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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 Portfolio Managers Regulations, which of the following is a permitted fee structure that a portfolio manager may charge a client?

A portfolio manager may charge a fixed fee, a return-based fee, or a combination of both, as set out in the client agreement. Entry loads are not permitted, and linking fees to brokerage would encourage excessive trading.

  1. AA fixed fee, a return-based fee, or a combination of bothCorrect
  2. BOnly a fixed fee, with no return-based fee allowed
  3. COnly an entry load charged upfront to the client
  4. DA fee linked to the brokerage generated by trades

Explanation

Portfolio managers may charge fixed fee, return-based (performance) fee, or a hybrid of both, as agreed in the contract. Entry loads are not permitted for PMS and fees linked to brokerage encourage churning. Return-based fees are therefore allowed, contrary to the second option.

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