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NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Operational Aspects of Portfolio Managers

PMS Investor Grievance Redressal and Termination of Services

Updated 11 October 2026 · Fact-checked

A PMS client with a complaint first approaches the portfolio manager, then escalates through SEBI's SCORES platform and, if still unsatisfied, to Online Dispute Resolution (ODR). Termination follows the notice and settlement terms in the portfolio management agreement, within SEBI limits on exit load. Learn the order of steps and the limits.

Understand Investor Grievance Redressal and Termination of Services

Every PMS client has the right to complain and the right to leave. The SEBI (Portfolio Managers) Regulations, 2020 require a portfolio manager to have a system to handle investor grievances and to deal with them promptly. The portfolio manager must also name a compliance officer, who is responsible for monitoring compliance and for the grievance process.

Complaints move up in stages. Stage one is the portfolio manager itself. If the client is not satisfied, stage two is SCORES, SEBI's web-based complaint redress system. SEBI forwards the complaint to the portfolio manager, which must respond with an action taken report. If the issue is still unresolved, stage three is ODR (Online Dispute Resolution), where a SEBI-recognised institution handles conciliation and, if needed, arbitration. Think of it as: firm, then SCORES, then ODR.

Audit supports good conduct. A portfolio manager must have its accounts audited every year by an independent chartered accountant, and it must keep records of client funds, securities and complaints. SEBI can also inspect the books. The client may ask for the same information in periodic reports.

Termination is a contract matter first. The portfolio management agreement sets out how a client can end the relationship: the notice period, how fees up to the exit date are settled, and how funds and securities are returned. Under the 2020 Regulations, any exit load is capped and falls to nil after three years. The portfolio manager cannot hold the client's assets back after a valid termination, except for dues payable under the agreement.

Key formulas to remember

Grievance escalation order
Portfolio manager → SCORES → ODR
Know the sequence. Exam traps reverse it or let the client skip the firm's own process.
Exit load cap (first three years)
Year 1: up to 3% | Year 2: up to 2% | Year 3: up to 1% | After year 3: nil
These are maximums, applied to the amount withdrawn. Check the exact wording in your NISM workbook.
Exit load amount
Exit load (₹) = Amount withdrawn × applicable exit load %
Use the rate for the year of withdrawal, not the rate for the year of investment.
Audit rule
Annual audit by an independent chartered accountant
Do not confuse this with SEBI inspection, which is a separate power of the regulator.

How to solve Investor Grievance Redressal and Termination of Services questions

Most questions on this topic test sequence, limits or who does what. Use the same method each time.

  1. 1Identify whether the question is about complaints, audit or termination.
  2. 2For a complaint question, place the stage: portfolio manager, SCORES or ODR. Check which stage the client has already used.
  3. 3For an audit question, note who must audit (an independent chartered accountant) and how often (annually), and keep it separate from SEBI inspection.
  4. 4For a termination question, look first at what the portfolio management agreement says on notice and settlement.
  5. 5For an exit load question, find the year of withdrawal, pick the cap for that year and apply it to the amount withdrawn.
  6. 6Eliminate options with absolute words such as always, never or immediately if they ignore the agreement or the regulations.
  7. 7Re-read the question for words like maximum, minimum or can, and choose the matching option.

Quickest way: Three-line recall for grievance and exit questions

When to use it: Use it when time is short and the question asks about order, limits or the client's rights.

  1. Complaint order: firm, SCORES, ODR.
  2. Exit load: 3, 2, 1, then nil, applied to the amount withdrawn.
  3. Termination: follow the agreement, settle dues, return assets.

Common mistakes in Investor Grievance Redressal and Termination of Services

  • Saying the client can go straight to ODR without using the firm or SCORES.

    Students remember ODR as the newest and strongest channel.

    Fix: Remember the order: firm first, then SCORES, then ODR.

  • Treating the exit load caps as fixed charges.

    The numbers 3, 2 and 1 look like standard rates.

    Fix: They are maximums. The agreement and disclosure document state the actual load.

  • Applying exit load to the whole portfolio value on a partial withdrawal.

    Students ignore the base on which the load is calculated.

    Fix: Apply the percentage only to the amount withdrawn.

  • Confusing the annual audit with SEBI inspection.

    Both check records and compliance.

    Fix: The annual audit is done by an independent chartered accountant. Inspection is done by SEBI.

  • Assuming the portfolio manager can keep client assets after termination as it likes.

    Students think the firm decides when settlement is complete.

    Fix: After valid termination the firm must settle the account and return funds and securities, deducting only dues allowed under the agreement.

Worked examples

Example 1

A PMS client is unhappy with how a complaint was handled by the portfolio manager. Which is the correct next step in the escalation order? (A) File on SCORES (B) Approach ODR directly (C) Wait for the annual audit (D) Terminate without notice

Show the solution
  1. The complaint has already gone to the portfolio manager, which is stage one.
  2. The next stage is SCORES, where SEBI forwards the complaint to the firm for an action taken report.
  3. ODR comes after SCORES, so (B) skips a stage.
  4. An audit is not a complaint channel, and termination without notice may breach the agreement.

Answer: (A) File on SCORES

Example 2

A client of a PMS makes a partial withdrawal of ₹20,00,000 in the second year of investment. The agreement charges the maximum exit load permitted. What is the exit load?

Show the solution
  1. Second-year cap is 2%.
  2. Base is the amount withdrawn: ₹20,00,000.
  3. Exit load = 20,00,000 × 2% = ₹40,000.

Answer: ₹40,000

Exam tips

  • Learn the escalation order cold: firm, SCORES, ODR. It is the most likely question.
  • Memorise the exit load pattern 3-2-1-nil and the base it applies to.
  • Watch for options that give SEBI or the portfolio manager powers the regulations do not mention.
  • Where the workbook gives a specific number of days for complaint handling, learn that exact figure and ignore figures from other sources.
  • Read the stem for who is acting: client, portfolio manager, auditor or SEBI.

Practice questions from Operational Aspects of Portfolio Managers

Investor Grievance Redressal and Termination of Services in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Investor Grievance Redressal and Termination of Services: frequently asked questions

What is SCORES in PMS grievance redressal?

SCORES is SEBI's online complaint redress system. A client lodges a complaint against a portfolio manager, SEBI forwards it, and the firm must respond with an action taken report.

What is ODR and when is it used?

ODR stands for Online Dispute Resolution. A client uses it when a complaint is still unresolved after going through the firm and SCORES. It offers conciliation and, if needed, arbitration through a SEBI-recognised institution.

Can I terminate a PMS agreement at any time?

A client can end the relationship as the portfolio management agreement allows, usually by giving notice. The firm then settles dues and returns funds and securities, and any exit load must stay within SEBI's limits.

Is exit load charged after three years in PMS?

Under the 2020 Regulations the exit load steps down over the first three years and is not charged after that. Confirm the exact caps in your NISM workbook before the exam.