NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers
Which fee structure is NOT permitted to be charged by a portfolio manager to PMS clients under SEBI norms?
A fee based on brokerage turnover generated is not permitted. SEBI allows only fixed, return-based or hybrid management fees, because a turnover-linked fee would encourage excessive trading and create a conflict of interest against the client.
- AFixed fee
- BReturn-based (performance) fee
- CHybrid of fixed and return-based fee
- DFee based on brokerage turnover generatedCorrect
Explanation
SEBI permits fixed, return-based or a hybrid of the two as the portfolio management fee. Linking fees to brokerage turnover would create a conflict of interest and encourage churning, so it is not an allowed structure.
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