NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Operational Aspects of Portfolio Managers
Which of the following best describes the role of a custodian in a PMS arrangement?
A custodian safeguards client securities and handles settlement-related work for the portfolio manager. It does not make investment decisions, guarantee returns or set fees, which makes it a key operational and safekeeping function in PMS.
- ASafekeeping client securities and handling settlement-related activities on behalf of the portfolio managerCorrect
- BDeciding which stocks the portfolio manager should buy
- CGuaranteeing minimum returns to the client
- DApproving the fee structure of the portfolio manager
Explanation
A custodian holds securities in safekeeping and carries out settlement-related and corporate action servicing for the portfolio. It does not take investment decisions, guarantee returns or approve fees.
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