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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 statements about a portfolio manager's handling of client funds under SEBI rules is correct?

Client money must be kept in a separate bank account from the portfolio manager's own funds. This segregation protects investors from misuse or commingling. Pooling client funds with the manager's own money is not allowed under SEBI rules.

  1. AClient funds must be kept in a separate bank account distinct from the portfolio manager's own fundsCorrect
  2. BThe portfolio manager may pool client money with its own funds to invest in the same securities
  3. CThe portfolio manager may lend client securities without a client's written consent
  4. DThe portfolio manager may invest discretionary client funds in unlisted securities without any limit

Explanation

Regulations require client funds to be held in a separate account from the portfolio manager's own money, so as to prevent misuse. Pooling with own funds is prohibited. Securities lending needs client consent, and unlisted investments are subject to restrictions and caps.

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