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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 role of a custodian in the operations of investment management for institutional or portfolio clients?

A custodian safeguards the client's securities and handles settlement, corporate action benefits and reporting on the client's behalf. It does not make investment decisions, rate issuers or set exchange margins; those tasks belong to managers, rating agencies and clearing bodies.

  1. AIt safeguards the securities and handles settlement and related servicing on behalf of the clientCorrect
  2. BIt decides which securities the client should buy
  3. CIt rates the credit quality of issuers
  4. DIt sets margin rates for exchange trading

Explanation

A custodian holds assets for safekeeping and handles settlement, corporate action collection and reporting. Investment decisions rest with the manager or adviser, ratings with rating agencies, and margins with exchanges and clearing corporations.

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