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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Regulatory, Governance and Ethical Aspects of Portfolio Managers

A PMS distributor is advising a prospective client. Which of the following conduct is consistent with SEBI's code of conduct for distributors of portfolio management services?

Disclosing all fees and commissions received from the portfolio manager is the proper conduct. Distributors must be transparent about conflicts of interest, while guaranteeing returns, breaching client confidentiality or skipping risk profiling are all violations of the code of conduct and suitability duties.

  1. AGuaranteeing a minimum return of 12% a year to attract the client
  2. BDisclosing all fees and commissions received from the portfolio manager for the referralCorrect
  3. CSharing the client's portfolio details with other prospects as a success story
  4. DRecommending a product without assessing the client's risk profile to close the sale quickly

Explanation

Distributors must make transparent disclosure of fees and commissions and any conflict of interest. Guaranteeing returns is prohibited, sharing client information breaches confidentiality, and ignoring risk profile violates suitability duties. Only the disclosure option is proper conduct.

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