Mis-selling and its cost
What not to do, and why it hurts
Everything in this module points one way: do right by the investor. Mis-selling is the shortcut that looks like a win and ends as a loss, for them and for you.
This lesson teaches a concept for the NISM Series V-A exam. It is education, not financial advice.
- 1
Mis-selling is recommending something unsuitable, usually to earn more, and it is a serious breach.
- 2
Churning, switching an investor needlessly to generate commission, is a form of mis-selling.
- 3
Promising guaranteed returns or hiding risk is mis-selling, even if the investor seems happy at first.
- 4
The cost is real: lost trust, complaints, and a suspended or cancelled ARN.
Switching a client between funds every few months to earn fresh commission is churning, and it can end your ARN.
A distributor sells an unsuitable fund for the fat commission. The money lands today.
Mis-selling pays nowThe investor loses money they could not afford to lose, and the trust is gone.
The investor pays laterA complaint follows, and with it the risk of a suspended or cancelled ARN.
So does the distributorMis-selling pays once and costs twice: the investor's money, then your licence.
Practice
🔥 0 streakReal exam format. Answer by voice, tap, or press 1 to 4. No negative marking, so always attempt.
Mis-selling is:
Churning means:
Promising a fund's future returns is:
A consequence of mis-selling can be:
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Education for the exam, not financial advice. Answers can be wrong, so confirm figures against the workbook.