NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers
Which of the following best describes the role of a custodian in a PMS arrangement?
A custodian holds the client's securities and funds in safe custody and handles settlement of transactions, giving an independent layer of safekeeping. It does not make investment decisions, market the service, or fix fees, which are handled by the portfolio manager and agreement.
- ADeciding which securities to buy for the client
- BHolding the client's securities and funds in safe custody and settling transactionsCorrect
- CMarketing the PMS strategy to investors
- DSetting the performance fee for the portfolio manager
Explanation
The custodian safeguards the client's securities and assists in settlement, providing independent record-keeping. Investment decisions belong to the portfolio manager, marketing to distributors, and fees are set by the agreement between the manager and the client.
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