NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers
A discretionary portfolio manager invests a client's money. Which statement best describes the manager's authority under a discretionary PMS?
In a discretionary PMS the portfolio manager independently decides what to buy or sell and when, on the client's behalf, within the terms of the portfolio management agreement. Trade-by-trade client consent is not needed, unlike non-discretionary services.
- AThe manager must obtain the client's approval before every trade
- BThe manager can only invest in debt instruments
- CThe manager can exercise independent judgment on investment decisions for the client's portfolio, as per the agreementCorrect
- DThe manager can use client funds for proprietary trading
Explanation
In discretionary PMS, the manager decides choice and timing of investments on the client's behalf within the agreement. Prior approval for each trade is a feature of non-discretionary PMS. Using client funds for own trading is prohibited, and there is no restriction to debt.
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More Role of Portfolio Managers questions
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