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

Which of the following is a correct practice for a mutual fund distributor when dealing with a client?

A distributor should disclose all commissions received for the schemes recommended, as the AMFI Code of Conduct requires. Guaranteeing returns, giving cash rebates and churning portfolios to earn more commission are prohibited or unethical practices that harm investors.

  1. ADisclose all commissions received for the schemes recommended, as required by AMFI Code of ConductCorrect
  2. BGuarantee a minimum return on an equity scheme to attract the client
  3. CRebate part of the commission to the client in cash to win the business
  4. DAdvise the client to switch schemes frequently to earn more commission

Explanation

AMFI's Code of Conduct requires distributors to disclose commissions (both trail and any other) across schemes. Assuring returns, giving cash rebates and churning for commission are prohibited or unethical practices.

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