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

Which of the following is the correct statement about commissions paid to distributors by an asset management company for mutual fund schemes?

Distributor commission is paid by the AMC out of the scheme's expenses within the total expense ratio limits. Entry load has been prohibited since August 2009, so investors cannot be charged an entry load by the AMC or the distributor.

  1. ACommission may be paid to a distributor only in the form of upfront payments that are not linked to the scheme
  2. BCommission is paid from the scheme's expenses within the limits of the total expense ratio, and no entry load can be charged to investorsCorrect
  3. CDistributors may charge entry load directly to investors as agreed between them
  4. DCommission is paid by the investor on top of the scheme expenses through a deduction from the units allotted

Explanation

Since August 2009 entry load is banned. Distributor commission is paid out of the scheme's expenses by the AMC, within the permitted TER limits. Charging entry load or deducting from units is not permitted.

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