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

A distributor wants to sell a mutual fund scheme by showing the investor a past-performance comparison. Which practice is consistent with the SEBI and AMFI code of conduct for distributors?

A distributor should present performance fairly and consistently and disclose that past performance may not be sustained in future. Selective period choice, assured returns and hiding loads or costs mislead the investor and breach the AMFI and SEBI code of conduct.

  1. AQuoting only the best-performing period to attract the investor
  2. BGuaranteeing that the past return will continue in future
  3. CPresenting performance on a consistent, fair basis with the risk disclosure that past performance may not be sustainedCorrect
  4. DHiding the exit load to make the scheme look attractive

Explanation

Distributors must not mislead investors. Performance should be presented fairly, with the disclaimer that past performance may or may not be sustained. Cherry-picking periods, guaranteeing returns and concealing loads are all violations of the code.

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