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6.3 Non-Mandatory Disclosures

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NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

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1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

6.3 Non-Mandatory Disclosures

Key Takeaways Explain This Topic AI

Non-mandatory disclosures are those an AMC provides voluntarily beyond regulatory minimums.

The monthly fact sheet is the most widely used voluntary disclosure and consolidates portfolio, performance and ratio data.

Voluntary disclosures must still be accurate and consistent with the scheme documents and the advertisement code.

Portfolio characteristics such as turnover, top holdings, sector weights and quantitative ratios help compare schemes.

Fund manager commentary explains what changed and why, but is opinion rather than a regulated disclosure.

Last updated: August 2026

The Distinction

Mandatory disclosures are those SEBI requires: daily NAV and daily total expense ratio, the monthly portfolio within 10 calendar days of month end, an additional fortnightly portfolio for debt schemes within 5 calendar days, half-yearly results, the annual report, the risk-o-meter by the 10th calendar day of each month, scheme performance in prescribed formats, and voting disclosures.

Non-mandatory disclosures are what an AMC chooses to publish in addition. They are voluntary in existence but not voluntary in standard : once published, they must be accurate, consistent with the scheme documents and compliant with the advertisement code. An inaccurate fact sheet is a compliance problem even though the fact sheet itself was optional.

The Monthly Fact Sheet

The monthly fact sheet is the principal voluntary disclosure and the single most useful document for comparing schemes. A typical fact sheet page carries:

  • Section Content
  • Scheme snapshot Objective, category, launch date, fund manager and tenure
  • Size Assets under management and monthly average AUM
  • NAV NAV of each plan and option
  • Portfolio Top holdings with weights, full or partial holdings list
  • Sector allocation Weight by industry, usually against the benchmark
  • Market cap split Large, mid and small cap proportions for equity schemes
  • Debt characteristics Average maturity, modified duration, Macaulay duration, yield to maturity, rating profile
  • Quantitative ratios Standard deviation, beta, Sharpe ratio, portfolio turnover, tracking error
  • Performance Trailing and since-inception returns against the benchmark
  • SIP performance Returns on a hypothetical monthly investment
  • Expenses and load Total expense ratio for regular and direct plans, exit load
  • Commentary Fund manager's view on markets and positioning
  • What to Actually Read

A distributor comparing two schemes gets more from four fields than from the rest of the document combined.

Portfolio turnover indicates how actively the manager trades. A turnover of 0.5 implies roughly half the portfolio changed over the year; a turnover above 2 indicates very high activity. High turnover means higher transaction costs borne by the scheme, so it should be paired with evidence that the activity earns its cost.

Yield to maturity on a debt scheme is a statement about credit risk and duration, not a forecast of return. A debt scheme showing a YTM materially above its peers is taking more credit risk, more duration risk, or both, and the rating profile in the same fact sheet will usually show which.

Rating profile for debt schemes shows the split across sovereign, AAA, AA, A and below. Two "corporate bond funds" with very different rating profiles are not comparable products.

Market-capitalisation split for equity schemes reveals whether a flexi cap fund is effectively a large cap fund or is running substantial mid and small cap exposure — a difference the category name conceals entirely.

  • Other Voluntary Disclosures
  • More frequent portfolio disclosure than the monthly requirement

Rolling returns rather than only point-to-point trailing returns, which give a far more honest picture of consistency

Investment philosophy notes explaining the process a manager follows

Scheme-level stress testing and liquidity disclosures , some of which have since become mandatory for mid and small cap schemes

  • Investor education content on the AMC website
  • Stewardship and engagement reports describing how the AMC engaged with investee companies
  • Limits on Voluntary Material

Three cautions the syllabus expects a distributor to hold.

Fund manager commentary is opinion. It explains positioning and it is useful context, but it carries no regulatory status and should never be presented to an investor as a forecast.

Voluntary presentation can flatter. Because the format is unregulated, a scheme may highlight the metric on which it looks strongest. If one fact sheet shows three-year returns and another shows since-inception, the two are not being compared.

Consistency with mandatory disclosure is required. A fact sheet cannot show performance in a manner the advertisement code would prohibit merely because the fact sheet is voluntary. Selective periods, missing benchmark comparison and absent cautions are breaches wherever they appear.

Using Disclosure Well

The practical discipline is to build comparisons from mandatory disclosures — portfolio, performance against benchmark, expense ratio, risk-o-meter — and use voluntary disclosures such as ratios and commentary to explain what the mandatory data shows. Doing it the other way round means comparing whichever numbers each AMC chose to feature, which is not a comparison at all.

Rolling Returns: The Most Useful Voluntary Disclosure

Of everything an AMC publishes voluntarily, rolling returns carry the most information, and understanding why is worth the paragraph.

A trailing return is a single observation. A stated three-year return of 16% means the return from one particular start date to one particular end date. Move the start date by three months and the figure can change substantially, because it is dominated by where the market happened to be on those two days.

A rolling return takes every possible start date over a long period and computes the return for a fixed holding period from each of them, then reports the distribution.

Illustration. Two schemes each show a five-year trailing return of 15%.

  • Rolling 3-year returns over 10 years Scheme R Scheme S
  • Best observation 24% 38%
  • Worst observation 9% -2%
  • Average 15% 15%
  • Observations below 8% 0% of periods 24% of periods

The averages are identical and the experiences are not remotely comparable. An investor entering Scheme S at the wrong moment had a materially different outcome from one entering it at the right moment; an investor in Scheme R had broadly the same outcome whenever they started. Consistency is invisible in a trailing return and unmistakable in a rolling one , which is precisely why the disclosure is optional rather than mandatory.

Two Habits Worth Forming

Compare the same fields. Before comparing two fact sheets, confirm they are as of the same month-end and that the return periods, benchmark and expense figures are stated on the same basis. Fact sheet formats are not standardised, and month-end dates occasionally differ.

Treat the fact sheet as the start of the enquiry. Where the fact sheet raises a question — a jump in turnover, a YTM well above peers, a capitalisation split at odds with the category — the answer is in the monthly portfolio disclosure , which is mandatory and complete. The fact sheet points; the portfolio proves.