📊 NISM Series X-AChapter 12 of 20⚖ 8 marks weightageCase-Based ✓
Ch.12: Portfolio Manager
Practice questions for NISM-Series-X-A: Investment Adviser (Level 1) Certification Examination
(mandated by SEBI under the Investment Advisers Regulations, 2013).
Chapter 12 carries 8 out of 150 marks
in the final examination. The exam has 90 MCQs + 9 case-based sets (5 sub-questions each, mixed 1-mark
and 2-mark weighting), 180-minute duration, 60% passing score, and 25% negative marking on the marks
of each wrong answer.
175
MCQ
5
Case Sets
200
Total Qs
8
Exam Marks
60%
Pass Score
−25%
Neg. Marking
What You Will Learn in This Chapter
Understand portfolio management services (PMS) and their structure
Know SEBI PMS regulations and typical fee structures
Distinguish PMS from mutual funds and alternative investment funds
According to the provided text, which of the following is described as an essential characteristic of alternative investments?
AHigh liquidity, allowing easy conversion into cash.
BPrimarily on-market opportunities with readily available exit options.
CIlliquidity, as they are not readily convertible into cash.
DDesigned mainly for general investors seeking better returns than savings schemes.
Q2MCQ · 1 markHardCost, Expenses and Fees
In the context of performance-linked fees for a PMS, what is the 'no catch-up concept' with respect to a hurdle rate?
AThe fund manager earns fees on all gains, starting from the first earning, once the hurdle rate is crossed.
BFees are only calculated on the incremental amount of gains above the specified hurdle rate.
CThe fund manager does not charge any performance fees if the hurdle rate is not met.
DThe hurdle rate is adjusted annually based on market performance, and fees are always charged on the full gains.
Q3MCQ · 1 markMediumNet Worth Requirement
What is the net worth requirement for an applicant seeking a certificate of registration as a portfolio manager?
AFifty lakh rupees
BTwo crore rupees
CFive crore rupees
DTen crore rupees
Q4MCQ · 1 markMediumRegistration Requirements
Which of the following is NOT a mandatory requirement for a Principal Officer of an applicant seeking registration as a Portfolio Manager, as per SEBI regulations?
AProfessional qualification in finance, law, accountancy, or business management.
BExperience of at least five years in related activities in the securities market.
CRelevant NISM certification as specified by the regulator.
DGraduation from a university recognized by the Central Government.
Q5MCQ · 1 markMediumRegistration Requirements
Which of the following is NOT a mandatory qualification or experience requirement for the Principal Officer of an applicant seeking portfolio manager registration?
AProfessional qualification in finance, law, accountancy, or business management.
BExperience of at least five years in related activities in the securities market.
CRelevant NISM certification as specified by the regulator.
DBeing a director or partner in a SEBI-registered stockbroker for at least two years.
What is the minimum experience required for the principal officer of an applicant seeking portfolio manager registration in related activities in the securities market?
AAt least two years.
BAt least five years.
CAt least ten years.
DNo specific experience is mentioned, only professional qualification.
Q7MCQ · 1 markEasyResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a portfolio manager shall accept from a client?
ATwenty-five lakh rupees
BOne crore rupees
CFifty lakh rupees
DTen lakh rupees
Q8MCQ · 1 markMediumDisclosure Document
Which of the following must be included in the Disclosure Document provided by a Portfolio Manager to a client, as per SEBI requirements?
ADetails of the client's personal financial goals for the next five years.
BQuantum and manner of payment of fees and portfolio risks specific to each investment approach.
CA guarantee of minimum returns on the portfolio.
DA list of all previous clients and their performance history.
Q9MCQ · 1 markHardResponsibilities and Disclosure
Which of the following statements regarding the responsibilities of a portfolio manager and SEBI's disclosure requirements is INCORRECT?
AA portfolio manager can invest a maximum of 30% of a client’s portfolio in securities of their own associates/related parties with a one-time written consent.
BThe Disclosure Document must include portfolio risks specific to each investment approach and be available on the portfolio manager's website.
CThe portfolio manager is required to keep the funds of all clients in a separate account maintained in any registered bank, not necessarily a Scheduled Commercial Bank.
DThe portfolio manager shall report its performance uniformly in disclosures to SEBI, marketing materials, client reports, and on its website.
Q10MCQ · 1 markEasyRegistration Requirements
What is the mandatory requirement for an entity to act as a portfolio manager in India?
AObtaining a certificate of registration from SEBI.
BHaving a minimum net worth of INR 10 crore.
CBeing a member of a recognized stock exchange.
DAppointing a qualified auditor approved by the Ministry of Finance.
Q11MCQ · 1 markEasyResponsibilities of a Portfolio Manager
Which of the following is a key responsibility of a discretionary portfolio manager regarding client funds?
ATo manage funds in accordance with the directions of the client.
BTo manage funds individually and independently for each client.
CTo pool funds from multiple clients for common investment strategies.
DTo borrow funds on behalf of the client for investment purposes.
Q12MCQ · 1 markMediumRegistration Requirements
Which of the following is a mandatory qualification/experience requirement for the Principal Officer of an applicant seeking a Portfolio Manager registration?
AA graduate degree in any discipline and at least two years of experience in the securities market.
BA professional qualification in finance, law, accountancy, or business management, along with at least five years of experience in related activities in the securities market and relevant NISM certification.
COnly NISM certification specified by the regulator, without any specific professional qualification.
DExperience of at least ten years as a fund manager, irrespective of professional qualification.
Q13MCQ · 1 markEasyResponsibilities of a Portfolio Manager
How does a non-discretionary portfolio manager manage client funds?
AIndividually and independently, without client directions.
BIn accordance with the directions of the client.
CBy replicating a mutual fund's portfolio.
DBy investing only in debt instruments.
Q14MCQ · 1 markHardFees and Costs
In the context of performance-linked fees, what is the fundamental difference between the 'catch-up' and 'no catch-up' concepts when a hurdle rate has been crossed?
A'Catch-up' applies only to discretionary portfolios, while 'no catch-up' applies to non-discretionary.
B'Catch-up' calculates fees on all gains from the first earning, whereas 'no catch-up' calculates fees only on the incremental amount above the hurdle rate.
C'Catch-up' allows the manager to recover past losses, while 'no catch-up' does not.
D'Catch-up' is a fixed cost, while 'no catch-up' is performance-linked.
Q15MCQ · 1 markEasyRegistration Requirements
As per SEBI regulations, what is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager?
AOne crore rupees
BTwo crore rupees
CFive crore rupees
DTen crore rupees
Q16MCQ · 1 markMediumResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the maximum percentage of a client's portfolio that a portfolio manager can invest in securities of their own associates/related parties?
A10%
B20%
C30%
D50%
Q17MCQ · 1 markHardCost, expenses and fees - High Watermark
A Portfolio Manager (PMS) has a profit-sharing fee structure that incorporates the 'high watermark principle'. If the corpus invested initially was Rs 50 lakh, rose to Rs 60 lakh in year 1 (and fees were calculated), then dropped to Rs 55 lakh in year 2. When would the next profit-sharing fee calculation occur?
AWhen the portfolio value exceeds Rs 50 lakh.
BWhen the portfolio value exceeds Rs 55 lakh.
CWhen the portfolio value exceeds Rs 60 lakh.
DThe fee calculation would occur annually, regardless of the high watermark.
Q18MCQ · 1 markEasyRegistration Requirements
Under which form of Schedule I must an application for obtaining a certificate of registration as a Portfolio Manager be made to SEBI?
AForm A
BForm B
CForm C
DForm D
Q19MCQ · 1 markEasyDirect Access Facility
What is the primary benefit for an investor choosing the direct access facility offered by a Portfolio Manager (PMS)?
AAccess to exclusive investment strategies unavailable through regular plans.
BElimination of the need for an investment adviser.
CLower costs due to the absence of intermediaries/distributors.
DGuaranteed higher performance compared to regular plans.
Q20MCQ · 1 markHardFees and Expenses
A PMS agreement includes a hurdle rate of 10%. If the portfolio generates a return of 15% in a year, and the agreement specifies a 'no catch-up' concept for performance fee calculation, on what percentage of the return would the profit-sharing fee be calculated?
AOn the full 15% return.
BOn 10% of the return.
COn the incremental 5% return above the hurdle rate.
DNo profit-sharing fee would be calculated, as it's a 'no catch-up' concept.
Q21MCQ · 1 markMediumResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a Portfolio Manager shall accept from a client according to SEBI regulations?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q22MCQ · 1 markMediumRegistration Requirements
When applying for a certificate of registration as a Portfolio Manager, which of the following details is not explicitly required to be provided in Form A of Schedule I?
ABusiness Plan for three years.
BDetails of settled and pending disputes.
CSpecific details of individual client transactions from the past year.
DCopy of Draft Agreement with Client.
Q23MCQ · 1 markMediumRegistration Requirements
Which specific form is required for an application to SEBI for obtaining a certificate of registration as a portfolio manager?
AForm B of Schedule II
BForm A of Schedule I
CForm C of Schedule III
DForm D of Schedule IV
Q24MCQ · 1 markMediumDirect Access Facility
What is the primary benefit for an investor choosing the direct access facility offered by a Portfolio Management Service (PMS)?
AAccess to exclusive investment opportunities not available otherwise.
BLower costs due to the absence of intermediaries.
CGuaranteed higher returns compared to regular plans.
DMore personalized management of funds by the portfolio manager.
Q25MCQ · 1 markHardResponsibilities of a Portfolio Manager
A Portfolio Manager intends to invest a portion of a client's portfolio in securities of its own associates. What is the maximum percentage allowed for such investment and what specific condition must be met?
A10% with annual written consent.
B20% with prior SEBI approval.
C30% with one-time written consent from the client.
D50% with quarterly disclosure to the client.
Q26MCQ · 1 markEasyRegistration Requirements
Which of the following forms is required to be submitted to SEBI for obtaining a certificate of registration as a Portfolio Manager?
AForm B of Schedule I
BForm A of Schedule I
CForm C of Schedule II
DForm D of Schedule II
Q27MCQ · 1 markMediumDirect Access Facility
What is the primary advantage for an investor who chooses the 'direct access facility' offered by a Portfolio Manager compared to a regular plan?
BThe investor gets direct control over all investment decisions.
CThe cost for the investor will be lower due to the absence of intermediaries.
DThe management process of the funds differs significantly, offering more specialized services.
Q28MCQ · 1 markEasyRegistration Requirements
According to SEBI regulations, what is the mandatory requirement for an entity to act as a portfolio manager?
AObtaining a license from the Reserve Bank of India.
BRegistering as a company under the Companies Act, 2013.
CObtaining a certificate of registration from SEBI under the Portfolio Managers regulations.
DBecoming a member of a recognized stock exchange.
Q29MCQ · 1 markMediumFees and Costs
A portfolio manager charges performance-linked fees based on the 'High Watermark Principle'. If a client's portfolio value increased from Rs. 50 lakh to Rs. 60 lakh in Year 1, and then dropped to Rs. 55 lakh in Year 2, when would the profit-sharing fee next be calculated?
AIn Year 2, based on the Rs. 5 lakh gain from Rs. 50 lakh to Rs. 55 lakh.
BIn Year 2, based on the Rs. 55 lakh current value.
COnly when the portfolio value crosses Rs. 60 lakh.
DAnnually, regardless of the previous high value, if the hurdle rate is met.
Q30MCQ · 1 markMediumResponsibilities of a Portfolio Manager
As per SEBI regulations, what is the minimum value of funds or securities a Portfolio Manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q31MCQ · 1 markEasyDirect Access Facility
What is the primary benefit of an investor opting for the direct access facility in a Portfolio Management Service (PMS)?
AIt guarantees higher performance returns.
BIt allows the investor to save on costs by bypassing intermediaries.
CIt provides exclusive investment opportunities not available through regular plans.
DIt changes the fundamental management process of the funds.
Q32MCQ · 1 markEasyRegistration Requirements
As per SEBI regulations, what is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager?
ATwo crore rupees
BFive crore rupees
CTen crore rupees
DOne crore rupees
Q33MCQ · 1 markEasyDirect Access Facility
What is a primary benefit for an investor opting for the 'direct access facility' in PMS, similar to direct plans in mutual funds?
AGuaranteed higher returns on investment.
BElimination of intermediary commissions, leading to lower costs.
CAccess to exclusive investment opportunities not available otherwise.
DFaster processing of investment requests.
Q34MCQ · 1 markMediumCost, Expenses and Fees
The 'High Watermark Principle' in PMS fee calculation primarily aims to prevent the portfolio manager from:
ACharging fixed costs more than once a year.
BInvesting in below investment grade securities.
CCollecting performance-linked fees for recent poor performance when the portfolio value has not surpassed a previous high.
DLending client securities to a third person without consent.
An applicant for a Portfolio Manager registration must meet several criteria. Which of the following statements correctly describes a mandatory requirement for the principal officer and the minimum funds accepted from a client?
AThe principal officer must have at least three years of experience in related activities, and the portfolio manager shall not accept funds or securities worth less than twenty-five lakh rupees.
BThe principal officer must have a professional qualification in finance and at least five years of experience, and the portfolio manager shall not accept funds or securities worth less than fifty lakh rupees.
CThe principal officer must have a professional qualification in law and at least two years of experience, and the portfolio manager shall not accept funds or securities worth less than one crore rupees.
DThe principal officer must have an NISM certification and at least ten years of experience, and the portfolio manager shall not accept funds or securities worth less than five crore rupees.
Q36MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant seeking a certificate of registration as a Portfolio Manager from SEBI?
ATwo crore rupees
BThree crore rupees
CFive crore rupees
DTen crore rupees
Q37MCQ · 1 markEasyResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a Portfolio Manager shall accept from a client?
ATwenty-five lakh rupees
BFifty lakh rupees
COne crore rupees
DTwo crore rupees
Q38MCQ · 1 markMediumRegistration Requirements
Which of the following is a mandatory qualification/experience requirement for the Principal Officer of an applicant seeking registration as a Portfolio Manager?
AA bachelor's degree in any discipline and at least three years of experience in the securities market.
BA professional qualification in finance, law, accountancy or business management, and at least five years of experience in related activities in the securities market.
CA professional qualification in economics or statistics, and at least ten years of experience in banking.
DA postgraduate degree in any discipline and at least two years of experience in a research analyst role.
Q39MCQ · 1 markMediumSEBI Requirements on Disclosure
Which of the following must be included in the Disclosure Document provided by a Portfolio Manager to a client?
ADetails of the client's personal income and tax liabilities.
BQuantum and manner of payment of fees, and portfolio risks specific to each investment approach.
CThe exact future performance projections for the client's portfolio.
DA guarantee of minimum returns over the investment period.
Q40MCQ · 1 markMediumCost, expenses and fees
Which principle ensures that a Portfolio Manager does not collect performance-linked fees for recent poor performance, by only calculating fees when the portfolio value crosses a previously achieved higher level?
AHurdle rate principle
BCatch-up concept
CHigh watermark principle
DFixed cost principle
Q41MCQ · 1 markEasyResponsibilities of a Portfolio Manager
As per SEBI regulations, what is the minimum value of funds or securities a portfolio manager shall accept from a client?
ATen lakh rupees
BTwenty-five lakh rupees
CFifty lakh rupees
DOne crore rupees
Q42MCQ · 1 markMediumFees and Costs - High Watermark
According to the High Watermark Principle, when would a Portfolio Manager calculate profit-sharing fees again after a period where the portfolio value has dropped below a previous high?
AFees are calculated every financial year regardless of performance.
BFees are calculated immediately once the portfolio value recovers any losses.
CFees are calculated only when the current fund value surpasses the previous high watermark at which fees were last paid.
DFees are calculated only if the hurdle rate is crossed, irrespective of previous high watermark.
Q43MCQ · 1 markMediumDirect Access Facility
What is the primary benefit for an investor opting for the 'direct access facility' in a Portfolio Management Service (PMS)?
AAccess to exclusive investment strategies not available in regular plans.
BLower costs due to the absence of intermediaries like distributors.
CGuaranteed higher returns compared to regular PMS plans.
DAbility to manage their own portfolio decisions without any intervention from the PMS.
Q44MCQ · 1 markEasyResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a portfolio manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q45MCQ · 1 markMediumInvestment in Related Parties
A portfolio manager can invest a maximum of what percentage of their client’s portfolio in securities of their own associates/related parties, provided a one-time written consent is taken from the client?
A10%
B20%
C30%
D50%
Q46MCQ · 1 markHardHigh Watermark Principle
According to the high watermark principle, if a portfolio's value drops after fees have been calculated on a specific higher level, when would the profit-sharing fee typically be calculated again?
AImmediately, based on the new, lower value.
BOnly when the portfolio value crosses the original corpus investment value.
COnly when the portfolio value crosses the previous highest value on which fees were paid.
DAfter a fixed period of one financial year, irrespective of the portfolio value.
Q47MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI?
ATwo crore rupees
BFive crore rupees
CTen crore rupees
DFifty lakh rupees
Q48MCQ · 1 markMediumDisclosure Document
Which of the following information is NOT explicitly required to be included in the Disclosure Document provided by a Portfolio Manager to its client?
AThe quantum and manner of payment of fees.
BPortfolio risks specific to each investment approach.
CDetails of the portfolio manager's personal investments.
DDisclosures with respect to related parties as required under Accounting Standards.
What is the minimum experience requirement in related activities in the securities market for the Principal Officer of an applicant seeking a Portfolio Manager registration?
AAt least two years
BAt least three years
CAt least five years
DAt least ten years
Q50MCQ · 1 markHardRegistration Requirements
Which of the following is NOT a factor that SEBI considers before issuing a certificate of registration to an applicant for a Portfolio Manager?
AThe applicant has appointed a compliance officer.
BThe applicant, its director or partner, principal officer, compliance officer or the employee has at any time been convicted for any offence involving moral turpitude.
CThe applicant has in its employment at least one person with a graduation from a recognized university and two years of experience in related activities in the securities market.
DThe applicant is a partnership firm with a minimum of two partners having professional qualifications.
Q51MCQ · 1 markEasyClient Funds Management
What is the minimum amount of funds or securities a portfolio manager shall accept from a client?
ANot less than ten lakh rupees.
BNot less than twenty-five lakh rupees.
CNot less than fifty lakh rupees.
DNo minimum amount is specified.
Q52MCQ · 1 markHardCosts, Expenses and Fees
A client has a portfolio managed by a PMS, and the profit-sharing fees are subject to the High Watermark Principle. If the corpus invested initially was Rs 50 lakh, and in the first year, it rose to Rs 60 lakh, resulting in fees being paid. In the second year, the portfolio value drops to Rs 55 lakh. What would be the basis for calculating profit-sharing fees in the third year, assuming the portfolio value reaches Rs 62 lakh?
ARs 7 lakh (Rs 62 lakh - Rs 55 lakh)
BRs 2 lakh (Rs 62 lakh - Rs 60 lakh)
CRs 12 lakh (Rs 62 lakh - Rs 50 lakh)
DNo fees would be calculated until the portfolio crosses Rs 65 lakh.
Q53MCQ · 1 markEasyDirect Access Facility
What is the primary benefit for an investor choosing the direct access facility offered by a Portfolio Management Service (PMS) compared to a regular plan?
AThe portfolio manager will provide enhanced performance guarantees.
BThe investor will have more control over individual investment decisions.
CThe cost for the investor will be lower due to the absence of intermediary commissions.
DThe PMS will offer a wider range of investment options exclusively for direct access clients.
Q54MCQ · 1 markEasyApplication Process
In which form must an application for obtaining a certificate of registration as a Portfolio Manager be made to SEBI?
AForm B of Schedule I
BForm A of Schedule I
CForm C of Schedule II
DForm D of Schedule II
Q55MCQ · 1 markMediumRegistration Requirements
According to SEBI regulations, what is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager?
ATwo crore rupees
BFive crore rupees
CTen crore rupees
DFifty lakh rupees
Q56MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI?
AOne crore rupees
BTwo crore rupees
CFive crore rupees
DTen crore rupees
Q57MCQ · 1 markHardCost, Expenses and Fees
An investor has a PMS with a profit-sharing fee based on the high watermark principle. If the portfolio value increased from Rs 50 lakh to Rs 60 lakh in year 1, and then dropped to Rs 55 lakh in year 2, when would the profit-sharing fee next be calculated?
AWhen the portfolio value exceeds Rs 50 lakh.
BWhen the portfolio value exceeds Rs 55 lakh.
CWhen the portfolio value exceeds Rs 60 lakh.
DAt the end of every financial year, regardless of the high watermark.
Q58MCQ · 1 markMediumResponsibilities of a Portfolio Manager
What is the maximum percentage of a client's portfolio a portfolio manager can invest in securities of its own associates/related parties, and what client consent is required?
A20% with annual written consent.
B30% with a one-time written consent.
C40% with verbal consent.
D15% with no consent required.
Q59MCQ · 1 markHardRegistration Requirements
Which of the following is a mandatory qualification or experience requirement for the Principal Officer of an applicant seeking a Portfolio Manager registration from SEBI?
AA bachelor's degree in any discipline and at least two years of experience in the securities market.
BA professional qualification in finance, law, accountancy, or business management, and at least five years of experience in related activities in the securities market.
CA professional qualification in any field and an NISM certification, with no specific experience requirement.
DA diploma in financial services and at least three years of experience as a stockbroker.
Q60MCQ · 1 markEasyResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the minimum value of funds or securities that a portfolio manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q61MCQ · 1 markEasyResponsibilities of Portfolio Manager
As per SEBI regulations, a portfolio manager shall not accept from a client, funds or securities worth less than what amount?
ATwenty-five lakh rupees
BFifty lakh rupees
COne crore rupees
DTen lakh rupees
Q62MCQ · 1 markHardResponsibilities of a PM
Which of the following statements regarding the responsibilities and limitations of a Portfolio Manager is INCORRECT, according to SEBI regulations?
AA portfolio manager shall not invest in below investment grade securities.
BA portfolio manager may invest up to 30% of a client’s portfolio in securities of their own associates/related parties, provided a one-time written consent is obtained from the client.
CA portfolio manager shall keep the funds of all clients in a single pooled account maintained in a Scheduled Commercial Bank for operational efficiency, and segregate client securities in separate accounts.
DA portfolio manager shall not borrow funds or securities on behalf of the client.
Q63MCQ · 1 markEasyResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a portfolio manager shall accept from a client?
ATwenty-five lakh rupees
BFifty lakh rupees
COne crore rupees
DTen lakh rupees
Q64MCQ · 1 markEasyResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a portfolio manager is permitted to accept from a client?
ALess than fifty lakh rupees
BExactly fifty lakh rupees
CNot less than fifty lakh rupees
DMore than one crore rupees
Q65MCQ · 1 markHardRegistration Requirements
For an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI, which of the following statements is NOT a mandatory requirement?
AThe applicant must be a body corporate.
BThe applicant must fulfil a net worth requirement of five crore rupees.
CThe Principal Officer of the applicant must have at least ten years of experience in related activities in the securities market.
DThe applicant must have in its employment at least one person with a graduation degree and two years of experience in related securities market activities, in addition to the Principal Officer and Compliance Officer.
Q66MCQ · 1 markMediumRegistration Requirements
For an applicant seeking registration as a Portfolio Manager, what is the minimum experience required for its principal officer in related activities in the securities market?
AAt least two years
BAt least three years
CAt least five years
DAt least ten years
Q67MCQ · 1 markEasyDirect Access Facility
What is a primary benefit for an investor opting for the direct access facility offered by a Portfolio Management Service (PMS)?
AAccess to exclusive investment opportunities not available through regular plans.
BDirect involvement in daily portfolio trading decisions.
CLower costs due to the absence of intermediaries.
DGuaranteed higher returns compared to regular plans.
Q68MCQ · 1 markMediumCost, Expenses and Fees
What is the primary purpose of 'performance linked costs' in a PMS agreement?
ATo cover the administrative expenses of managing the portfolio, irrespective of returns.
BTo incentivize the fund manager to achieve better performance for the client.
CTo compensate the distributor for selling the PMS plan to the client.
DTo ensure that the client's portfolio does not fall below a certain value.
Q69MCQ · 1 markHardRegistration Requirements
Which of the following is NOT a specific criterion SEBI takes into account before issuing a certificate of registration to an applicant as a Portfolio Manager?
AThe applicant has appointed a dedicated grievance redressal officer.
BThe applicant is a body corporate.
CThe applicant fulfils the net worth requirement of five crore rupees.
DThe principal officer has at least five years of experience in related securities market activities.
Q70MCQ · 1 markEasyResponsibilities of a Portfolio Manager
What is the minimum amount of funds or securities a portfolio manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q71MCQ · 1 markMediumRegistration Requirements
What is the net worth requirement for an applicant to be granted a certificate of registration as a Portfolio Manager by SEBI?
ATwo crore rupees
BFive crore rupees
CTen crore rupees
DOne crore rupees
Q72MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI?
ATwo crore rupees
BThree crore rupees
CFive crore rupees
DTen crore rupees
Q73MCQ · 1 markMediumRegistration Requirements
Before issuing a certificate of registration to an applicant as a Portfolio Manager, SEBI shall take into account that the applicant has appointed which of the following officers?
AA Chief Financial Officer
BA Chief Executive Officer
CA Compliance Officer
DA Risk Management Officer
Q74MCQ · 1 markMediumDirect Access Facility
Which of the following is the primary benefit for an investor opting for the direct access facility in a Portfolio Management Service (PMS)?
AEnhanced performance guarantees from the PMS provider.
BDirect involvement in daily investment decisions.
CLower costs due to the elimination of intermediary commissions.
DAccess to exclusive investment opportunities not available otherwise.
Q75MCQ · 1 markHardPMS Fee Structures
A Portfolio Manager's agreement includes a profit-sharing fee, a hurdle rate, and the high watermark principle. If the portfolio value in Year 1 rose from Rs. 50 lakh to Rs. 60 lakh, and in Year 2 it dropped to Rs. 55 lakh, which of the following conditions must be met for profit-sharing fees to be calculated in Year 3?
AThe portfolio value must exceed Rs. 55 lakh AND the returns must be higher than the hurdle rate.
BThe portfolio value must exceed Rs. 60 lakh AND the returns must be higher than the hurdle rate.
CThe portfolio value must exceed Rs. 50 lakh, irrespective of the hurdle rate.
DThe portfolio value must simply show a positive return in Year 3, irrespective of previous highs.
Q76MCQ · 1 markMediumCost, expenses and fees of investing in PMS
An investor has a portfolio managed by a PMS. The initial corpus was Rs 50 lakh. In the first year, the portfolio value rose to Rs 60 lakh, and profit sharing fees were calculated on Rs 10 lakh. In the second year, the portfolio value dropped to Rs 55 lakh. According to the high watermark principle, when will the next profit-sharing fee be calculated?
AWhen the portfolio value exceeds Rs 50 lakh.
BWhen the portfolio value exceeds Rs 55 lakh.
CWhen the portfolio value exceeds Rs 60 lakh.
DProfit sharing fees will be calculated on the current year's gains regardless of the previous high.
Q77MCQ · 1 markMediumResponsibilities of a Portfolio Manager
What is the maximum percentage of a client's portfolio that a portfolio manager is allowed to invest in securities of their own associates/related parties, and what is required for this?
AA maximum of 10% with a one-time verbal consent from the client.
BA maximum of 20% with annual written consent from the client.
CA maximum of 30% with a one-time written consent from the client.
DThere is no restriction on investing in associate/related party securities, provided it is disclosed.
Q78MCQ · 1 markMediumRegistration Requirements
Which of the following is a mandatory qualification/experience requirement for the principal officer of an applicant seeking registration as a Portfolio Manager from SEBI?
AA graduate degree in any discipline with at least ten years of experience in the securities market.
BA professional qualification in finance, law, accountancy, or business management, along with at least five years of experience in related activities in the securities market.
CA post-graduate degree in economics with at least three years of experience as a stockbroker.
DOnly the relevant NISM certification as specified by the regulator from time to time, without any specific experience.
Q79MCQ · 1 markMediumResponsibilities of a Portfolio Manager
What is the maximum percentage of a client’s portfolio that a Portfolio Manager is permitted to invest in securities of their own associates/related parties?
A10%
B20%
C30%
D50%
Q80MCQ · 1 markEasyRegistration Requirements
Which of the following forms is mandatory for applying for a certificate of registration as a Portfolio Manager with SEBI?
AForm B of Schedule II
BForm A of Schedule I
CForm C of Schedule III
DForm D of Schedule IV
Q81MCQ · 1 markHardRegistration Requirements and Disqualifications
An applicant for a Portfolio Manager license has a Principal Officer with a B.Com degree and 6 years of experience as a stockbroker. The applicant also has a net worth of Rs. 6 crore. However, SEBI discovers that the applicant's director was convicted for an economic offense 3 years ago. Considering only the provided text, what is the most likely outcome of the application?
AThe application will be approved, as the Principal Officer and net worth requirements are met.
BThe application will be approved, provided the director resigns.
CThe application will be rejected, as the director's conviction is a disqualifying factor.
DThe application will be put on hold, pending further investigation into the director's past.
Q82MCQ · 1 markHardHigh Watermark Principle
An investor's portfolio managed by a PMS had a value of Rs. 50 lakh. In the first year, it rose to Rs. 60 lakh, and profit-sharing fees were calculated on the Rs. 10 lakh gain. In the second year, the portfolio value dropped to Rs. 55 lakh. According to the high watermark principle, when would the next profit-sharing fee be calculated?
AWhen the portfolio value crosses Rs. 50 lakh.
BWhen the portfolio value crosses Rs. 55 lakh.
CWhen the portfolio value crosses Rs. 60 lakh.
DProfit-sharing fees will be calculated based on the year-end performance, regardless of the previous high.
Q83MCQ · 1 markEasyResponsibilities of a Portfolio Manager
Which of the following types of securities are Portfolio Managers explicitly prohibited from investing in?
AGovernment securities
BBlue-chip equities
CBelow investment grade securities
DExchange Traded Funds (ETFs)
Q84MCQ · 1 markMediumDirect Access Facility
What is the primary benefit for an investor opting for the direct access facility in PMS, similar to direct plans in mutual funds?
AAccess to exclusive investment opportunities.
BLower costs due to the absence of intermediaries.
CGuaranteed higher returns compared to regular plans.
DEnhanced control over investment decisions.
Q85MCQ · 1 markMediumResponsibilities of a Portfolio Manager
Which of the following is NOT a mandatory responsibility of a Portfolio Manager as enumerated by SEBI regulations?
ASegregating each client’s holding in securities in separate accounts.
BKeeping the funds of all clients in a single pooled account for efficient management.
CActing in a fiduciary capacity with regard to the client's funds.
DEnsuring proper and timely handling of complaints from clients.
Q86MCQ · 1 markMediumResponsibilities of a Portfolio Manager
A discretionary portfolio manager is required to manage the funds of each client in which of the following ways?
AIn a manner that partakes the character of a Mutual Fund, pooling client funds for efficiency.
BIndividually and independently, in accordance with the client's needs, without partaking the character of a Mutual Fund.
CIn accordance with general market trends, irrespective of individual client needs.
DBy investing a minimum of 50% of the portfolio in securities of their own associates.
Q87MCQ · 1 markHardRegistration Requirements - Principal Officer
Which of the following is NOT a mandatory qualification or experience requirement for the Principal Officer of an applicant seeking registration as a Portfolio Manager?
AA professional qualification in finance, law, accountancy, or business management.
BAt least five years of experience in related activities in the securities market.
CRelevant NISM certification as specified by the regulator.
DA minimum of three years of experience as a registered Investment Adviser.
Q88MCQ · 1 markMediumRegistration Requirements
According to SEBI regulations, what is the minimum net worth requirement for an applicant seeking registration as a portfolio manager?
ATwo crore rupees
BFive crore rupees
CTen crore rupees
DFifty lakh rupees
Q89MCQ · 1 markEasyRegistration Requirements
Which form is mandatory for an applicant to submit to SEBI for obtaining a certificate of registration as a Portfolio Manager?
AForm B of Schedule II
BForm A of Schedule I
CForm C of Schedule III
DForm D of Schedule IV
Q90MCQ · 1 markMediumRegistration Requirements - Principal Officer
Which of the following is a mandatory qualification/experience requirement for the principal officer of an applicant seeking registration as a portfolio manager?
AA bachelor's degree in any discipline and three years of experience in the securities market.
BA professional qualification in finance, law, accountancy, or business management, along with at least five years of experience in related activities in the securities market and relevant NISM certification.
CAn experience of at least two years in related activities in the securities market and graduation from a recognized university.
DMembership with a recognized stock exchange and a minimum net worth of five crore rupees.
Q91MCQ · 1 markEasyRegistration Requirements
What is the mandatory requirement for an entity to act as a portfolio manager in India?
AObtaining a certificate of registration from SEBI under the Portfolio Managers regulations.
BRegistering as a body corporate with the Ministry of Corporate Affairs.
CObtaining a license from the Reserve Bank of India.
DBecoming a member of a recognized stock exchange.
Q92MCQ · 1 markMediumFees and Costs
According to the 'high watermark principle' in PMS fee calculation, when would a profit-sharing fee typically NOT be calculated?
AWhen the portfolio value has increased, but is still below the hurdle rate.
BWhen the current fund value is lower than the previous highest value at which fees were paid.
CWhen the portfolio manager achieves returns exactly equal to the hurdle rate.
DWhen the client explicitly waives the profit-sharing fee for a given year.
A Portfolio Manager is managing funds for multiple clients. Which of the following actions is permissible under SEBI regulations as per the given text?
ALending securities held on behalf of clients to a third person without any specific provision.
BAccepting funds worth forty lakh rupees from a new client.
CInvesting 40% of a client's portfolio in securities of the portfolio manager's own associates, with client consent.
DSegregating each client’s holding in securities in separate accounts.
Q94MCQ · 1 markEasyRegistration Application
In which form of Schedule I must an application for obtaining a certificate of registration as a Portfolio Manager be made to SEBI?
AForm B
BForm C
CForm A
DForm D
Q95MCQ · 1 markEasyResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the minimum amount of funds or securities a Portfolio Manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q96MCQ · 1 markEasyDirect Access Facility
What is the primary benefit for an investor using the direct access facility offered by a Portfolio Management Service (PMS)?
AAccess to exclusive investment opportunities not available otherwise.
BLower costs due to the absence of intermediaries.
CGuaranteed higher returns compared to regular plans.
DMore personalized investment advice from the portfolio manager.
Q97MCQ · 1 markEasyRegulator's Considerations
What is the minimum net worth requirement for an applicant seeking a certificate of registration as a portfolio manager from SEBI?
ATwo crore rupees.
BThree crore rupees.
CFive crore rupees.
DTen crore rupees.
Q98MCQ · 1 markEasyRegistration Requirements
Which of the following forms is mandatory for an applicant seeking a certificate of registration from SEBI to act as a portfolio manager?
AForm B of Schedule II
BForm A of Schedule I
CForm C of Schedule III
DForm D of Schedule IV
Q99MCQ · 1 markHardDirect Access Facility
When advising a knowledgeable client about PMS, an Investment Adviser might recommend the direct access facility primarily for what reason?
ATo ensure continuous support from an intermediary.
BTo allow for more frequent trading decisions.
CTo enable the client to save on costs.
DTo gain access to exclusive investment products.
Q100MCQ · 1 markMediumResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the maximum percentage of a client’s portfolio that a portfolio manager is allowed to invest in securities of their own associates/related parties?
A10%
B20%
C30%
D50%
Q101MCQ · 1 markMediumCost, expenses and fees - Catch-up/No Catch-up
In the context of performance-linked fees, if a PMS uses the 'no catch-up' concept, how are the fees calculated once the hurdle rate is crossed?
AFees are calculated on the full gains from the first earning.
BFees are calculated only on the incremental amount above the hurdle rate.
CFees are calculated as a fixed percentage of the total portfolio value.
DFees are not calculated until the portfolio value doubles.
Q102MCQ · 1 markHardFees and Costs - Catch-up Concept
In the context of performance-linked fees for a Portfolio Manager, what does the 'no catch-up' concept signify?
AThe fund manager does not charge any performance fee if the hurdle rate is not met.
BThe performance fee is calculated on the full gains, including the amount below the hurdle rate, once the hurdle rate is crossed.
CThe performance fee is calculated only on the incremental amount of gains above the specified hurdle rate.
DThe fund manager is allowed to catch up on fees for previous years' underperformance.
Q103MCQ · 1 markHardCost, expenses and fees
In the context of performance-linked fees, what does the 'catch-up concept' imply regarding the calculation of fees once the hurdle rate is crossed?
AOnly the incremental amount above the hurdle rate would be considered for fee calculation.
BThe full gains, right from the first earning, would be used for fee calculation, effectively 'catching up' to total earnings.
CFees are capped at a certain percentage of the hurdle rate.
DThe portfolio manager foregoes fees for initial gains up to the hurdle rate.
Q104MCQ · 1 markMediumAlternative Investments
According to the provided text, which of the following is considered a 'traditional investment'?
APrivate Equity funds.
BReal Estate (commercial property).
CStocks and bonds from primary and secondary capital markets.
DHedge funds.
Q105MCQ · 1 markMediumRegistration Requirements
Which of the following is a mandatory qualification requirement for the Principal Officer of an applicant seeking registration as a Portfolio Manager?
AA professional qualification in finance, law, accountancy, or business management, with at least two years of experience in the securities market.
BA graduation from a university recognized by the Central Government and an experience of at least five years in related activities in the securities market.
CA professional qualification in finance, law, accountancy, or business management, with at least five years of experience in related activities in the securities market, and relevant NISM certification.
DA professional qualification in any discipline with at least five years of experience in managing investment portfolios.
Q106MCQ · 1 markMediumRegistration Requirements
Which of the following is a mandatory qualification/experience requirement for the principal officer of an applicant seeking registration as a Portfolio Manager?
AA bachelor's degree in any discipline and at least two years of experience in the securities market.
BA professional qualification in finance, law, accountancy, or business management, and experience of at least five years in related activities in the securities market.
CA professional qualification in IT or engineering, and experience of at least three years in financial services.
DNo specific professional qualification, but ten years of experience in any business management role.
Q107MCQ · 1 markMediumRegistration Requirements
Which of the following is a mandatory qualification for the principal officer of an applicant seeking registration as a Portfolio Manager?
AA graduation degree in any discipline and five years of experience in the securities market.
BA professional qualification in finance, law, accountancy, or business management, along with at least five years of experience in related activities in the securities market.
CExperience of at least ten years in managing mutual funds.
DMembership with a recognized stock exchange and a NISM certification.
Q108MCQ · 1 markHardCost, expenses and fees
A PMS agreement includes a hurdle rate and a profit-sharing fee. If the concept of 'no catch-up' is applied, how are the profit-sharing fees calculated once the hurdle rate is crossed?
AThe fees are calculated on the full gains from the initial investment.
BThe fees are calculated only on the incremental amount of gains above the hurdle rate.
CThe fees are calculated on the gains that bring the total earnings up to the hurdle rate, and then on the excess.
DThe fees are calculated based on the highest portfolio value achieved, irrespective of the hurdle rate.
Q109MCQ · 1 markHardFees and Expenses
An investor has a PMS portfolio with a corpus investment value of Rs 50 lakh. In year 1, the portfolio value rises to Rs 60 lakh, and profit-sharing fees are calculated on Rs 10 lakh. In year 2, the portfolio value drops to Rs 55 lakh. According to the high watermark principle, when would the next profit-sharing fee calculation be applicable?
AWhen the portfolio value exceeds Rs 50 lakh.
BWhen the portfolio value exceeds Rs 55 lakh.
CWhen the portfolio value exceeds Rs 60 lakh.
DProfit-sharing fees will be calculated annually regardless of the high watermark.
Q110MCQ · 1 markMediumResponsibilities of Portfolio Manager
A portfolio manager wants to invest in securities of its own associates/related parties for a client. What is the maximum percentage of the client's portfolio that can be invested this way, and what condition applies?
AMaximum 20% with prior written consent from SEBI.
BMaximum 30% with a one-time written consent from the client.
CMaximum 15% with annual written consent from the client.
DMaximum 25% with no specific consent required if disclosed in the agreement.
Q111MCQ · 1 markHardDirect Access Facility
An Investment Adviser suggests a client opt for the direct access facility when investing in a Portfolio Management Service (PMS). What is the primary advantage for the client by choosing this facility?
AIt guarantees higher performance compared to a regular plan.
BIt ensures the portfolio manager will invest in a non-discretionary manner.
CIt leads to lower costs due to the absence of intermediaries, resulting in higher net returns.
DIt allows the client to directly manage their portfolio without any intervention from the PMS.
Q112MCQ · 1 markMediumFees and Principles
A client's portfolio managed by a PMS had a value of Rs. 70 lakh when performance fees were last paid. In the subsequent year, the portfolio value dropped to Rs. 65 lakh. According to the high watermark principle, when would the profit-sharing fee next be calculated for this client?
AWhen the portfolio value recovers to Rs. 65 lakh.
BWhen the portfolio value reaches Rs. 70 lakh.
CWhen the portfolio value exceeds Rs. 70 lakh.
DAt the end of the next financial year, regardless of the portfolio value.
Q113MCQ · 1 markEasyRegistration Requirements
Which form must be used to apply for a certificate of registration as a Portfolio Manager with SEBI?
AForm B of Schedule II
BForm A of Schedule I
CForm C of Schedule III
DForm D of Schedule IV
Q114MCQ · 1 markHardCost, expenses and fees
In the context of performance-linked costs for a PMS, what does the 'high watermark principle' ensure?
AThat the PMS manager only charges fees if the portfolio value exceeds the initial investment.
BThat fees are calculated based on the highest portfolio value achieved in any financial year.
CThat the PMS does not collect performance fees for recent poor performance if the current fund value has not surpassed a previously achieved higher level on which fees were already paid.
DThat the client pays a fixed percentage of the assets under management, irrespective of performance, once the portfolio reaches a certain value.
Q115MCQ · 1 markEasyRegistration Requirements
To act as a portfolio manager, obtaining which of the following is a mandatory requirement?
AA certificate of registration from SEBI.
BA membership with a recognized stock exchange.
CA minimum of ten years of experience in the securities market.
DA corpus of at least one hundred crore rupees under management.
Q116MCQ · 1 markMediumResponsibilities of Portfolio Manager
In what capacity is a portfolio manager required to act with regard to the client's funds?
AAs an agent, following all client instructions without question.
BIn a fiduciary capacity, managing funds in the client's best interest.
CAs a principal, taking ownership of the client's funds temporarily.
DAs a guarantor, assuring specific returns on the client's funds.
Q117MCQ · 1 markEasyResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the minimum amount of funds or securities a portfolio manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q118MCQ · 1 markHardPerformance Linked Costs
In the context of performance-linked fees, if a PMS uses the 'no catch-up' concept, what amount would be considered for profit-sharing fee calculation once the hurdle rate is crossed?
AThe full gains from the first earning.
BOnly the incremental amount above the hurdle rate.
CA fixed percentage of the total assets under management.
DThe gains up to the hurdle rate.
Q119MCQ · 1 markEasyApplication Process
In which form of Schedule I must an application for obtaining a certificate of registration as a portfolio manager be made?
Which of the following is a mandatory qualification/experience requirement for the principal officer of an applicant seeking registration as a Portfolio Manager?
AA professional qualification in any field and at least two years of experience in the securities market.
BA professional qualification in finance, law, accountancy or business management, and at least five years of experience in related activities in the securities market.
COnly a relevant NISM certification as specified by the regulator.
DA graduation from a recognized university and at least three years of experience as a fund manager.
Q122MCQ · 1 markEasyRegistration Requirements
Which form is mandatory for an applicant to submit to SEBI for obtaining a certificate of registration as a Portfolio Manager?
AForm B of Schedule II
BForm A of Schedule I
CForm C of Schedule III
DForm D of Schedule IV
Q123MCQ · 1 markEasyRegistration Requirements
To obtain a certificate of registration from SEBI as a Portfolio Manager, the application needs to be made in which specific form?
AForm A of Schedule I
BForm B of Schedule II
CForm C of Schedule I
DForm D of Schedule II
Q124MCQ · 1 markHardCost, expenses and fees
According to the High Watermark Principle, when would a Portfolio Manager calculate profit-sharing fees after a period of poor performance?
AFees are calculated every financial year regardless of performance.
BFees are calculated only when the portfolio value drops below the initial investment.
CFees are calculated only when the current fund value exceeds the previous highest value on which fees were last paid.
DFees are calculated as soon as the portfolio value recovers to its initial investment level.
Q125MCQ · 1 markMediumDirect Access Facility
What is a key benefit for an investor opting for the 'direct access facility' offered by a Portfolio Manager, as advised by an Investment Adviser?
AIt guarantees higher returns compared to regular plans due to specialized management.
BIt allows the investor to directly manage their own portfolio without any PMS intervention.
CIt results in lower overall costs for the investor by cutting out intermediary commissions.
DIt provides exclusive access to below investment grade securities for higher potential gains.
Q126MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI?
ATwo crore rupees
BThree crore rupees
CFive crore rupees
DTen crore rupees
Q127MCQ · 1 markEasyDirect Access Facility
What is the main advantage for an investor choosing the 'direct access facility' in a Portfolio Management Service (PMS)?
AAccess to exclusive investment opportunities not available through regular plans.
BLower costs due to the elimination of intermediaries' commissions.
CGuaranteed higher returns compared to regular PMS plans.
DThe ability to frequently change the portfolio manager without additional charges.
Q128MCQ · 1 markHardCost, expenses and fees (High Watermark)
A client's portfolio managed by a PMS had a value of Rs. 70 lakh at the time profit-sharing fees were last calculated. In the following year, the portfolio value dropped to Rs. 65 lakh, and in the year after, it rose to Rs. 72 lakh. Based on the High Watermark Principle, on what amount would the profit-sharing fee be calculated in the second year when the value reached Rs. 72 lakh?
AOn the entire Rs. 72 lakh, assuming the hurdle rate is met.
BOn Rs. 5 lakh (Rs. 70 lakh - Rs. 65 lakh).
COn Rs. 2 lakh (Rs. 72 lakh - Rs. 70 lakh).
DNo profit-sharing fee would be calculated until the portfolio value exceeds Rs. 72 lakh.
Q129MCQ · 1 markHardFees and Costs - High Watermark
An investor has a portfolio managed by a PMS. The portfolio value was Rs 50 lakh when fees were first calculated. In the first year, it rose to Rs 60 lakh, and fees were calculated on the Rs 10 lakh gain. In the second year, the portfolio value dropped to Rs 55 lakh. According to the high watermark principle, when would the next profit-sharing fee be calculated?
AWhen the portfolio value exceeds Rs 50 lakh.
BWhen the portfolio value exceeds Rs 55 lakh.
CWhen the portfolio value exceeds Rs 60 lakh.
DWhen the portfolio value exceeds Rs 65 lakh.
Q130MCQ · 1 markHardResponsibilities of a Portfolio Manager
A Portfolio Manager is permitted to invest in securities of its own associates/related parties under specific conditions. What is the maximum percentage of a client’s portfolio that can be invested this way, and what client consent is required?
AMaximum 20% with a one-time verbal consent from the client.
BMaximum 30% with a one-time written consent from the client.
CMaximum 10% with annual written consent from the client.
DMaximum 25% with explicit consent for each transaction.
Q131MCQ · 1 markMediumResponsibilities of a Portfolio Manager
A discretionary portfolio manager is entrusted with managing a client's funds. Which of the following best describes the core principle guiding their management?
AThey must manage funds in a manner that closely resembles a Mutual Fund.
BThey shall manage funds individually and independently, in accordance with the client's needs.
CThey are required to obtain written directions from the client for every transaction.
DThey primarily focus on investing in below investment grade securities for higher returns.
Q132MCQ · 1 markEasySEBI Requirements on Performance Disclosure
Which document is a Portfolio Manager required to provide to the client, specifying details like the quantum and manner of fees, portfolio risks, and related party disclosures, and which must also be available on the portfolio manager's website and filed with SEBI?
AAnnual Report
BBusiness Plan
CDraft Agreement with Client
DDisclosure Document
Q133MCQ · 1 markEasyClient Funds
What is the minimum value of funds or securities that a portfolio manager shall accept from a client?
ATen lakh rupees.
BTwenty-five lakh rupees.
CFifty lakh rupees.
DOne crore rupees.
Q134MCQ · 1 markEasyResponsibilities of a PM
According to SEBI regulations, what is the minimum value of funds or securities a portfolio manager shall accept from a client?
ANot less than Ten lakh rupees
BNot less than Twenty-five lakh rupees
CNot less than Fifty lakh rupees
DNot less than One crore rupees
Q135MCQ · 1 markMediumResponsibilities of a Portfolio Manager
What is the minimum value of funds or securities that a Portfolio Manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q136MCQ · 1 markEasyDirect Access Facility
What is the main advantage for an investor choosing the 'direct access facility' offered by a Portfolio Management Service (PMS)?
AAccess to exclusive investment opportunities not available through regular plans.
BLower overall costs due to the absence of intermediary commissions.
CGuaranteed higher returns compared to regular PMS plans.
DMore personalized management of funds by the portfolio manager.
Q137MCQ · 1 markEasyRegistration Requirements
What is the mandatory requirement for an entity to act as a portfolio manager in India?
AObtaining a certificate of registration from SEBI.
BRegistering with the Reserve Bank of India.
CBecoming a member of a recognized stock exchange.
DHaving a minimum of ten years of experience in financial services.
Q138MCQ · 1 markEasyRegistration Requirements
An application for obtaining a certificate of registration as a Portfolio Manager from SEBI must be made in which specific form?
AForm B of Schedule II
BForm C of Schedule I
CForm A of Schedule I
DForm D of Schedule II
Q139MCQ · 1 markMediumAlternative Investments
As per the provided text, what is identified as the essential characteristic of alternative investments?
AHigh liquidity, allowing for easy conversion into cash.
BInvestment primarily in traditional stocks and bonds.
CIlliquidity, meaning they are not readily convertible into cash.
DGuaranteed higher returns compared to traditional investments.
Q140MCQ · 1 markMediumFees and Costs in PMS
A client invests Rs. 50 lakh with a PMS. In the first year, the portfolio value rises to Rs. 60 lakh, and profit-sharing fees are calculated. In the second year, the portfolio value drops to Rs. 55 lakh. According to the high watermark principle, when would the profit-sharing fee next be calculated?
AWhen the portfolio value exceeds Rs. 50 lakh.
BWhen the portfolio value exceeds Rs. 55 lakh.
CWhen the portfolio value exceeds Rs. 60 lakh.
DProfit-sharing fees will be calculated annually regardless of the high watermark.
Q141MCQ · 1 markMediumResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the maximum percentage of a client's portfolio that a portfolio manager can invest in securities of their own associates/related parties?
A10%
B20%
C30%
D40%
Q142MCQ · 1 markMediumResponsibilities of a Portfolio Manager
A Portfolio Manager is allowed to invest a maximum percentage of their client’s portfolio in securities of their own associates/related parties, provided a one-time written consent is obtained from the client. What is this maximum percentage?
A10%
B20%
C30%
D50%
Q143MCQ · 1 markEasyRegistration Requirements
What is the mandatory requirement for an entity to act as a portfolio manager in India?
AObtaining a certificate of registration from SEBI under the Portfolio Managers regulations.
BHaving a minimum net worth of fifty lakh rupees before starting operations.
CAppointing a Principal Officer with at least two years of experience in the securities market.
DFiling an application directly with the Reserve Bank of India.
How does a discretionary portfolio manager manage the funds of each client?
AIn accordance with the directions of the client, similar to a Mutual Fund.
BIndividually and independently, in a manner which does not partake character of a Mutual Fund.
CBy pooling funds from multiple clients for collective investment decisions.
DBy investing exclusively in below investment grade securities for higher returns.
Q145MCQ · 1 markMediumCost and Fees
An investor's portfolio managed by a PMS had a value of Rs 50 lakh. In year 1, it rose to Rs 60 lakh, and profit-sharing fees were calculated. In year 2, the portfolio value dropped to Rs 55 lakh. According to the high watermark principle, when would the next profit-sharing fee be calculated?
AWhen the portfolio value crosses Rs 50 lakh again.
BWhen the portfolio value crosses Rs 55 lakh again.
CWhen the portfolio value crosses Rs 60 lakh again.
DProfit-sharing fees are calculated annually regardless of the high watermark.
Q146MCQ · 1 markMediumPMS Fees
In the context of Portfolio Management Services (PMS) fees, what is the primary function of a 'Hurdle rate'?
AIt is the maximum percentage of profit a PMS manager can earn.
BIt is the minimum rate of return an investor must achieve before any fixed costs are applied.
CIt is the rate which must be crossed before the PMS would charge any extra profit-sharing fees to the investor.
DIt is the rate at which the fixed costs for the PMS are calculated.
Q147MCQ · 1 markHardRegistration Requirements
Which of the following statements is INCORRECT regarding the criteria SEBI considers before issuing a certificate of registration to a Portfolio Manager?
AThe applicant must be a body corporate.
BThe principal officer must have a minimum of two years of experience in related activities in the securities market.
CThe applicant must have appointed a compliance officer.
DThe applicant must have at least one additional employee (beyond Principal and Compliance Officer) with a graduation and at least two years of experience in related activities in the securities market.
According to SEBI regulations for Portfolio Managers, what is the minimum experience required for the principal officer of an applicant in related activities in the securities market?
AAt least two years
BAt least three years
CAt least five years
DAt least ten years
Q149MCQ · 1 markHardRegistration Requirements
Which of the following is NOT a mandatory condition for SEBI to consider before issuing a certificate of registration to a portfolio manager applicant?
AThe applicant has appointed a compliance officer.
BThe principal officer has at least five years of experience in related securities market activities.
CThe applicant is a partnership firm.
DThe applicant has in its employment at least one person with a graduation degree and two years of experience in the securities market.
Q150MCQ · 1 markMediumSEBI requirements on performance disclosure
Which of the following particulars is NOT explicitly required to be included in the Disclosure Document provided by a Portfolio Manager to a client?
AThe quantum and manner of payment of fees.
BPortfolio risks specific to each investment approach.
CDetails of the client's personal financial goals.
DDisclosures with respect to related parties as required under Accounting Standards issued by ICAI.
Q151MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI?
ATwo crore rupees
BThree crore rupees
CFive crore rupees
DTen crore rupees
Q152MCQ · 1 markMediumMinimum Investment
What is the minimum amount of funds or securities that a portfolio manager shall accept from a client?
ANot less than ten lakh rupees
BNot less than twenty-five lakh rupees
CNot less than fifty lakh rupees
DNot less than one crore rupees
Q153MCQ · 1 markMediumDirect Access Facility
What is the primary advantage for an investor choosing the 'direct access facility' when investing in a Portfolio Management Service (PMS)?
AAccess to exclusive investment strategies not available through regular plans.
BDirect control over all investment decisions, making it a non-discretionary service.
CLower costs due to the absence of intermediary commissions.
DGuaranteed higher returns compared to regular PMS plans.
Q154MCQ · 1 markHardCatch-up/No Catch-up Concept
A PMS agreement includes a hurdle rate of 10%. If the 'catch-up concept' is applied for calculating performance-linked fees, how are the fees determined when the portfolio generates a return exceeding 10%?
AFees are calculated only on the incremental gains above the 10% hurdle rate.
BFees are calculated on the full gains, starting from the first earning, to 'catch up' to the total earnings.
CFees are calculated only if the portfolio value is higher than the previous high watermark, ignoring the hurdle rate.
DThe portfolio manager does not charge any performance-linked fees under the catch-up concept.
Q155MCQ · 1 markMediumResponsibilities of a Portfolio Manager
What is the maximum percentage of a client's portfolio that a portfolio manager can invest in securities of their own associates/related parties, and what is required for this?
A10%, with a one-time verbal consent from the client.
B20%, with annual written consent from the client.
C30%, with a one-time written consent from the client.
D50%, with no specific consent required as long as it's disclosed.
Q156MCQ · 1 markMediumResponsibilities of a Portfolio Manager
Which of the following actions is explicitly prohibited for a Portfolio Manager regarding client funds or securities, as per SEBI regulations?
AMaintaining client funds in a separate account in a Scheduled Commercial Bank.
BSegregating each client’s holding in securities in separate accounts.
CBorrowing funds or securities on behalf of the client.
DInvesting up to 30% of a client’s portfolio in securities of own associates with one-time written consent.
Q157MCQ · 1 markMediumCost, expenses and fees
Under the 'high watermark principle' for PMS fees, if a portfolio's value drops after a fee calculation, when would the next profit-sharing fee be calculated?
AImmediately after the portfolio value recovers to its initial investment.
BOnly when the portfolio value crosses the previous highest level on which fees were paid.
CAnnually, regardless of the portfolio performance.
DOnly when the portfolio value exceeds the hurdle rate.
Q158MCQ · 1 markEasyRegistration Requirements
Which regulatory body issues the certificate of registration for a Portfolio Manager in India?
Which of the following is NOT a mandatory requirement for the Principal Officer of an applicant seeking registration as a portfolio manager?
AA professional qualification in finance, law, accountancy, or business management.
BExperience of at least five years in related activities in the securities market.
CRelevant NISM certification as specified by the regulator.
DGraduation from a foreign university with a Ph.D. in financial economics.
Q160MCQ · 1 markMediumSEBI requirements on performance disclosure
Which of the following information is NOT explicitly required to be included in the Disclosure Document provided by a Portfolio Manager to a client, as per SEBI regulations?
AThe quantum and manner of payment of fees.
BPortfolio risks specific to each investment approach.
CDisclosures with respect to related parties as required under Accounting Standards.
DA guarantee of minimum annual returns to the client.
Q161MCQ · 1 markMediumPMS Fees
According to the 'high watermark principle' in PMS fee calculation, under which scenario would a profit-sharing fee NOT be calculated for the current period?
AWhen the current fund value exceeds the previous high watermark.
BWhen the current fund value drops below the initial corpus investment value.
CWhen the current fund value is higher than the initial corpus but still below the previous high watermark.
DWhen the returns are lower than the hurdle rate, irrespective of the fund value.
Q162MCQ · 1 markMediumSEBI Requirements on Performance Disclosure
Which of the following details is NOT explicitly mentioned as a required inclusion in the Disclosure Document provided by a Portfolio Manager to a client?
AThe quantum and manner of payment of fees.
BPortfolio risks specific to each investment approach.
CDisclosures with respect to related parties as required under Accounting Standards.
DA guarantee of minimum returns over a specified period.
Q163MCQ · 1 markMediumPerformance Disclosure
What specific information regarding fees is a Portfolio Manager required to include in the Disclosure Document provided to clients?
AOnly the fixed percentage of the amount invested as a fee.
BThe quantum and manner of payment of fees for each activity and the range of fees charged under various heads.
CThe exact amount of performance-linked costs paid by other clients.
DA guarantee that the total fees will not exceed a certain percentage of returns.
Q164MCQ · 1 markEasyDirect Access Facility
What is the primary benefit for an investor opting for the 'direct access facility' in PMS, similar to direct plans in mutual funds?
AAccess to exclusive investment opportunities not available otherwise.
BLower costs due to the absence of intermediaries.
CA guarantee of higher returns compared to regular plans.
DDirect control over all investment decisions.
Q165MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant to obtain a certificate of registration as a Portfolio Manager from SEBI?
AOne crore rupees
BThree crore rupees
CFive crore rupees
DTen crore rupees
Q166MCQ · 1 markMediumRegistration Requirements - Principal Officer
Which of the following describes the experience requirement for the Principal Officer of an applicant seeking a Portfolio Manager registration from SEBI?
AAt least three years in related activities in the securities market.
BAt least five years in unrelated activities in the financial market.
CAt least five years in related activities in the securities market, including in a portfolio manager, stock broker, investment advisor, research analyst or as a fund manager.
DAt least two years as a fund manager only.
Q167MCQ · 1 markMediumRegistration Requirements
For an applicant seeking registration as a Portfolio Manager, what is the minimum experience required for the Principal Officer in related activities in the securities market?
AAt least two years
BAt least three years
CAt least five years
DAt least ten years
Q168MCQ · 1 markEasyRegistration Requirements
What is the minimum net worth requirement for an applicant seeking a certificate of registration as a Portfolio Manager from SEBI?
AOne crore rupees
BFive crore rupees
CTen crore rupees
DFifty lakh rupees
Q169MCQ · 1 markEasyCost, expenses and fees
What is the primary purpose of performance-linked costs in a Portfolio Management Service (PMS)?
ATo cover administrative expenses of the PMS.
BTo incentivize the fund manager to give a better performance.
CTo compensate for fixed costs regardless of investment outcome.
DTo reduce the overall expenses for the investor.
Q170MCQ · 1 markMediumPerformance Disclosure
Which of the following particulars is NOT explicitly required to be included in the Disclosure Document provided by a Portfolio Manager to a client, as per the text?
AThe quantum and manner of payment of fees.
BPortfolio risks specific to each investment approach.
CDetails of the portfolio manager's personal investment strategies for their own funds.
DDisclosures with respect to related parties as required under Accounting Standards issued by Institute of Chartered Accounts of India.
Q171MCQ · 1 markHardCost, Expenses and Fees
In the context of performance-linked fees for a PMS, what is the key difference between the 'catch-up' concept and the 'no catch-up' concept when a hurdle rate is crossed?
A'Catch-up' means fees are calculated on the full gains from the first earning above the hurdle rate, while 'no catch-up' considers only the incremental amount above the hurdle rate.
B'Catch-up' refers to the portfolio manager making up for previous losses before charging fees, whereas 'no catch-up' implies fees are charged irrespective of past performance.
C'Catch-up' applies only to discretionary portfolios, while 'no catch-up' applies to non-discretionary portfolios.
D'Catch-up' allows the portfolio manager to charge fees retroactively for periods below the hurdle rate, while 'no catch-up' strictly limits fees to current performance above the hurdle.
Q172MCQ · 1 markMediumRegistration Requirements
According to SEBI regulations, what is the minimum net worth requirement an applicant must fulfill to obtain a certificate of registration as a Portfolio Manager?
ATwo crore rupees
BThree crore rupees
CFive crore rupees
DTen crore rupees
Q173MCQ · 1 markHardCost, Expenses and Fees
According to the High Watermark Principle, if a client's portfolio value reaches Rs. 60 lakh in one year and profit-sharing fees are calculated, but then drops to Rs. 55 lakh the next year, when will the profit-sharing fee be calculated again?
AThe fee will be calculated as soon as the portfolio value exceeds Rs. 50 lakh again.
BThe fee will be calculated when the portfolio value crosses the previous high of Rs. 60 lakh.
CThe fee will be calculated based on any positive gain from Rs. 55 lakh, regardless of the previous high.
DThe fee will be calculated only after two consecutive years of positive returns.
Q174MCQ · 1 markMediumResponsibilities of a Portfolio Manager
According to SEBI regulations, what is the minimum value of funds or securities a portfolio manager shall accept from a client?
ATwenty-five lakh rupees
BFifty lakh rupees
COne crore rupees
DTen lakh rupees
Q175MCQ · 1 markMediumPerformance Disclosure
Which of the following details is NOT explicitly required to be included in the Disclosure Document provided by a Portfolio Manager to its clients, as per SEBI regulations?
AThe quantum and manner of payment of fees.
BPortfolio risks specific to each investment approach.
CDisclosures with respect to related parties as required under Accounting Standards.
DDetailed personal financial statements of the portfolio manager's employees.
Case-Based Questions (5 sets)
Case 1Case-Based · 1 mark eachPMS Registration and Responsibilities
Mr. Ajay Sharma, a 45-year-old software professional, has accumulated significant wealth over the years. With a current net worth of ₹12 Crores, primarily in fixed deposits and real estate, he is now looking to diversify his portfolio and achieve potentially higher returns through professional management. He is considering investing ₹70 lakhs in a Portfolio Management Service (PMS). He has heard about the various types of fees and regulatory requirements for PMS providers and wants to ensure he makes an informed decision. Ajay is also keen on understanding how his investment would be managed, especially concerning potential conflicts of interest and the transparency of charges. He is evaluating "Alpha Wealth Managers Pvt. Ltd." as a potential PMS provider, which claims to offer both discretionary and non-discretionary services.
Hard Sub-question 1
Alpha Wealth Managers proposes to invest 35% of Mr. Ajay Sharma's portfolio in securities of its own associate companies to leverage internal expertise. Additionally, Mr. Sharma is considering utilizing the direct access facility for his PMS. Which of these two propositions aligns correctly with SEBI regulations for PMS?
ABoth propositions are fully compliant and beneficial for Mr. Sharma.
BThe investment in associate companies is compliant, but the direct access facility is not always beneficial.
CThe investment in associate companies exceeds the regulatory limit, but the direct access facility is a valid option for cost saving.
DNeither proposition is aligned with SEBI regulations for PMS.
Medium Sub-question 2
For Alpha Wealth Managers Pvt. Ltd. to obtain a certificate of registration from SEBI, what is the minimum experience requirement for its Principal Officer in related activities in the securities market?
ATwo years in any financial services sector.
BThree years specifically as a fund manager.
CFive years in related activities including in a portfolio manager, stock broker, or investment advisor.
DSeven years in business management with NISM certification.
Medium Sub-question 3
Alpha Wealth Managers Pvt. Ltd. charges a performance fee based on the High Watermark principle. If Mr. Ajay Sharma's initial investment is ₹70 lakhs, the portfolio grows to ₹85 lakhs in Year 1, drops to ₹80 lakhs in Year 2, and then rises to ₹90 lakhs in Year 3 (assuming the hurdle rate is met in all profitable years). On what amount would the performance fee be calculated in Year 3?
A₹20 lakhs (₹90 lakhs - ₹70 lakhs)
B₹5 lakhs (₹90 lakhs - ₹85 lakhs)
C₹10 lakhs (₹90 lakhs - ₹80 lakhs)
DNo performance fee in Year 3 as it dropped in Year 2.
Easy Sub-question 4
In what specific capacity is Alpha Wealth Managers Pvt. Ltd. expected to act concerning Mr. Ajay Sharma's funds, as per SEBI regulations?
AAs an agent, executing trades on behalf of the client.
BAs a principal, investing its own funds alongside the client's.
CIn a fiduciary capacity, prioritizing the client's best interests.
DAs an advisor, providing recommendations without managing funds.
Easy Sub-question 5
Based on SEBI (Portfolio Managers) Regulations, 2020, is Mr. Ajay Sharma's proposed investment amount of ₹70 lakhs acceptable for a Portfolio Management Service?
ANo, because the minimum investment required is ₹1 crore.
BYes, as the minimum investment threshold is ₹50 lakhs.
CNo, as the minimum investment must be in securities, not cash.
DYes, but only if it's a non-discretionary portfolio.
Case 2Case-Based · 1 mark eachPortfolio Manager Regulations and Fees
Mr. Rajan Sharma, aged 52, and his wife, Mrs. Priya Sharma, aged 48, are a high net-worth couple residing in Mumbai. With their children settled abroad, they are looking to consolidate and professionally manage their investment portfolio, which currently stands at approximately ₹75 lakhs across various instruments. They are particularly interested in a Portfolio Management Service (PMS) to achieve their long-term financial goals, which include wealth appreciation and legacy planning.
They have been researching different PMS providers and have come across "Alpha Wealth Managers Pvt. Ltd.," a newly established firm seeking to obtain a certificate of registration from SEBI. Alpha Wealth Managers boasts a team with extensive experience, including a Principal Officer with over 10 years of experience in the securities market and relevant NISM certifications. The firm plans to offer both discretionary and non-discretionary services.
The Sharmas are keen to understand the regulatory requirements for a PMS, its responsibilities towards clients, and the various fee structures. They are particularly intrigued by the 'direct access facility' and how it might benefit them. They have decided to meet with an Investment Adviser to guide them through the process and help them make an informed decision about Alpha Wealth Managers and PMS in general.
Easy Sub-question 1
Based on the SEBI (Portfolio Managers Regulations), 2020, what is the minimum amount of funds or securities Mr. and Mrs. Sharma must commit to Alpha Wealth Managers Pvt. Ltd. to avail of their PMS services?
A₹25 lakh
B₹50 lakh
C₹75 lakh
D₹1 crore
Easy Sub-question 2
The Sharmas are considering the 'direct access facility' offered by Alpha Wealth Managers. What is the primary benefit of choosing this facility over a regular PMS plan?
AHigher guaranteed returns due to direct investment.
BAccess to exclusive investment strategies not available in regular plans.
CLower overall costs for the investor by cutting out intermediary commissions.
DMore frequent performance reports and direct interaction with the fund manager.
Medium Sub-question 3
Mr. and Mrs. Sharma are concerned about potential conflicts of interest. If Alpha Wealth Managers Pvt. Ltd. decides to invest in securities of its own associates/related parties, what is the maximum percentage of the client's portfolio that can be invested in such securities, and what condition applies?
AMaximum 20% with prior verbal consent from the client.
BMaximum 30% with a one-time written consent from the client.
CMaximum 50% without any specific consent required.
DNo investment is allowed in securities of associates/related parties.
Medium Sub-question 4
Alpha Wealth Managers Pvt. Ltd. is in the process of obtaining its registration from SEBI. Which of the following conditions related to its Principal Officer is mandatory for SEBI to issue a certificate of registration?
AThe Principal Officer must be a graduate in any discipline.
BThe Principal Officer must have at least five years of experience in related activities in the securities market and relevant NISM certification.
CThe Principal Officer must be involved in at least one litigation connected with the securities market.
DThe Principal Officer must have a net worth of at least ₹5 crore.
Hard Sub-question 5
The Sharmas are evaluating the fee structure of Alpha Wealth Managers, which includes a performance-linked fee. The agreement states a hurdle rate of 8% and employs the 'high watermark' principle for performance fee calculation. Their initial portfolio value is ₹75 lakhs. In Year 1, the portfolio grows to ₹85 lakhs. In Year 2, it drops to ₹80 lakhs. In Year 3, it recovers and grows to ₹90 lakhs. If the profit-sharing fee is 20% on gains above the hurdle rate (assuming 'no catch-up' for simplicity), at which point will the performance fee be calculated in Year 3, assuming the hurdle rate was crossed?
AOn the gains from ₹75 lakhs to ₹90 lakhs.
BOn the gains from ₹80 lakhs to ₹90 lakhs, provided the return exceeds 8%.
COn the gains from ₹85 lakhs to ₹90 lakhs, provided the return exceeds 8%.
DNo performance fee will be calculated in Year 3 because the portfolio dropped in Year 2.
Case 3Case-Based · 1 mark eachPortfolio Manager Registration and Client Responsibilities
Mr. Ajay Sharma, a seasoned professional with 7 years of experience in the securities market, including 3 years as a fund manager for a large mutual fund house, decides to establish his own Portfolio Management Service (PMS) firm, "Apex Wealth Managers Pvt. Ltd." He holds a professional qualification in finance and has completed the relevant NISM certifications. His company has a net worth of ₹6 crore, a well-equipped office space, and has appointed a dedicated compliance officer. Ajay also plans to hire Ms. Reena Kapoor, who has a graduation degree and 2.5 years of experience as an investment advisor, to join his team. He plans to offer both discretionary and non-discretionary services.
Meanwhile, Mrs. Priya Singh, a successful entrepreneur, is exploring options to manage her investable surplus of ₹75 lakh. She is looking for a personalized investment approach and is particularly interested in understanding the fee structures, including performance-linked fees, and the benefits of direct access facilities offered by PMS providers. She wants to ensure her chosen PMS adheres to all regulatory requirements and acts in her best interest, specifically concerning the maximum allocation to related parties and the segregation of funds.
Easy Sub-question 1
Based on the information provided, does Mr. Ajay Sharma meet the experience requirement to be the Principal Officer for Apex Wealth Managers Pvt. Ltd.?
ANo, because he only has 3 years of experience as a fund manager, which is less than the 5-year requirement.
BYes, because his total securities market experience of 7 years exceeds the 5-year requirement, and fund management experience is considered relevant.
CNo, because experience as a fund manager is not considered relevant for a Portfolio Manager's Principal Officer.
DYes, but only if he also has experience as a stockbroker or research analyst.
Hard Sub-question 2
Beyond the Principal Officer's qualification and the company's net worth, what critical aspects would SEBI also scrutinize for Apex Wealth Managers Pvt. Ltd.'s registration, particularly concerning its team and operational readiness, and how does Ms. Reena Kapoor's hiring contribute?
ASEBI would primarily check for a large marketing team; Ms. Kapoor's experience is irrelevant as she is not a Principal Officer.
BSEBI would verify the existence of a robust grievance redressal mechanism, research facilities, and that Ms. Kapoor, with her graduation and 2.5 years of experience, fulfills the requirement for at least one additional experienced employee.
CSEBI would focus on the applicant's past investment performance; Ms. Kapoor's role is mainly administrative.
DSEBI would only examine the capital structure; Ms. Kapoor's hiring is not a regulatory requirement.
Medium Sub-question 3
If Apex Wealth Managers Pvt. Ltd. offers Mrs. Priya Singh a performance-linked fee structure with a hurdle rate of 8% and applies the high watermark principle, under which condition would performance fees be calculated in a given financial year?
APerformance fees are always calculated if the portfolio generates any positive return.
BPerformance fees are calculated only if the portfolio return exceeds 8%, regardless of previous performance.
CPerformance fees are calculated only if the portfolio return exceeds 8% AND the current portfolio value surpasses the highest value on which fees were previously paid.
DPerformance fees are calculated if the portfolio value drops below the high watermark, to compensate for losses.
Easy Sub-question 4
Mrs. Priya Singh plans to invest ₹75 lakh with a PMS. Is this amount acceptable under SEBI (Portfolio Managers Regulations)?
ANo, the minimum investment required is ₹1 crore.
BYes, as the minimum acceptable fund or securities from a client is ₹50 lakh.
CNo, the minimum investment for discretionary PMS is ₹1 crore, while for non-discretionary it is ₹50 lakh.
DYes, but only if she opts for a direct access facility.
Medium Sub-question 5
Considering Mrs. Priya Singh's concern about the PMS adhering to regulatory requirements, what are the specific rules regarding a PMS investing in its own associates/related parties and the handling of client funds?
AA PMS can invest up to 50% of a client’s portfolio in its own associates/related parties with client consent, and all client funds must be pooled into one master account.
BA PMS can invest up to 30% of a client’s portfolio in its own associates/related parties with a one-time written client consent, and client funds must be kept in a separate account in a Scheduled Commercial Bank.
CA PMS is prohibited from investing in its own associates/related parties, and client funds must be held directly by the portfolio manager in cash.
DThere are no specific limits on investing in associates/related parties, but client funds must be segregated into individual client accounts, not pooled.
Case 4Case-Based · 1 mark eachPortfolio Management Services (PMS)
Mr. and Mrs. Sharma, both 45 years old, are high-net-worth individuals looking to optimize their investment portfolio. They have a combined annual income of ₹50 lakhs and have accumulated an investable corpus of ₹75 lakhs. They are considering investing ₹60 lakhs into a Portfolio Management Service (PMS) to benefit from professional management tailored to their financial goals, which include funding their children's higher education in 10 years and ensuring a comfortable retirement. They are comfortable with a moderate-to-high risk profile.
They have approached Ms. Priya Singh, a SEBI-registered Investment Adviser, for guidance. Ms. Singh has explained the various aspects of PMS, including the registration requirements for a PMS provider, their responsibilities, and the different fee structures like fixed fees, performance-linked fees, and concepts such as 'high watermark' and 'hurdle rate'. She also mentioned the 'direct access facility' offered by PMS providers. The Sharmas are particularly interested in understanding the regulatory framework governing PMS and how they can ensure they choose a reputable and compliant service.
Easy Sub-question 1
Based on the SEBI (Portfolio Managers) Regulations, what is the minimum amount of funds or securities that Mr. and Mrs. Sharma must commit to a portfolio manager?
A₹25 lakh
B₹50 lakh
C₹75 lakh
D₹1 crore
Easy Sub-question 2
When a firm applies for a Portfolio Manager registration with SEBI, which of the following details is mandatory to be included in Form A of Schedule I?
ADaily trading logs of the applicant.
BDetailed personal financial statements of all clients.
COrganization structure and a three-year business plan.
DList of all competitors and their market share.
Hard Sub-question 3
Ms. Priya Singh, the Investment Adviser, has recommended that Mr. and Mrs. Sharma consider a direct access facility for their PMS investment. Which of the following statements accurately reflects the benefits of this facility and a key requirement for a firm to obtain PMS registration from SEBI?
AThe direct access facility provides enhanced performance guarantees, and a PMS applicant's Principal Officer must have at least two years of experience in the securities market.
BThe direct access facility results in lower costs for the investor due to the absence of intermediaries, and a PMS applicant must have a net worth of at least five crore rupees.
CThe direct access facility offers a wider range of investment options not available through regular plans, and a PMS applicant can be an individual, not necessarily a body corporate.
DThe direct access facility allows investors to manage their portfolio directly, and the PMS applicant is not required to appoint a compliance officer.
Medium Sub-question 4
The Sharmas are evaluating the fee structure proposed by a PMS provider, which includes a performance-linked fee. The provider explains the 'High Watermark Principle'. If the Sharmas initially invest ₹60 lakhs, and their portfolio grows to ₹70 lakhs in the first year, then drops to ₹65 lakhs in the second year, what would be the basis for calculating performance fees in the third year, assuming all other conditions (like hurdle rate) are met and the previous high watermark was ₹70 lakhs?
APerformance fees would be calculated on any gains above ₹60 lakhs.
BPerformance fees would be calculated on any gains above ₹65 lakhs.
CPerformance fees would only be calculated if the portfolio value crosses ₹70 lakhs.
DPerformance fees would be calculated on the entire portfolio value of ₹65 lakhs.
Medium Sub-question 5
Mr. and Mrs. Sharma are concerned about the transparency and ethical conduct of their potential portfolio manager. Which of the following is a key responsibility of a portfolio manager regarding client funds, as per SEBI regulations?
AThe portfolio manager must pool all client funds into a single account for efficient management.
BThe portfolio manager shall keep the funds of all clients in a separate account to be maintained by it in a Scheduled Commercial Bank and segregate each client’s holding in securities in separate accounts.
CThe portfolio manager can invest up to 50% of a client’s portfolio in securities of their own associates/related parties without explicit consent.
DThe portfolio manager is permitted to borrow funds on behalf of the client for investment purposes.
Case 5Case-Based · 1 mark eachPMS Regulatory and Operational Aspects
Mr. and Mrs. Sharma, aged 45 and 42 respectively, are successful IT professionals based in Bengaluru. They have accumulated substantial savings of ₹70 lakh and are now looking for sophisticated investment avenues beyond traditional mutual funds. Having heard about Portfolio Management Services (PMS), they decide to explore this option for long-term wealth creation and approach a SEBI-registered Investment Adviser, Ms. Priya Singh.
The Sharmas are keen to understand not only the potential returns but also the regulatory framework, the responsibilities of a portfolio manager, and the fee structures involved. They specifically inquire about the minimum investment required, how their funds will be managed, and the various costs associated with PMS, particularly performance-linked fees.
Medium Sub-question 1
For a body corporate to be granted a certificate of registration as a Portfolio Manager, what is the minimum professional experience required for its Principal Officer in related activities in the securities market?
ATwo years
BThree years
CFive years
DTen years
Easy Sub-question 2
One of the fundamental responsibilities of a portfolio manager, as discussed with the Sharmas, is to act in a certain capacity with regard to the client's funds. What is this capacity?
AAs an agent representing the portfolio manager's interests.
BAs a trustee holding funds for a third party.
CIn a fiduciary capacity, prioritising the client's best interests.
DAs a custodian, merely safeguarding the assets.
Easy Sub-question 3
What is the minimum amount of funds or securities that a portfolio manager can accept from a client as per SEBI (Portfolio Managers) Regulations?
A₹10 lakh
B₹25 lakh
C₹50 lakh
D₹1 crore
Hard Sub-question 4
The Sharmas are informed about performance-linked fees, including the 'hurdle rate' and 'catch-up' concepts. If their PMS agreement includes a hurdle rate of 8% and a 'catch-up' concept for profit sharing, and their portfolio generated a 15% return in a year, how would the profit-sharing fee typically be calculated compared to a 'no catch-up' concept?
AUnder 'catch-up', fees are calculated only on the 7% (15%-8%) above the hurdle rate, similar to 'no catch-up'.
BUnder 'catch-up', fees are calculated on the full 15% return, whereas under 'no catch-up', it's only on the 7% above the hurdle rate.
CUnder 'catch-up', fees are calculated on the full 15% return, while 'no catch-up' means no fees are charged at all.
DThe 'catch-up' and 'no catch-up' concepts are only relevant if the returns are below the hurdle rate.
Medium Sub-question 5
When applying for a certificate of registration as a Portfolio Manager from SEBI, in which form is the application made, and which of the following details is NOT typically required in this application form itself?
AForm A of Schedule I; Business Plan for three years
BForm B of Schedule II; Financial Information
CForm A of Schedule I; Details of client's personal investment preferences
DForm B of Schedule I; Organization Structure
About this content: These practice questions are based on the
NISM-Series-X-A: Investment Adviser (Level 1) Certification Examination Workbook
published by the National Institute of Securities Markets (NISM), Mumbai.
NISM is a SEBI-established institution. Questions cover Portfolio Manager with verified answers and explanations.
BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI.
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