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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)

In a PMS, when the portfolio manager sells securities within the client's account, which tax-related reporting is the portfolio manager typically expected to provide to the client?

The portfolio manager typically gives the client periodic reports and a capital gains and losses statement, so the client can compute tax liability and file the return. Guaranteeing post-tax returns is not permitted, and verbal updates alone would not meet reporting needs.

  1. AA statement of capital gains and losses and a periodic report to help the client file the tax returnCorrect
  2. BOnly a verbal update on market conditions
  3. CA guarantee of post-tax returns
  4. DNothing, since the client's custodian has no reporting obligation

Explanation

Portfolio managers provide clients with periodic reports and transaction details, and commonly a realised capital gains/loss statement, so the client can compute tax and file returns. They cannot guarantee returns, and reporting is a core operational service, not optional verbal updates.

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