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

Under the SEBI PMS Regulations, how must a portfolio manager keep client funds and securities in relation to its own assets?

A portfolio manager must hold each client's funds and securities in separate client-wise accounts, kept distinct from the manager's own money and securities. Pooling with its own funds or commingling clients without individual records violates SEBI's segregation requirements designed to protect investors.

  1. AThey may be pooled with the manager's own funds for efficiency
  2. BThey must be kept in separate accounts for each client, distinct from the manager's own accountsCorrect
  3. CThey may be held in the distributor's account
  4. DThey may be commingled across clients with no individual records

Explanation

Portfolio managers must maintain separate client-wise bank and demat accounts and keep them distinct from their own. Pooling or commingling without client-wise records breaches the segregation rule. Distributors are not custodians of PMS assets.

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