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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Regulatory, Governance and Ethical Aspects of Portfolio Managers

Which of the following is a requirement for a portfolio manager regarding the investment approach offered to clients?

A portfolio manager must describe every investment approach it offers, including its philosophy and risks, in the disclosure document given to clients. It can offer several approaches, and the approaches are set by the manager rather than the distributor.

  1. AAn investment approach need not be disclosed in the disclosure document
  2. BThe portfolio manager must offer only one investment approach at any time
  3. CThe portfolio manager must disclose each investment approach, including its philosophy and risk, in the disclosure documentCorrect
  4. DInvestment approaches are decided by the distributor

Explanation

The disclosure document must describe each investment approach offered, covering its philosophy, nature of securities and risk factors. Portfolio managers may offer multiple approaches, and the manager, not the distributor, designs them. Omitting them would defeat the purpose of disclosure.

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