NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Key Regulations
Mr. Raghunath Iyer, a registered investment adviser, receives a request from a client to recommend a particular mutual fund scheme. Which action is most consistent with the SEBI (Investment Advisers) Regulations regarding conflict of interest?
The adviser should disclose to the client any conflict of interest, including relationships with the product issuer or a related distribution entity, before advising. Undisclosed commissions or related-party dealing and skipping risk profiling violate the regulations.
- ADisclose to the client any conflict of interest, including relationships with the product issuer, before giving the adviceCorrect
- BAccept a commission from the fund house and keep it undisclosed since the client pays no advisory fee
- CAdvise the scheme and have his family-run distribution firm sell it to the client without informing the client
- DAvoid giving a written risk profile to save time
Explanation
Advisers must act in the client's interest and disclose any conflict of interest, including associations with the issuer or distributor. Undisclosed commissions or routing business through related entities without informing the client breach the code of conduct. Skipping the risk profiling also violates the regulations.
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