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 the operations of a portfolio manager?
A custodian safekeeps client securities and handles settlement and related servicing independently of the portfolio manager. It does not make investment decisions or guarantee returns, and its independence provides an operational check on the portfolio manager.
- ADeciding which securities to buy for each client
- BSafekeeping client securities and handling settlement-related activities independently of the portfolio managerCorrect
- CGuaranteeing minimum returns to clients
- DCollecting the PMS fee from the client on behalf of the distributor
Explanation
A custodian is an independent entity that holds securities, handles settlement and corporate action benefits, and gives reports. It does not take investment decisions or guarantee returns. Its independence adds a check on the portfolio manager's operations.
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