NISM Exam Preparation

1. Dr. Ankit Jain 1

2.  Individual Distributor are known as Independent Financial Advisors
(IFA)
 Institutional distributor can be distribution houses, banks or NBFC.
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3.  Online Mutual Fund Distribution
 Distributors through Stock exchange.
 Platform to purchase and sale of mutual fund in NSE is NEAT and in BSE
is BSE Stars.
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4.  AMC appoint mutual fund distributors by entering into distribution
agreements.
 Appointment/Termination of distributor is the discretion of the AMC.
 AMC does not require SEBI approval for appointment or termination.
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5.  Individual distributors and employees or representative of institutional
distributors have to clear the NISM Mutual Fund Distributor Certificate
Examination.
 Need to obtain the AMFI registration number (ARN) before they can seek
register with AMC.
 Institutions in the distribution business also need to get registered with
AMFI.
 The certificate is valid for 3 years, after which it has to be revalidated by
attending a Continuing Professional Education (CPE) programme or
reappear in NISM exam.
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6. There are two types of commission:
 Initial or Upfront Commission
 Trail Commission
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7.  Initial or Upfront Commission was actually paid by AMC on the amount
mobilized by the distributor.
 Earlier it is collected in the form of entry load.
 Since entry load is nil now. Upfront commission to distributor will be paid by
the investors directly to the distributor, based on various factors including the
service rendered by distributors.
 Currently, mutual funds are paying distributors upfront fees as high as 1.5-2 per
cent, against the 1 per cent recommended by AMFI.
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8.  It is paid on the market value of investors investment.
 It is paid till investors redeem their units.
 The trail commission is normally paid by the AMC on a quarterly basis.
 For e.g an investors invest Rs 4 lakh in 2008 and redeems in 2018.
 In this case trail commission is paid every year till 2018.
 No commission for their own investment.
 Generally the rate of trail commission is 0.5%.
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