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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Manager

A client in a PMS with a non-discretionary arrangement asks what distinguishes it from a discretionary one. Which statement is correct?

In a non-discretionary PMS the portfolio manager needs the client's prior consent for each investment decision, whereas in a discretionary PMS the manager takes decisions independently on the client's behalf. The distinction concerns who has the authority to execute transactions.

  1. AThe portfolio manager needs the client's prior consent for each investment decisionCorrect
  2. BThe portfolio manager can invest at own discretion without informing the client
  3. CThe portfolio manager may act only in debt securities
  4. DThe client cannot withdraw funds during the tenure

Explanation

In non-discretionary PMS the manager advises and the client approves each transaction before execution, while the manager acts independently in discretionary PMS. The other options misdescribe the arrangement, since asset class and withdrawal are governed by the agreement, not by this distinction.

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