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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 management service?

A custodian holds and safeguards the client's securities in a PMS and supports settlement, corporate action and record-keeping activities. It does not take investment decisions, which remain with the portfolio manager, nor does it act as distributor.

  1. AIt takes investment decisions on behalf of the client
  2. BIt holds and safeguards the client's securities and handles related settlement and record-keepingCorrect
  3. CIt acts as the distributor and earns trail commission
  4. DIt certifies the portfolio manager's net worth to SEBI

Explanation

Portfolio managers must appoint a custodian to keep securities of clients, and the custodian handles safekeeping, settlement-related and corporate action records. Investment decisions are made by the portfolio manager, not the custodian.

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