Good Practices

1Approaching clients the right way

• AIFs may be offered only by private placement. No public advertising, mass mailing, social media campaigns or public invitations.
• Use only materials approved by the AIF (PPM, presentations, factsheets), and do not alter them.
• Approach only investors who may be eligible (meeting the minimum investment and any accreditation needed) and for whom the product may be suitable.
• Never use exaggerated or misleading claims, and never promise or guarantee returns.

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2Suitability and disclosure

• Before recommending an AIF, understand the client's wealth, income, liquidity needs, time horizon, risk appetite, experience and existing alternatives exposure.
• Explain the strategy, risks, leverage, lock-in, notice periods, fees (management and performance, hurdle, high-water mark) and tax position, and make sure the client reads the PPM.
• Disclose your distribution fee (trail only for Category III) and that a direct plan is available.
• Disclose any conflict of interest, such as a relationship with the sponsor or manager, or higher commission from one fund than another.
• Recommend schemes for their merit and fit, never because of higher commission.

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3Documentation and records

• Record the suitability assessment, what was explained, and the client's acknowledgement of risks.
• Keep copies of documents provided and communications.
• Ensure application forms are complete and signed by the client. Never alter a client's form.
• Maintain confidentiality of client information.

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4Conduct rules

Do:

• hold the required NISM certification (XIX-B for Category III; XIX-A covers Category I and II) and keep it current;
• have a written agreement with the AIF or its manager;
• keep your own and client money separate: clients pay the AIF directly;
• respond promptly to client queries and complaints, and escalate when needed.

Don't:

• offer rebates, gifts or inducements to win clients;
• churn clients between funds for commission;
• downplay the risks in the PPM;
• appoint sub-distributors without the AIF's approval;
• give legal or tax advice you are not qualified to give.

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5KYC and anti-money laundering

• The AIF is responsible for KYC, but distributors help collect documents, including FATCA/CRS declarations for tax residency.
• Watch for red flags: unexplained sources of money, reluctance to give information, third-party payments, or requests to bypass procedures. Report suspicious activity through the proper channels.
• Payments must come from the investor's own bank account.

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6Responsible investing and continuing learning

• Many investors want to know how funds handle ESG (environmental, social and governance) risks. Some managers follow responsible-investment frameworks such as the UN Principles for Responsible Investment (PRI).
• Rules change often: SEBI amends AIF rules frequently. Distributors should keep up to date through circulars, industry bodies and training, and renew their certification on time.

Remember

• Private placement only; approved materials; no promised returns.
• Suitability, full disclosure (fees, direct plan, conflicts), documentation.
• No rebates, no churning, no sub-distributors without approval.

Practise this concept (2 questions)

7Pitchbooks, client support, confidentiality and insurance

• Pitchbooks (presentations about the fund) must be consistent with the PPM, show performance fairly (net of fees, over suitable periods, against suitable benchmarks), state the risks clearly and avoid any promise of returns. Use only the version approved by the manager.
• After investment, good distributors keep supporting clients: sharing NAV statements and reports, explaining performance and changes in the fund, helping with redemption requests and notice periods, tax statements and complaints, and reviewing whether the fund is still suitable as the client's circumstances change.
• Confidentiality: client information and non-public information about the fund (such as portfolio holdings shared in confidence) must not be misused or disclosed, except as the law requires.
• Code of conduct: act honestly, in the client's interest, with due skill and care, and comply with SEBI rules and the AIF's policies.
• Professional indemnity insurance protects a distributor against claims from clients for errors or omissions. It does not protect clients against investment losses.

Remember

• Pitchbook must match the PPM; no promised returns.
• Keep reviewing suitability after the client invests.
• Professional indemnity cover is for the distributor's errors, not market losses.

Practise this concept (7 questions)