Under SEBI regulations, an AMC must conduct mandatory due diligence on a mutual fund distributor if the distributor satisfies which of the following quantitative criteria?

[ A ]Presence in more than 20 locations, OR AUM raised over Rs. 100 crore across the industry, OR commission received over Rs. 1 crore p.a. across industry, OR commission received over Rs. 50 lakhs from a single mutual fund[ CORRECT ]

[ B ]Operating from a single office location with total AUM under Rs. 10 lakhs

[ C ]Passing the NISM certification examination with a score of exactly 50%

[ D ]Opening an institutional demat account with a depository participant in Mumbai

Takeaway

Option A is correct: Presence in more than 20 locations, OR AUM raised over Rs. 100 crore across the industry, OR commission received over Rs. 1 crore p.a. across industry, OR commission received over Rs. 50 lakhs from a single mutual fund

Derivation

SEBI circulars mandate AMCs to implement a structured due diligence process for large distributors qualifying under any of four criteria: (1) multiple point presence (more than 20 locations), (2) AUM raised over Rs. 100 crore across the industry in non-institutional categories, (3) gross commission over Rs. 1 crore p.a. across the industry, or (4) gross commission over Rs. 50 lakhs from a single AMC. This tests regulatory risk management over distribution channels. The common error is confusing qualifying scale thresholds with general registration prerequisites.

Why the others fail

B — Operating from a single office location with total AUM under Rs. 10 lakhs

A single office with Rs. 10 lakh AUM falls far below the regulatory threshold triggering mandatory AMC institutional due diligence.

C — Passing the NISM certification examination with a score of exactly 50%

Scoring 50% on the NISM exam is the standard passing benchmark for all MFDs, not a criterion for enhanced AMC due diligence.

D — Opening an institutional demat account with a depository participant in Mumbai

Opening a demat account is an operational transaction step and has no bearing on distributor due diligence thresholds.