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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Regulatory, Governance and Ethical Aspects of Portfolio Managers

A portfolio manager's discretionary PMS invests in a client's account. Which of the following is a regulatory requirement regarding the client's funds and securities?

Client funds and securities must be kept segregated from the portfolio manager's own funds and securities, with separate bank and demat accounts maintained for each client. Mixing or pooling client assets, or holding them in the manager's name, is not permitted under the PMS regulations.

  1. AFunds may be pooled with the portfolio manager's own funds for efficiency
  2. BClient funds and securities must be kept separate from the portfolio manager's own funds and securities, with separate bank and demat accounts for clientsCorrect
  3. CClient securities may be held in the portfolio manager's name for quicker settlement
  4. DFunds of different clients must be pooled in one common demat account

Explanation

Regulations require segregation: separate client accounts, and the portfolio manager's own money and securities must not be mixed with clients'. Pooling or holding in the manager's name is not allowed; each client's assets must be identifiable.

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