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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 recommending a portfolio manager to a client. Which action would be consistent with the code of conduct expected of distributors?

A distributor should disclose to the client the commission or fees received from the portfolio manager. Guaranteeing returns, concealing information or implying past performance will repeat is misleading and breaches the ethical and regulatory conduct expected of distributors.

  1. AGuaranteeing a minimum annual return to win the mandate
  2. BDisclosing to the client the commission or fees the distributor receives from the portfolio managerCorrect
  3. CAdvising the client to hide a past loss from the portfolio manager
  4. DPromising that past performance will repeat

Explanation

Distributors must be transparent and disclose commissions received. Guaranteeing or promising returns is prohibited, as PMS returns are market-linked. Withholding information or misrepresenting past performance breaches ethical and regulatory conduct.

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