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nism-series-va-amfi-code-of-conduct-rebating-prohibition[ MUTUAL FUND DISTRIBUTORS ]

Under the AMFI Code of Conduct for Mutual Fund Distributors, can a licensed distributor rebate or pass back a portion of their trail commission to an investor in cash or kind?

[ A ]Yes, distributors are legally required to rebate 50% of their commission.
[ B ]Yes, if the rebate is paid on a national public holiday.
[ C ]No, commission rebating or passing back payouts in cash, gifts, or kind to investors is strictly prohibited and can lead to permanent ARN suspension and debarment.[ CORRECT ]
[ D ]Yes, for institutional corporate clients only.
Takeaway

Option C is correct: No, commission rebating or passing back payouts in cash, gifts, or kind to investors is strictly prohibited and can lead to permanent ARN suspension and debarment.

Derivation
The AMFI Code of Conduct treats commission rebating as a fundamental breach of distributor integrity, not a customer-friendly discount. If distributors could legally hand back a slice of trail commission, competition would shift from advice quality to who rebates the most, encouraging distributors to push high-commission products regardless of investor suitability, and eroding the professional advisory relationship into a price war. The consequence for violation is severe and specific: cancellation of the distributor's AMFI Registration Number (ARN) and forfeiture of trail commission, effectively ending their ability to legally distribute mutual funds. This rule applies uniformly across retail, HNI, and institutional relationships with no carve-outs for holidays or client category.
Why the others fail
A — Yes, distributors are legally required to rebate 50% of their commission.
AMFI bans commission sharing outright to preserve advisory integrity and prevent destructive price wars, not the reverse; rebating is never a legal requirement.
B — Yes, if the rebate is paid on a national public holiday.
There is no exemption tied to public holidays; the prohibition on rebating applies uniformly regardless of the calendar date on which it occurs.
D — Yes, for institutional corporate clients only.
The rebating prohibition applies universally across retail, HNI, and institutional or corporate client relationships, with no carve-out for any client category.