accepted Answer

Insider trading under SEBI PIT Regulations involves dealing in securities by persons who possess unpublished price-sensitive information (UPSI) about the company. The key element is that the information must be 'price-sensitive' (capable of affecting the price of securities) and 'unpublished' (not in the public domain). Mere possession of confidential information without it being price-sensitive does not constitute insider trading. Therefore, answer is B.

Question 14

Under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, which of the following constitutes 'insider trading' as per the definition that requires both access to unpublished price-sensitive information (UPSI) AND a fiduciary relationship or connection with the company?

Accepted Answer

The setup tests the candidate's understanding of insider trading definition under SEBI regulations — specifically the dual requirement of UPSI access and a qualifying relationship. The solution: SEBI defines insider trading under the Prohibition of Fraudulent and Unfair Trade Practices Regulations, 2003 (now subsumed under SEBI (Prohibition of Insider Trading) Regulations, 2015). An 'insider' is a person who is connected with the company or has access to UPSI by virtue of their position, employment, or fiduciary relationship. The critical element is that BOTH conditions must be met: (1) possession of UPSI, AND (2) a qualifying connection (director, employee, consultant, or person in fiduciary capacity). A person with UPSI alone, without connection, is not technically an insider under the strict definition. The trap explanation: Candidates often confuse 'access to UPSI' with 'insider status' — but SEBI regulations require a dual test. A journalist or analyst with leaked UPSI may trade illegally, but is not an 'insider' in the regulatory sense unless they have a fiduciary or employment connection. Therefore, answer is B.

Question 15

Under PFRDA regulations, the National Pension System (NPS) allows subscribers to choose from multiple investment options. Which of the following correctly describes the 'E-Lite' fund option and its investment mandate?

Accepted Answer

The NPS investment options include Equity (E), Government Securities (G), Corporate Bonds (C), and Liquid/Alternative (L) funds. However, there is no 'E-Lite' fund option in the NPS framework. The correct equity fund option is simply 'E' (Equity Fund), which invests up to 100% in equity and equity-related instruments. The term 'E-Lite' does not exist in PFRDA's official fund classification. Therefore, answer is C.

Question 16

SEBI's framework for regulating Alternative Investment Funds (AIFs) classifies them into three categories. Which of the following correctly identifies Category III AIFs and their primary characteristic?

Accepted Answer

SEBI classifies AIFs into three categories: Category I (venture capital, infrastructure, social venture funds), Category II (private equity, debt funds, etc.), and Category III (hedge funds and funds employing complex trading strategies). Category III AIFs are characterized by their use of leverage, derivatives, and complex trading strategies to generate returns, and they face the most stringent regulatory requirements including higher minimum fund size and investor accreditation norms. Therefore, answer is D.

Question 17

Under the Pension Fund Regulatory and Development Authority (PFRDA) framework, the National Pension System (NPS) Tier-II account can be opened by which category of individuals, and what is the minimum balance requirement?

Accepted Answer

The NPS Tier-II account is a voluntary, non-retirement savings account that can be opened by any individual (resident or non-resident Indian) who has an active Tier-I account. There is no mandatory minimum balance requirement for Tier-II accounts; however, the minimum contribution per transaction is typically ₹1,000 as per PFRDA guidelines. Tier-II accounts offer flexibility in withdrawal and are not subject to the lock-in period applicable to Tier-I accounts. Therefore, answer is B.

Question 18

The IRDAI (Insurance Regulatory and Development Authority of India) was established as a statutory body under which Act, and in which year?

Accepted Answer

The Insurance Regulatory and Development Authority of India (IRDAI) was established under the Insurance Regulatory and Development Authority Act, 1999, and became operational on 1st April 2000. It replaced the Office of the Controller of Insurance and became the primary regulator for the insurance sector in India. Therefore, answer is C.

Question 19

IRDAI has prescribed specific solvency margin requirements for insurance companies to ensure financial stability. Which of the following correctly states the regulatory framework and the purpose of solvency margin requirements?

Accepted Answer

IRDAI prescribes solvency margin requirements under the Insurance Act, 1938 (as amended) and IRDAI regulations. The solvency margin is the minimum amount of funds that an insurance company must maintain over and above the liabilities to policyholders. For life insurance companies, the solvency margin is calculated as a percentage of the sum assured or net premium income (whichever is higher). For general insurance companies, it is calculated as a percentage of net premium income or claims incurred (whichever is higher). The purpose of solvency margin is to protect policyholders' interests by ensuring that insurance companies maintain adequate financial reserves to meet claims even in adverse circumstances. The solvency margin requirement is reviewed and updated periodically by IRDAI. Therefore, answer is A.

Question 20

Under SEBI's regulatory framework, what is the minimum lock-in period for promoters' shareholding in a company seeking listing on a stock exchange, and which SEBI regulation governs this requirement?

Accepted Answer

SEBI's ICDR (Issue of Capital and Disclosure Requirements) Regulations, 2018 govern the listing requirements for companies. The regulations mandate that promoters must lock in a minimum of 20% of their post-IPO shareholding for a period of 3 years from the date of listing. This lock-in requirement is designed to ensure promoter commitment and protect investor interests by preventing large-scale promoter exits immediately after listing. The lock-in is enforced through stock exchange rules and is a non-negotiable requirement for all IPOs. Therefore, answer is D.

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