Portfolio Management Services (PMS) Distributors Free Demo Test 1

As per the SEBI (Prohibition of Insider Trading) Regulations: The code of conduct shall specify the period, which in any event shall not be less than six months, within which a designated person who is a connected person of the listed company and is permitted to trade in the securities of such listed company, shall not execute a contra trade.

Therefore, the period to enter into a contra trade is greater than 6 months. Contra Trade (opposite trade: i.e., if you buy, then you cannot sell).

JANUARY EFFECT: In the US market, it is observed that investors tend to engage in tax selling toward the end of the year to book losses on stocks that have declined and buy back the same stocks or similar stocks after the new year.

This leads to downward pressure on stock prices towards the end of November and December and positive pressure in early January.

Information Coefficient is the measure of a manager’s skill in terms of accurately predicting the future outcome. This can be for any of the variables such as the financial performance of the company, macroeconomic data prediction, stock price movement, P/E expansion or contraction, business cycles, etc.

Information Coefficient is obtained by finding the correlation between expected and actual outcomes of strategies. So, the information coefficient is essentially a correlation coefficient, which like any other correlation ranges from -1 to +1.

While futures contracts and forward contracts share similarities as derivatives, their payoff structures are not identical due to differences in settlement methods and margining:

• Futures contracts are marked-to-market daily, meaning gains or losses are settled daily.
• Forward contracts, on the other hand, settle only at maturity, leading to a single payoff.

Thus, the statement that a futures contract has the same payoffs as a forward contract is false.

As per the SEBI circular, Portfolio Managers shall provide an option to clients to be onboarded directly, without intermediation of persons engaged in distribution services.

Portfolio Managers shall prominently disclose in its disclosure documents, marketing material, and on its website, about the option for direct on-boarding. At the time of onboarding of clients directly, no charges except statutory charges shall be levied.

A portfolio manager can invest in units of mutual funds through the direct plan. The portfolio manager cannot deploy the clients’ funds in bill discounting, badla financing, or for the purpose of lending or placement with corporate or non-corporate bodies.

Non-residents who are eligible to avail of the benefits of the relevant Double Taxation Avoidance Agreements (DTAA) may opt to be taxed as per such DTAA on their income earned in India to the extent that they are more benefiicial than the provisions of the ITA.

The non-residents, however, will be required to obtain a Tax Residency Certificate and also submit a duly completed Form No. 10-F along with supporting documents, to the extent applicable.

A Trust can invest in PMS with a minimum investment of Rs. 50 lacs.

The portfolio manager is required to preserve the books of account and other records and documents for the preceding five accounting years and furnish them to SEBI as and when required.