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

A distributor's client wants to invest in a mutual fund scheme through a regular plan but asks about the cost of using the distributor. Which disclosure practice is consistent with AMFI Code of Conduct and SEBI norms?

The distributor should tell the client that regular plans include distribution commission and that direct plans have a lower expense ratio. Transparent disclosure of commissions is required by AMFI and SEBI norms, and hiding or misstating costs is a violation.

  1. ADisclose that a regular plan includes distribution commission and that a direct plan has a lower expense ratioCorrect
  2. BConceal the commission as it is the AMC's confidential information
  3. CTell the client that regular and direct plans have identical expenses
  4. DDisclose commission only if the client asks in writing

Explanation

Distributors must make fair disclosure of commissions received and of the availability of direct plans with lower expenses. Concealing or misstating costs breaches the code of conduct, so the other options are incorrect.

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