NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers
Which of the following is a correct statement about the portfolio manager's relationship with PMS clients under SEBI rules?
Client funds and securities must be kept separate from the portfolio manager's own funds, with client-wise accounting. SEBI prohibits assured returns and does not permit pooling clients' assets, so segregation protects the investor's holdings.
- AThe portfolio manager may guarantee a minimum return to the client in the agreement
- BClient funds and securities must be kept separate from the portfolio manager's own fundsCorrect
- CThe manager may pool all clients' securities in one account for convenience
- DFees may be linked to returns without any disclosed hurdle or high-water mark
Explanation
SEBI requires segregation of each client's funds and securities from the manager's own and maintains client-wise accounts. Guaranteeing returns is prohibited, and pooling client assets is not allowed. Return-based fees need to follow disclosed norms.
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