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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 takes the investment decisions on behalf of the client under the SEBI (Portfolio Managers) Regulations?

The portfolio manager decides independently in a discretionary PMS. The client grants this authority through the agreement, so no prior approval is needed for each trade. Under non-discretionary services, the manager needs the client's consent before every investment decision.

  1. AThe portfolio manager, independently, without needing the client's prior consent for each decisionCorrect
  2. BThe client, who approves every trade before execution
  3. CThe custodian, who selects the securities to be bought
  4. DThe stock exchange, which allocates securities to the portfolio

Explanation

In the discretionary service the portfolio manager exercises independent discretion over investment and management of the client's funds or securities, as agreed in the contract. In the non-discretionary service the manager needs the client's prior consent for each decision. Custodians only hold securities and exchanges do not allocate securities.

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