Study guide
5.5 AMFI Code of Conduct for Intermediaries
NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam
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1 Chapter 1: Introduction & Exam Overview
1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan
2 Chapter 2: Investment Landscape
2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help
3 Chapter 3: Concept and Role of a Mutual Fund
3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India
4 Chapter 4: Legal Structure of Mutual Funds in India
4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI
5 Chapter 5: Legal and Regulatory Framework
5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries
6 Chapter 6: Scheme Related Information
6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures
7 Chapter 7: Fund Distribution and Channel Management Practices
7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor
8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units
8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio
9 Chapter 9: Taxation
9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST
10 Chapter 10: Investor Services
10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times
11 Chapter 11: Risk, Return and Performance of Funds
11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk
12 Chapter 12: Mutual Fund Scheme Performance
12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure
13 Chapter 13: Mutual Fund Scheme Selection
13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts
5.5 AMFI Code of Conduct for Intermediaries
Key Takeaways Explain This Topic AI
Rebating any part of commission or offering gifts to induce investment is expressly prohibited.
A distributor must disclose all commission received, in both regular and direct plans, for competing schemes recommended.
Recommendations must be based on the investor's need, risk profile and horizon rather than on commission.
A distributor must not make misleading or exaggerated claims, or offer guarantees the scheme does not carry.
Breach of the Code can lead to suspension or cancellation of the ARN by AMFI.
Last updated: August 2026
Status of the Code
The AMFI Code of Conduct for Intermediaries of Mutual Funds binds every ARN holder. It is an AMFI instrument, appended to the NISM curriculum, and it is enforced through the ARN: AMFI can suspend or cancel registration for breach. A separate AMFI Code of Ethics (ACE) applies to AMCs and trustees; do not confuse the two.
Suitability and the Investor's Interest
The foundational obligation is that recommendations serve the investor.
Recommend on the basis of need, risk profile and horizon , not on the commission a scheme pays.
Understand the product before recommending it — a distributor who cannot explain what a scheme invests in should not be selling it.
Do not churn. Switching an investor between schemes to generate fresh commission, without a genuine change in circumstances or scheme merit, is an express breach.
Take into account the investor's existing portfolio rather than treating every recommendation in isolation.
Disclosure of Commission
The Code requires full disclosure of all commissions , in whatever form, received from any AMC in respect of schemes being recommended. The obligation has a specific and often-missed dimension:
When a distributor recommends a scheme from among competing schemes, the commission receivable from each of those competing schemes must be disclosed, so the investor can see whether the recommendation aligns with the distributor's remuneration.
Disclosure covers both regular and direct plans , so that the investor knows a lower-cost route exists. Failing to mention that a direct plan is available is a disclosure failure even when everything said about the scheme is accurate.
The Prohibition on Rebating
The Code prohibits rebating — passing back any part of the commission to the investor, in cash or in kind, as an inducement to invest, and equally prohibits offering gifts or other inducements.
The rule looks paternalistic until its logic is seen: rebating turns distribution into a price competition on commission share rather than competition on advice quality. The distributor prepared to rebate most wins the business, the distributor who advises best does not, and investors are then steered into whatever product carries the largest commission to rebate from. Prohibiting it is what makes advice, rather than kickback, the basis of competition.
Honest Representation
No misleading or exaggerated claims about performance, safety or returns.
No guarantees of return, capital protection or assured income unless the scheme genuinely carries such a feature and it is disclosed in the scheme documents.
Past performance must be presented in the prescribed manner , with the standard caution that it may or may not be sustained.
Do not disparage other distributors, AMCs or schemes; compete on merit.
Do not use unauthorised material. Communications about a scheme must be consistent with the scheme documents and the advertising code.
Process and Documentation Obligations
Complete KYC and other documentation correctly, and never submit forms signed in blank.
Deposit collected instruments promptly ; a distributor must not delay, and must never accept cash beyond what is permitted.
Do not accept a power of attorney to transact on behalf of an investor in a way that removes the investor's decision.
Maintain confidentiality of investor information; it may not be used for any purpose other than servicing the investor.
Provide the EUIN of the individual giving the advice, so that advice is traceable to a person.
Assist in grievance redress rather than obstructing it.
Practices Expressly Prohibited
- Practice Why it breaches the Code
- Rebating commission or offering gifts Substitutes inducement for advice
- Guaranteeing returns Misrepresents the product's nature
- Churning to generate commission Costs the investor, benefits the distributor
- Splitting an application to inflate commission Circumvents remuneration rules
- Submitting blank signed forms Removes the investor's informed consent
- Disclosing investor information Breaches confidentiality
- Selling without disclosing direct plans Withholds a materially cheaper alternative
- Advising outside one's own certification Operating without the required qualification
- Consequences of Breach
AMFI administers the Code through the ARN and may suspend or cancel it. Beyond that, an AMC conducting due diligence may restrict or terminate empanelment, and conduct amounting to fraud or market misconduct remains within SEBI's reach under general securities law.
The practical defence against a conduct allegation is not a persuasive account given years later. It is contemporaneous records: a dated risk profile, a written recommendation basis, retained communications, and a commission disclosure the investor acknowledged. A distributor who keeps those has evidence; a distributor who does not has only a recollection.