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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Regulatory, Governance and Ethical Aspects of Portfolio Managers

Which of the following is a permitted practice for a PMS distributor under SEBI's framework?

A PMS distributor may receive distribution fees from the portfolio manager, but cannot guarantee returns or take client money in its own name. Direct-plan clients cannot be charged distribution fees. Upfront commissions are not allowed; payments are structured on a trail basis.

  1. ACharging the client a separate upfront fee for distribution in the direct plan
  2. BReceiving distribution commission only from the portfolio manager, with no upfront charge to the client for the distributionCorrect
  3. CGuaranteeing a minimum return to attract clients
  4. DAccepting client cheques in the distributor's own name

Explanation

Distributors under the PMS rules are paid trail commission by the portfolio manager; no upfront commission is permitted, and the client may not be charged for distribution in a direct plan. Guaranteeing returns and taking cheques in own name are prohibited.

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