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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, who normally holds the legal title to the securities bought for the client, as per the typical operational arrangement under the SEBI (Portfolio Managers) Regulations?

The client holds the securities, in a separate demat account in the client's own name. The portfolio manager only operates on a mandate, because regulations require client assets to be kept segregated from the manager's own assets, protecting the client.

  1. AThe portfolio manager in its own proprietary name
  2. BThe client, with securities held in the client's own demat accountCorrect
  3. CThe custodian, in the custodian's own name
  4. DThe distributor who referred the client

Explanation

Under the PMS regulations, client funds and securities must be kept separate from the portfolio manager's own assets, and client securities are held in the client's name in a separate account. The portfolio manager has only a mandate to act. Holding them in the manager's own name would break the segregation rule.

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