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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 receives a commission from the portfolio manager for bringing in a client. Under SEBI's requirements for distributors of PMS, what must the distributor do?

A PMS distributor must disclose to the client all commissions received for distribution services. This transparency lets the client judge any conflict of interest in the recommendation. Keeping the commission secret breaches the distributor's code of conduct and SEBI's expectations.

  1. AKeep the commission arrangement confidential from the client
  2. BDisclose to the client all the commissions received for distribution servicesCorrect
  3. CPass on the commission only to the client's relatives
  4. DRefuse all registration with any body

Explanation

Distributors are expected to be transparent and must disclose to the client the commission or remuneration they receive from the portfolio manager. Hiding it is unethical and violates the code of conduct. The other options have no basis in the rules.

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