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

In a discretionary portfolio management service, which of the following is the key feature that distinguishes it from a non-discretionary service?

The distinguishing feature of a discretionary PMS is that the portfolio manager exercises independent discretion in investing the client's funds, without needing client approval for each transaction. In non-discretionary services, the client approves each decision before execution.

  1. AThe portfolio manager exercises independent discretion over investment decisions on the client's behalfCorrect
  2. BThe client must approve every individual trade before it is executed
  3. CThe portfolio manager can never invest in listed equity shares
  4. DThe funds are always pooled with other clients' funds in a single scheme

Explanation

In a discretionary PMS the manager takes investment decisions independently, as per the agreement, without seeking prior approval for each trade. Option 2 describes a non-discretionary service. Pooling of funds is not the defining feature, as client funds are held in separate individual accounts.

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