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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Operational Aspects of Investment Management

Which of the following is the primary purpose of a client's investment policy statement as used in the ongoing operational management of the portfolio?

An investment policy statement is the documented agreement setting out the client's objectives, risk tolerance, constraints and investment guidelines. It acts as the reference for portfolio decisions and periodic reviews. It does not guarantee returns, fix brokerage, or remove the need for regular review.

  1. ATo guarantee a minimum return to the client
  2. BTo serve as the documented agreement on objectives, constraints and guidelines against which portfolio decisions and reviews are madeCorrect
  3. CTo record the brokerage rates charged by the broker
  4. DTo replace the need for periodic portfolio review

Explanation

The investment policy statement documents the client's return objectives, risk tolerance, constraints and guidelines, and serves as the benchmark for decisions and periodic review. It guarantees no return and does not replace reviews.

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