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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 PMS distributor's obligation under SEBI's framework when dealing with a prospective client?

A PMS distributor should provide the portfolio manager's disclosure document and clearly explain risks, fees and other terms to the client. Guaranteeing returns, promising repeat of past performance, or hiding charges violates ethical and regulatory norms.

  1. AGuarantee a minimum return to attract the client
  2. BShare the portfolio manager's disclosure document and explain the risks and feesCorrect
  3. CCharge the client a separate upfront distribution fee in addition to the manager's payments, without disclosure
  4. DPromise that past performance will be repeated

Explanation

Distributors must ensure fair disclosure, including the disclosure document, fees, and risks, and must act in the client's interest. Guaranteeing returns or promising repetition of past performance is misleading and prohibited. Undisclosed charges breach transparency norms.

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