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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Regulatory, Governance and Ethical Aspects of Portfolio Managers

Under SEBI rules for portfolio managers, which of the following describes the required segregation for client assets?

Portfolio managers must keep client money in a separate client bank account and hold securities in client-wise demat accounts, distinct from their own assets. Pooling client funds with proprietary money or with other clients' assets is not permitted, regardless of the PMS type.

  1. AClient funds may be pooled with the portfolio manager's own funds for convenience
  2. BClient securities must be held in a separate client-wise demat account and funds in a separate client bank accountCorrect
  3. COnly funds need to be segregated; securities may be pooled
  4. DSegregation is required only for non-discretionary clients

Explanation

Portfolio managers must keep each client's funds and securities separately from their own and from other clients, with client-wise demat accounts and a separate bank account for client money. Pooling for convenience is prohibited, and the rule is not limited to securities or to non-discretionary services.

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