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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 under SEBI rules regarding a portfolio manager's investment of clients' funds in the securities of its own associates?

Portfolio managers may invest client funds in associate or group company securities only within limits prescribed by SEBI. The restriction exists to curb conflicts of interest, so such investment is neither unlimited nor dependent merely on client consent trade by trade.

  1. AIt is freely permitted without any limit
  2. BIt is permitted only with the client's written consent for each trade
  3. CIt is subject to prescribed limits on investing in group or associate company securitiesCorrect
  4. DIt is permitted only in unlisted securities of associates

Explanation

SEBI regulations restrict portfolio managers from investing client funds in securities of associates or group companies beyond prescribed limits, to manage conflict of interest. It is not free of limits and is not restricted to unlisted securities.

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