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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Operational Aspects of Investment Management

Which of the following best describes the purpose of a custodian in the operational framework of investment management for institutional portfolios?

A custodian safekeeps securities and handles settlement of trades and collection of corporate action benefits such as dividends and interest for the client. It does not make investment decisions, rate securities or list them on an exchange.

  1. AIt safekeeps securities and handles settlement and corporate action benefits for the clientCorrect
  2. BIt sets the investment strategy for the portfolio
  3. CIt rates the credit quality of the securities
  4. DIt lists securities on the stock exchange

Explanation

A custodian holds the client's securities and cash safely, settles trades, and collects dividends, interest and other corporate action entitlements. Investment decisions rest with the portfolio manager, ratings come from rating agencies, and listing is an exchange function.

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