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

In a discretionary PMS, which party normally holds the client's securities and cash in a separate account in the client's own name, as per the operational set-up required of a portfolio manager?

The custodian holds the client's securities and funds. PMS regulations require client assets to be segregated and held in the client's name, so a custodian provides safekeeping and settlement support rather than the manager, distributor or exchange.

  1. AThe custodian appointed for the client's assetsCorrect
  2. BThe portfolio manager in its own pooled account
  3. CThe distributor who sourced the client
  4. DThe stock exchange where trades are executed

Explanation

Portfolio managers must keep client funds and securities segregated from their own and from other clients. Assets are held in the client's name, with a custodian providing safekeeping and settlement support. Pooling them in the manager's or distributor's account would breach segregation norms.

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