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

Under the SEBI framework for mutual fund distribution, which of the following statements about a distributor's commission is correct?

A distributor must disclose to the investor all commissions received across the competing schemes of various mutual funds from which a scheme is being recommended. This transparency requirement under the AMFI code of conduct helps investors judge possible conflicts of interest.

  1. AA distributor may receive any extra payment from an AMC, as long as it is not disclosed to investors
  2. BCommission paid to distributors is to be paid only from the scheme's expenses and not from the AMC's own resources
  3. CDistributors need not disclose commissions received from different schemes to investors
  4. DA distributor must disclose to the investor all commissions received for the different competing schemes of various mutual funds, from amongst which the scheme is being recommendedCorrect

Explanation

AMFI/SEBI code of conduct requires distributors to disclose all commissions (trail or upfront) received from the different competing schemes among which the recommendation is made. Undisclosed payments and non-disclosure violate the code, and the claim about payment source is not the rule.

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