Ch.6 · Distributor Commission Structure · easy
Which of the following is an example of mis-selling in mutual fund distribution?
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EXPLANATION
Recommending a small cap fund to a risk-averse senior citizen needing money in 1 year is a clear mis-selling example. Small cap funds are highly volatile, inappropriate for short horizons, and unsuitable for investors who cannot tolerate capital loss. The motive could be higher trail commission on equity vs. debt funds.
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