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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process

Which statement about the investment approach of a PMS portfolio manager is correct under the SEBI Portfolio Managers framework?

The manager must disclose each investment approach to clients through the disclosure document. It sets out the philosophy, strategy and risks so clients can make an informed choice. Unilateral changes without intimation are not allowed, and approaches are compared against a stated benchmark.

  1. AThe manager must disclose the investment approach to clients in the disclosure documentCorrect
  2. BThe manager may change a client's investment approach without any intimation
  3. COnly a discretionary manager needs to follow an investment approach
  4. DThe investment approach need not name a benchmark

Explanation

Each portfolio manager offers defined investment approaches and must describe them, with philosophy and risks, in the disclosure document given to clients. Changes cannot be made unilaterally without proper process. The approach applies to discretionary services and is also used for performance comparison against a benchmark.

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