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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers

Which of the following statements about a portfolio manager's fee structure under SEBI rules is correct?

Portfolio managers may charge a fixed fee, a return-based performance fee, or a hybrid of both, as agreed with the client in the PMS agreement. The structure must be disclosed upfront in the Disclosure Document. SEBI does not restrict fees to only one form.

  1. AFees may be a fixed fee, a performance-based fee, or a combination of both, as agreed in the contractCorrect
  2. BOnly a performance-based fee is permitted
  3. CPortfolio managers may not charge any fee for the first year
  4. DFees must always be a fixed percentage of the client's net worth

Explanation

SEBI permits fixed, return-based (performance) or hybrid fee structures, which must be clearly disclosed in the agreement and Disclosure Document. The other options impose restrictions that the regulations do not contain.

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