NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Manager
Which of the following best describes a portfolio manager's obligation regarding client funds and securities under the SEBI regulations?
A portfolio manager must keep client funds and securities separate from its own funds and securities, and maintain separate accounts for each client. Mixing, pledging for its own needs or lending client assets to others breaches the regulations and fiduciary duty.
- AClient funds may be pooled with the manager's own funds for efficiency
- BClient funds and securities must be kept separate from the portfolio manager's own funds and securitiesCorrect
- CClient securities may be pledged freely to raise the manager's working capital
- DClient funds can be lent to other clients with the manager's discretion
Explanation
Regulations require segregation of each client's funds and securities and that they be kept distinct from the manager's own. Pooling, pledging for own needs, or lending between clients violates this and fiduciary duty.
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