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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Grievance Redress Mechanism

Ms. Anjali Deshmukh, a 45-year-old client, complains that her adviser recommended a product without disclosing that the adviser's group company earns a commission on it. She has the adviser's written risk profile and advice records. For the grievance forum, which fact most directly establishes the adviser's breach?

Failure to disclose a conflict of interest, here the commission earned by the adviser's group company, most directly establishes the breach. Advisers must disclose such conflicts before advising. Short-term underperformance, the client's age or the use of a written risk profile do not constitute violations.

  1. AFailure to disclose a conflict of interest to the client before giving adviceCorrect
  2. BThe product's returns being lower than the Sensex in one quarter
  3. CThe client being aged 45
  4. DThe adviser using a written risk profile

Explanation

Investment advisers must disclose any conflict of interest, such as commissions earned by associated entities, to clients. Non-disclosure is a breach of regulatory conduct. Short-term underperformance is not itself a breach, and age or use of a risk profile are proper practice, not violations.

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