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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 strategy to a client. Which action best reflects the ethical duty of the distributor?

The distributor should disclose all fees, commissions and risks and assess suitability before recommending a strategy. Ethical conduct requires putting the client's interest first, avoiding misleading claims, guaranteed returns or commission-driven recommendations.

  1. AHighlight only past best returns to attract the client
  2. BDisclose all fees, commissions and risks and check suitability before recommendingCorrect
  3. CGuarantee a minimum return to win the mandate
  4. DRecommend the strategy that pays the highest commission

Explanation

Distributors must act in the client's interest, with full disclosure of fees, commissions, risks and suitability. Selective return display, guaranteeing returns and commission-driven advice all breach the code of conduct.

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