Exam fear: SIF scale-up runs into distribution hurdle amid tough norms

Fund houses rolling out SIF are facing distribution challenges as stringent certification norms sharply limit eligible distributors, prompting the industry to seek regulatory relaxations

As fund houses ramp up offers under specialised investment funds (SIFs), a new category positioned between portfolio management services (PMS) and alternative investment funds (AIFs), they are grappling with a key bottleneck: Distribution.

 

Of the nearly 250,000 registered mutual-fund distributors (MFDs) in the country, only about 1,000 have cleared the “NISM Series XIII: Common Derivatives Certification Examination”, which is mandatory for distributing SIFs, according to two industry participants. (NISM stands for the National Institute of Securities Markets.)

 

Several distributors said they needed multiple attempts to clear the exam, with each attempt costing around ₹3,000.

 

Net assets under management (AUM) for SIFs stood at ₹4,892 crore as of December last year. This is less than a year after the category received regulatory approval.

 

Inflows during December alone were around ₹1,933 crore.

 

Distributors say the stringent certification requirements are limiting the product’s reach and have sought relaxation to enable wider participation.

 

“The exam has the provision for negative marking and covers a wide range of topics. The passing threshold is 60 per cent, which becomes particularly challenging with negative marking. Reducing the qualifying score to 50 per cent could help,” said a distributor. 

 

“The syllabus is heavily skewed towards derivatives, an area many distributors are not deeply familiar with.”

 

Distributors are seeking an extension of the NISM’s “grandfathering” provisions to Series XIII certification. Under the grandfathering rule, senior or experienced distributors are allowed to renew certification through training programmes instead of having to take the exam.

 

Series XIII certification is valid for three years and must be renewed thereafter.

 

Some fund houses have echoed these concerns, flagging certification constraints as a hurdle to scaling up SIF offers.

 

“We are ready to launch several SIF schemes, but are waiting for our distribution network to obtain the required certification for a smoother rollout and wider reach. It may take another month or so before the schemes go live,” said a fund manager.

 

According to industry sources, market participants are likely to approach the Securities and Exchange Board of India (Sebi), seeking relaxations to the certification norms, citing the complexity of topics related to derivatives and the deterrent effect of negative marking.

 

Queries emailed to Sebi remained unanswered till the time of going to press.

 

SIFs have a minimum investment ticket size of ₹10 lakh, placing them between PMS and AIFs, and allow for more sophisticated investment strategies. So far, schemes have been launched under three of the seven strategies permitted by the regulator. 

Major roadblocks

 

• Only 1,000 out of 250,000 registered mutual fund distributors have cleared the mandated exam
• Distributors say strict certification norms limiting product’s reach
• Derivative-heavy syllabus, high passing score acting as deterrents, say players
• Net AUM for SIFs stood at ₹4,892 crore as of Dec ’25