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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Fund Distribution and Channel Management Practices

A distributor wants to advertise a mutual fund scheme's past performance. Which approach is consistent with the SEBI/AMFI advertising code?

Performance advertising must be fair and standardised and must carry the disclaimer that past performance may or may not be sustained in future. Selective best-year quotes, guarantees of repeat returns, or dropping risk disclaimers for debt schemes are misleading and violate the code.

  1. AQuote only the best-performing year to attract investors
  2. BGuarantee that past returns will repeat if the investor stays for three years
  3. CInclude a statement that past performance may or may not be sustained in future, and present performance on a standard basisCorrect
  4. DOmit the risk disclaimer if the scheme is a debt fund

Explanation

The advertising code requires fair presentation of performance with the standard disclaimer that past performance may or may not be sustained. Cherry-picking the best period, guaranteeing returns or dropping risk disclaimers for debt funds is misleading and not allowed.

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