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100+ Free CCM Unit Trust Practice Questions

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Key Facts: CCM Unit Trust Exam

MCQ

Exam Format

SEC Sri Lanka CMET

WTC

Exam Venue

WTC Colombo 01

RIA

Licensing Goal

SEC Sri Lanka Act

No. 19 of 2021

Governing Act

Sri Lanka Parliament

CIS Code 2022

Operational Code

SEC Sri Lanka Directives

GCE A-Level

Entry Prerequisite

SEC Entry Guidelines

The SEC Sri Lanka Certificate in Unit Trust (CCM) is a key licensing requirement for Registered Investment Advisors (RIAs) specializing in Collective Investment Schemes (Unit Trusts) under the SEC of Sri Lanka Act No. 19 of 2021 and the CIS Code 2022. This practice question bank provides 100 high-quality, syllabus-aligned multiple choice questions covering fund structures, manager and trustee duties, NAV calculations, operations, and regulatory compliance. As of 2026, entry requires GCE A-Levels or accepted professional qualifications, with exams administered by CMET.

Sample CCM Unit Trust Practice Questions

Try these sample questions to test your CCM Unit Trust exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which of the following best defines a Collective Investment Scheme (CIS) under the Securities and Exchange Commission of Sri Lanka Act No. 19 of 2021?
A.A partnership where partners are personally liable for all business debts and capital investments
B.A scheme where investor funds are pooled and managed by a fund manager to acquire property/assets, with investors sharing the risk and return
C.A deposit scheme offered exclusively by licensed commercial banks with fixed interest rate guarantees
D.A public limited company where investors purchase shares directly on the secondary market of the Colombo Stock Exchange
Explanation: Under the SEC Act No. 19 of 2021, a Collective Investment Scheme (CIS), which includes unit trusts, is a scheme where funds from investors are pooled to buy assets. The assets are managed professionally on behalf of investors, and they share in the risks and returns proportional to their units.
2What is a primary advantage of investing in an open-ended unit trust compared to direct stock market investment for a retail investor in Sri Lanka?
A.It provides instant diversification across multiple securities, reducing unsystematic risk
B.It guarantees a higher return than the Colombo Stock Exchange's ASPI index every year
C.It grants the investor direct voting rights in the annual general meetings of the underlying companies
D.It exempts the investor from all market-related risks and price fluctuations
Explanation: An open-ended unit trust pools money from thousands of investors, allowing the fund manager to diversify across a broad range of equities and fixed income securities. This reduces unsystematic risk (business-specific risk) which is harder for retail investors to eliminate when buying individual stocks.
3An open-ended unit trust differs from a close-ended unit trust in Sri Lanka primarily because the open-ended trust:
A.Has a fixed number of units in issue that trade only on the secondary market of the Colombo Stock Exchange
B.Is prohibited by the SEC from investing in debt securities like Treasury Bills
C.Continually issues and redeems units directly with investors based on the Net Asset Value (NAV) per unit
D.Does not have a Trustee to oversee the fund manager's actions
Explanation: Open-ended unit trusts have a flexible capital structure. They continually issue new units when investors buy, and cancel units when investors redeem. Transactions are processed directly with the Managing Company based on the daily calculated Net Asset Value (NAV) per unit.
4Which of the following risks represents a systematic risk that cannot be eliminated by diversifying a unit trust's portfolio?
A.A sudden increase in inflation and interest rates across the Sri Lankan economy
B.The risk that a single corporate bond issuer in the portfolio will default
C.A labor strike that halts operations at a specific manufacturing company in the fund
D.Incompetent management decisions at one of the commercial banks whose shares are held in the fund
Explanation: Systematic risk (market risk) arises from macroeconomic factors—such as inflation, interest rate hikes, and geopolitical events—that affect the entire market. It cannot be diversified away. Unsystematic risks, like corporate defaults, strikes, or poor corporate management, affect specific issuers and can be minimized through diversification.
5Why does pooling money in a unit trust give a small retail investor access to a more diversified portfolio than they could typically build on their own?
A.Because the fund guarantees that every underlying security will rise in value
B.Because the combined capital of many unit holders is large enough to be spread across many different securities and asset classes
C.Because the SEC reimburses any losses suffered by individual retail unit holders
D.Because each unit holder is allowed to personally select the individual stocks the fund must buy
Explanation: A single retail investor usually has limited capital, which makes it costly and impractical to buy many different securities. By pooling capital with thousands of other investors, a unit trust accumulates a large asset base that the fund manager can spread across many issuers, sectors, and asset classes, achieving diversification that reduces unsystematic risk.
6What is the primary role of 'compounding' in the long-term growth of a unit trust investment?
A.It generates growth by reinvesting earned distributions (interest/dividends) to purchase more units, which then earn future returns
B.It guarantees that the daily NAV will never drop below the initial purchase price
C.It refers to the requirement for funds to pay out all interest income within a five-year period
D.It eliminates all transactional fees and management expenses from the fund's expense ratio
Explanation: Compounding in unit trusts works when investors opt to reinvest their distributions (dividends or interest) back into the fund. This buys additional units, which in turn generate their own future distributions, compounding the total value of the investment over time.
7What is the purpose of an 'entry load' (or front-end fee) in a unit trust?
A.To penalize investors for withdrawing their money before the maturity date
B.To pay the regulatory registration fees of the Securities and Exchange Commission (SEC)
C.To cover the initial costs of distribution, marketing, and agent commissions associated with selling the units
D.To build a cash reserve in the fund to pay for sudden stock market losses
Explanation: An entry load is a front-end fee charged to the investor at the time of purchase. It is added to the NAV to determine the purchase price (offer price). This fee is used to cover distribution costs, sales commissions for advisors, and marketing materials.
8In a unit trust structure, what is the 'Explanatory Memorandum'?
A.A confidential legal contract signed only between the Managing Company and the Trustee
B.The official marketing brochure that guarantees a minimum 12% return to investors
C.A monthly report issued to the Colombo Stock Exchange listing the fund manager's personal asset holdings
D.The prospectus or offering document that provides details about the fund's objectives, risks, fees, and operations to prospective investors
Explanation: The Explanatory Memorandum (also known as the prospectus or key investor information document) is the legal document that the Managing Company must provide to prospective investors. It details the fund's investment objectives, strategies, risks, fee structures (management and trustee fees), and entry/exit loads.
9Which of the following fund types in Sri Lanka would be expected to have the lowest volatility and default risk?
A.A Sector-Specific Equity Fund focusing on technology stocks
B.A High-Yield Corporate Debt Fund investing in unrated commercial papers
C.A Balanced Fund holding a mix of local corporate equities and corporate bonds
D.A Gilt-Edged (Gilt) Fund investing solely in Sri Lankan government securities
Explanation: Gilt Funds (or Gilt-Edged Funds) invest exclusively in government debt securities like Treasury Bills and Treasury Bonds. Because these are backed by the Government of Sri Lanka, they carry virtually zero default (credit) risk, making them the lowest risk option among those listed.
10What is the primary objective of a 'Growth Fund' in the Sri Lankan unit trust market?
A.To generate regular monthly cash income through dividend payments and bond interest
B.To maintain a stable NAV of exactly LKR 10.00 by holding short-term money market instruments
C.To achieve long-term capital appreciation by investing primarily in equity securities
D.To invest 100% of its assets in government-issued Treasury Bills to avoid price fluctuations
Explanation: Growth Funds invest primarily in corporate equities listed on the Colombo Stock Exchange. Their primary goal is long-term capital growth (capital appreciation) rather than regular income, which exposes them to higher price volatility.

About the CCM Unit Trust Exam

The Certificate in Unit Trust is a specialized module under the SEC Sri Lanka Certificate in Capital Markets (CCM) framework. It is a mandatory educational requirement for individuals seeking to practice as Registered Investment Advisors (RIAs) in Collective Investment Schemes. The curriculum covers the concept and structure of unit trusts, the roles and duties of the Managing Company and Trustee, daily fund administration, daily Net Asset Value (NAV) calculation, and SEC regulatory compliance under the SEC Act No. 19 of 2021 and the CIS Code 2022.

Assessment

Multiple-choice exam administered by SEC Sri Lanka CMET

Time Limit

Varies by cohort; check CMET registration pack

Passing Score

Contact SEC Sri Lanka

Exam Fee

Contact SEC Sri Lanka (Securities and Exchange Commission of Sri Lanka (SEC))

CCM Unit Trust Exam Content Outline

20% practice weight

Unit Trust & CIS Fundamentals

Collective Investment Schemes definition, benefits of pooling capital, diversification, retail access, and market risks.

20% practice weight

Structure of Unit Trusts

The roles of the Managing Company and Trustee, trustee independence requirements, and compliance with the Trust Deed constitution.

20% practice weight

Fund Administration & Operations

Daily operations, unit creation/redemption, cut-off times, marketing codes, and reporting standards.

20% practice weight

Net Asset Value (NAV) Calculations

NAV formula, pricing with loads, stock and government security mark-to-market valuations, and expense accruals.

20% practice weight

SEC Sri Lanka Regulations & Ethics

The SEC Act No. 19 of 2021, the CIS Code 2022, investment exposure rules, borrowing limits, and RIA ethical behaviors.

How to Pass the CCM Unit Trust Exam

What You Need to Know

  • Passing score: Contact SEC Sri Lanka
  • Assessment: Multiple-choice exam administered by SEC Sri Lanka CMET
  • Time limit: Varies by cohort; check CMET registration pack
  • Exam fee: Contact SEC Sri Lanka

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

CCM Unit Trust Study Tips from Top Performers

1Clearly distinguish between the roles of the Trustee (custody and compliance watchdog) and the Managing Company (portfolio management and daily administration). Exam questions frequently test who is responsible for which activity.
2Master the math of Net Asset Value (NAV) calculations, including how to compute the Offer Price (NAV + entry load) and Bid Price (NAV - exit load), as well as the number of units issued for a given investment amount.
3Understand the asset valuation rules: listed equities are valued at CSE closing market prices, while government securities are marked-to-market using current daily yield curves.
4Study the investment restriction caps in the CIS Code 2022, especially exposure limits to a single issuer (10-15% of NAV) and borrowing restrictions (prohibited except for short-term liquidity up to 10% of NAV).
5Pay attention to the Securities and Exchange Commission of Sri Lanka Act No. 19 of 2021 and its provisions regarding insider trading, market manipulation, and licensing of intermediaries.

Frequently Asked Questions

What is the purpose of the SEC Sri Lanka Certificate in Unit Trust (CCM) exam?

It is a mandatory educational qualification for capital market professionals in Sri Lanka who want to be licensed as Registered Investment Advisors (RIAs) specializing in Collective Investment Schemes (Unit Trusts).

What is the structure of a unit trust in Sri Lanka?

Under SEC regulations, a unit trust is a three-party structure consisting of: 1) The Managing Company (which manages the portfolio and makes investment decisions); 2) The Trustee (an independent commercial bank that holds custody of the assets and monitors compliance); and 3) The Unit Holders (who pool their capital and own beneficial interest in the assets).

How is the Net Asset Value (NAV) of a unit trust calculated?

The NAV per unit is calculated daily by taking the total market value of the trust's assets (investments, cash, and accrued income), subtracting all liabilities (accrued fees and operational expenses), and dividing the result by the total number of units currently in issue.

What governs the operations of a unit trust in Sri Lanka?

Operations are governed by the Securities and Exchange Commission of Sri Lanka Act No. 19 of 2021, the SEC's Code for Collective Investment Schemes (CIS Code 2022), and the specific Trust Deed signed between the Managing Company and the Trustee.

What are the entry qualifications for the CCM program in Sri Lanka?

Candidates must generally have passed all subjects at the GCE Advanced Level examination, hold a recognized Bachelor's Degree, or possess professional qualifications (such as CIMA, ACCA, or CA) acceptable to the SEC.