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

In a discretionary portfolio management service, who takes the investment decisions on behalf of the client?

In discretionary PMS the portfolio manager takes the investment decisions on the client's behalf at their own discretion, within the portfolio management agreement. The client does not approve each trade, unlike in non-discretionary services where client consent is required for every decision.

  1. AThe client, who approves every trade before execution
  2. BThe portfolio manager, at their sole discretion, as per the agreementCorrect
  3. CThe custodian, based on the client's instructions
  4. DThe distributor, based on market views

Explanation

In discretionary PMS the portfolio manager exercises independent discretion over investment choices in the client's name, within the terms of the agreement. In non-discretionary PMS the client's prior consent is needed for each trade. Custodians only hold securities and distributors do not decide investments.

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