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

A mutual fund distributor wants to advertise to prospective investors. Which practice is consistent with the AMFI Code of Conduct for distributors?

The correct practice is to disclose all material information, including risks, and avoid misrepresenting past performance. Guaranteeing returns, showing only the best period or promising outperformance are misleading and breach the code of conduct that requires fair and complete communication to investors.

  1. AGuaranteeing a minimum return on an equity scheme to attract investors
  2. BDisclosing all material information about the scheme, including risks, and not misrepresenting past performanceCorrect
  3. CQuoting only the best-performing period of the scheme to make it look attractive
  4. DPromising that the scheme will beat its benchmark every year

Explanation

Distributors must provide fair, complete and not misleading information, including risk factors. Guaranteeing returns, cherry-picking periods or promising benchmark outperformance misleads the investor and violates the code.

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