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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 operational feature that distinguishes it from a non-discretionary service?

A discretionary PMS lets the portfolio manager take investment decisions for the client without seeking approval for each transaction, within the agreed mandate. Non-discretionary services need client consent for each decision, which is the key operational difference between the two.

  1. AThe portfolio manager takes investment decisions on the client's behalf without needing prior approval for each transactionCorrect
  2. BThe client must approve every individual trade before execution
  3. CThe portfolio manager can only invest in mutual fund units
  4. DThe portfolio manager is not allowed to charge any fee

Explanation

In the discretionary service the manager exercises independent discretion over investment and management of the client's funds as per the agreement. In the non-discretionary service, the manager acts only with the client's prior consent for each decision, so the option on approving each trade describes the wrong service.

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