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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Fund Distribution and Channel Management Practices

Under SEBI rules, which of the following statements about the upfront commission and trail commission paid by an AMC to distributors is correct?

Upfront commission cannot be paid from scheme assets; if paid at all, the AMC bears it from its own resources. Only trail commission is charged to the scheme through the Regular Plan expenses, so commissions are allowed but structured this way under SEBI rules.

  1. AUpfront commission may not be paid out of scheme assets; it is paid by the AMC from its own resourcesCorrect
  2. BUpfront commission is paid out of the scheme's assets to the distributor
  3. CNo commission of any kind is allowed on mutual fund sales
  4. DTrail commission is paid only by the investor directly to the distributor

Explanation

SEBI prohibits payment of upfront commission from scheme assets; any upfront commission to distributors is borne by the AMC from its own resources, while trail commission is paid from scheme expenses via the Regular Plan. Commission is permitted and is not paid solely by the investor.

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