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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, which of the following is a feature of a discretionary portfolio manager's role?

A discretionary portfolio manager takes investment decisions independently on the client's behalf, within the terms of the written agreement and the investment approach. Trade-by-trade client instruction is the feature of non-discretionary services, not discretionary ones.

  1. AThe manager can act only after receiving the client's instruction for each trade
  2. BThe manager exercises independent investment decisions for the client's funds in accordance with the agreementCorrect
  3. CThe manager must invest only in mutual fund units
  4. DThe manager cannot charge a performance-linked fee under any circumstance

Explanation

Discretionary services allow the manager to take investment decisions independently on the client's behalf, within the agreement. Trade-by-trade instruction describes non-discretionary service. There is no mutual-fund-only restriction, and performance-linked fees are permitted on a disclosed basis.

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