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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services

A trading member's client wants to buy Nifty futures but has no knowledge of the risks involved. Which of the following is the most appropriate sales practice for the sales person to follow?

The sales person should explain the risks of futures and gather the client's risk profile before recommending suitable products. Suitability and honest disclosure are core sales practices; promising returns or favouring brokerage is improper and misleading to the investor.

  1. AExplain the risks and obtain the client's risk profile before recommending suitable productsCorrect
  2. BAssure the client of assured returns so that he is comfortable trading
  3. COpen the account quickly and let the client learn from losses
  4. DRecommend the product that earns the highest brokerage

Explanation

Suitability requires knowing the client's risk profile and explaining the risks of derivatives before any recommendation. Guaranteeing returns or prioritising brokerage violates fair sales practice and is misleading.

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