Source: Mint
Context:
The Securities and Exchange Board of India (Sebi) and the Association of Mutual Funds in India (Amfi) are considering changes to the NISM Series XIII (Derivatives) examination, which is mandatory for distributors seeking to sell Specialized Investment Funds (SIFs). The move aims to make the exam more relevant, practical, and accessible without diluting investor protection.
Why the Issue Has Arisen
1. Misalignment Between Exam Content and SIF Products
- The NISM XIII exam has three sections:
- Currency derivatives
- Equity derivatives
- Interest rate derivatives
- Currency derivatives currently have no relevance to SIFs, as:
- Sebi does not permit SIF strategies involving currency derivatives
- All approved SIF strategies rely mainly on equity and debt derivatives
2. High Entry Barrier for Distributors
- The exam is considered much tougher than the standard MF distributor (NISM VA) exam
- Features:
- Advanced mathematics
- Derivatives-heavy content
- Negative marking
- Result: Very low pass rate, discouraging participation
Key Proposals Under Discussion
1. Rationalising Exam Content
- Partial removal or dilution of currency derivatives section
- Retention of equity and interest rate derivatives due to relevance for risk explanation
2. Introduction of Exam Levels
- Different levels aligned with product complexity
- Distributors can qualify for the specific SIF strategies they intend to sell
- Ensures relevance without compromising risk awareness
3. Maintaining Investor Protection
- Amfi is cautious about not weakening risk assessment standards
- Focus remains on ensuring distributors can explain risks clearly to investors
About Specialized Investment Funds (SIFs)
Purpose
- Designed to bridge the gap between:
- Retail Mutual Funds (low risk)
- Portfolio Management Services (PMS) (high ticket, high risk)
Key Features
- Minimum investment: ₹10 lakh (PMS: ₹50 lakh)
- Target investors: Risk-tolerant, informed investors
- Approved strategies (7):
- Equity Long-Short Fund
- Equity Ex-Top 100 Long-Short Fund
- Sector Rotation Long-Short Fund
- Debt Long-Short Fund
- Sectoral Debt Long-Short Fund
- Active Asset Allocator Long-Short Fund
- Hybrid Long-Short Fund
