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

A distributor wants to tell a prospective client that a scheme gave 18% returns last year and that it will therefore keep giving similar returns. Under the AMFI Code of Conduct for intermediaries, what is the correct position?

It is not permitted. Distributors must not promise or guarantee returns, and any performance reference must carry the disclosure that past performance may or may not be sustained in future. The rule applies equally to oral and written communication and to every scheme category.

  1. APermitted if the distributor says the returns are guaranteed by the AMC
  2. BPermitted if the statement is made only orally
  3. CNot permitted, because distributors must not promise or guarantee returns and must disclose that past performance may or may not be sustainedCorrect
  4. DPermitted if the scheme is an equity scheme

Explanation

Distributors must not make misleading statements or assure returns. Past performance is not an indicator of future results, and the required disclaimer must accompany any performance communication. Medium of communication or scheme category does not change this rule.

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