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

Which statement about the PMS agreement between a portfolio manager and a client is consistent with SEBI's PMS regulations?

A portfolio manager must sign a written agreement with each client before managing funds or securities. Guaranteeing returns is prohibited, and fees and any related-party or group company investments must be disclosed. The agreement cannot omit fees even for high net worth clients.

  1. AThe portfolio manager may guarantee a minimum return to the client in the agreement
  2. BThe portfolio manager must enter into a written agreement with the client before taking up management of fundsCorrect
  3. CThe portfolio manager may invest client funds in a group company's securities without any disclosure
  4. DThe agreement need not specify fees if the client is a high net worth individual

Explanation

Regulations require a written agreement, in the prescribed form, with each client before managing their funds or securities. Guaranteeing returns is prohibited, and fees and related-party investments must be disclosed in the agreement and disclosure document.

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