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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 statements about a PMS distributor's conduct is consistent with the SEBI code of conduct for distributors of portfolio management services?

A PMS distributor must disclose all commissions or fees received from the portfolio manager and avoid misrepresenting past performance. Guaranteeing returns, leaking client information, or choosing products purely for higher commission is improper and conflicts with conduct and suitability requirements.

  1. AThe distributor may guarantee a minimum return to attract the client
  2. BThe distributor must disclose to the client all the commissions or fees received from the portfolio manager, and not misrepresent past performanceCorrect
  3. CThe distributor may share the client's confidential information with other clients to build trust
  4. DThe distributor may recommend a PMS solely because it pays the highest commission

Explanation

Distributors must act with transparency, disclose commissions or remuneration earned and avoid misleading statements on performance. Guaranteeing returns, breaching confidentiality, and recommending purely on commission all violate the code and the suitability duty.

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