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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Legal and Regulatory Framework

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

Past performance can be advertised only with the standard statement that it may or may not be sustained in future. Guaranteeing returns, omitting risk disclosures, or claiming a scheme is risk free would be misleading and violate SEBI and AMFI norms.

  1. AGuarantee the scheme's future returns based on the last year's performance
  2. BShow past performance with the standard disclaimer that it may or may not be sustained in futureCorrect
  3. COmit risk disclosures to keep the advertisement short
  4. DClaim the scheme is risk free because it is regulated by SEBI

Explanation

Advertisements must be fair, not misleading, and must carry the disclaimer that past performance may or may not be sustained. Guaranteeing returns, hiding risks, or calling a scheme risk free is prohibited since mutual fund investments are subject to market risks.

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