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

Under the SEBI PMS framework, which statement about the client's funds and securities is correct for a discretionary portfolio manager's operations?

Client funds and securities must be kept in separate client-wise accounts, distinct from the portfolio manager's own money. Pooling with proprietary funds or using client assets for the manager's trades is not permitted, because segregation protects each client's ownership and enables proper reporting.

  1. AClient funds may be pooled with the portfolio manager's own funds for convenience
  2. BClient funds and securities must be kept in separate client-wise accounts, distinct from the portfolio manager's ownCorrect
  3. CSecurities may be registered in the portfolio manager's name as beneficial owner
  4. DClient money may be used to fund the portfolio manager's proprietary trades temporarily

Explanation

Portfolio managers must maintain segregated, client-wise accounts for funds and securities and cannot mix them with their own. Pooling, registering in own name or using client money for proprietary trades violates this principle.

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