Ch.6 · Fund Distribution and Channel Management

Distributor Commission Structure

50 practice questions on this topic

What is the TER limit for an equity scheme with AUM up to ₹500 crore as per SEBI regulations?

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EXPLANATION

As per SEBI's revised TER regulations (effective April 2019), the maximum TER for equity schemes with AUM up to ₹500 crore is 2.25%. The limit decreases as AUM increases — 2.00% for next ₹250 crore, 1.75% for next ₹1,250 crore, and so on, with the minimum floor at 1.05% for very large schemes.

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What is the SEBI mandate on disclosure of 'Total Commissions' paid to distributors by AMCs?

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EXPLANATION

SEBI mandates AMCs to disclose the total commission paid to each distributor in their annual reports. AMFI also publishes this data on its website. This transparency allows investors to see which distributors earn the most from which AMCs, helping them assess potential conflicts of interest in their distributor's recommendations.

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Which type of distributor typically has the largest share of mutual fund AUM in India?

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EXPLANATION

Banks are the largest distributors of mutual funds by AUM in India, leveraging their existing customer relationships and branch networks. Large banks like SBI, HDFC, and ICICI distribute significant AUM. However, IFAs are the largest in terms of number of distributors.

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What happens to exit load proceeds collected from redeeming investors?

A.They go to the AMC as additional income

B.They go to SEBI as regulatory fees

C.They are credited back to the scheme's corpus, benefiting remaining unit holders

D.They are distributed to distributors as additional commission

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What is an 'Investment Policy Statement' (IPS) in the context of financial planning for mutual fund clients?

A.A SEBI-mandated document that every investor must sign before investing

B.A document that formalises the investor's goals, risk tolerance, constraints, and investment strategy

C.The scheme's investment policy as stated in the SID

D.A document issued by the AMC confirming the investor's subscription

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What is the 'Mutual Fund Sahi Hai' campaign?

A.SEBI's campaign for regulating mutual fund distributors

B.AMFI's investor awareness campaign promoting mutual funds as a suitable investment option

C.An AMC-specific marketing campaign for equity mutual funds

D.A government initiative providing tax benefits for mutual fund investments

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What is BSE StAR MF platform?

A.BSE's equity trading platform for retail investors

B.BSE's mutual fund transaction platform allowing distributors to transact across multiple AMCs

C.A SEBI-mandated platform for direct plan investments only

D.BSE's platform for listing close-ended mutual fund schemes

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What is the concept of 'asset allocation' in mutual fund distribution?

A.The AMC's decision on which stocks to include in an equity fund

B.The distribution of an investor's money across different asset classes (equity, debt, gold, etc.) based on goals and risk tolerance

C.SEBI's mandate on how each scheme must allocate its assets

D.The division of commission among different distributors

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Which of the following is an example of mis-selling in mutual fund distribution?

A.Recommending a liquid fund to an investor with a 1-month investment horizon

B.Recommending a small cap fund to a senior citizen who cannot afford capital loss and needs funds in 1 year

C.Recommending a large cap fund to a 35-year-old investor with a 15-year goal

D.Recommending an ELSS fund to an investor seeking tax deduction under 80C

Q10

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What is the significance of the AMFI website (www.amfiindia.com) for investors and distributors?

A.It is the only platform where mutual fund units can be bought and sold

B.It publishes daily NAV data, industry AUM statistics, ARN search, and other regulatory disclosures

C.It provides guaranteed returns calculations for all mutual fund schemes

D.It is SEBI's official portal for mutual fund regulation

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