NISM Series XXI-A key terms

A service in which a professional manager makes investment decisions and executes trades in a client's own demat account under a signed agreement, rather than pooling money into a collective fund.

A mandate in which the client authorises the portfolio manager to buy, sell and manage securities without seeking consent for each transaction, within the agreed investment objective and restrictions.

A mandate in which the portfolio manager recommends transactions and the client must approve each one before execution; the manager cannot act unilaterally in the client's account.

A service where the manager only provides investment advice on the client's securities and the client executes transactions independently, with no authority over the client's account.

The senior person designated by a portfolio manager to be responsible for overall supervision, compliance with regulations and reporting to the regulator; the appointment requires prior regulatory approval.

The mandatory certificate of registration a firm must obtain from the securities regulator before offering portfolio management services to clients in that jurisdiction.

The minimum owned funds a portfolio management firm must continuously maintain to hold registration, evidenced by a certificate from a practising chartered accountant.

The smallest sum a client may commit to a portfolio management service, prescribed by regulation so that the service remains aimed at investors able to bear the associated risk.

The written contract between client and portfolio manager that sets the mandate type, investment objective, fees, risk disclosures, reporting frequency and the rights and obligations of both parties.

Another name for the client contract governing the advisory or discretionary relationship, including scope of authority, custody arrangements, termination terms and dispute resolution.

The defined scope of authority and investment approach agreed with a client, covering asset classes, benchmark, risk limits and the level of decision-making discretion granted.

A written document recording the client's objectives, time horizon, risk tolerance, liquidity needs and permitted investments, which guides the manager's decisions and later performance review.

The structured assessment of a client's capacity and willingness to bear loss, used to match the client to a suitable strategy and asset allocation before the mandate begins.

The obligation to recommend or manage only products and strategies consistent with the client's documented objectives, risk profile, financial situation and experience.

The identity verification and due-diligence process that establishes who the client is, the source of funds and beneficial ownership before an account can be opened or serviced.

The end-to-end process of enrolling a new client: KYC checks, risk profiling, agreement signing, account opening, funding and initial portfolio construction.

The framework of client screening, transaction monitoring and suspicious-activity reporting that a portfolio manager must operate to prevent the service being used to launder funds.

The requirement that client money and securities be kept separate from the portfolio manager's own assets, typically held in the client's name or with an independent custodian.

An independent institution that safekeeps client securities and cash, settles trades and provides holdings statements, reducing the risk of manager misappropriation.

An account holding securities in electronic form; in portfolio management the client's own demat account is normally used so that holdings remain visible and attributable to the client.

The agreed basis on which the manager is paid, such as a flat fee on assets, a performance-linked fee, or a combination, including how and when charges are deducted.

A charge payable only when returns exceed a stated benchmark or hurdle, intended to align manager incentives with client outcomes; the calculation basis must be disclosed clearly.

A mechanism ensuring a performance fee is charged only on gains above the highest net asset value previously used for charging, so clients do not pay twice for recovered losses.

The minimum return the portfolio must achieve before a performance fee becomes payable, often set relative to a benchmark or a fixed percentage.

A client category, based on income, net worth or professional status, that may be offered certain products or lighter compliance formalities under the applicable regulatory framework.

The total market value of client assets managed by the firm at a point in time, used for fee computation, business reporting and regulatory thresholds.

The market value of a portfolio's holdings plus cash minus liabilities, divided by the number of units where units are used; the basis for valuation and fee calculation.

The periodic process of pricing holdings using prescribed methods, such as market prices for listed securities and documented fair-value approaches for illiquid assets.

A reference index or composite against which a portfolio's return and risk are measured to judge whether the manager added value.

The portion of return attributable to the manager's decisions rather than market movement, usually computed as portfolio return minus the return explained by benchmark exposure.

A measure of how much a portfolio's returns tend to move relative to the market; a beta above one indicates greater sensitivity than the benchmark.

The statistical dispersion of returns around their average, commonly expressed as standard deviation and used as a basic measure of investment risk.

The largest peak-to-trough fall in portfolio value over a period, expressed as a percentage, showing the worst loss an investor would have suffered.

Excess return over the risk-free rate divided by the standard deviation of returns; a higher value indicates better return per unit of total risk taken.

The standard deviation of the difference between portfolio returns and benchmark returns, indicating how closely the portfolio follows its stated benchmark.

The division of a portfolio among asset classes such as equity, debt and cash, which is a primary driver of long-term return and risk.

The periodic adjustment of holdings back to target weights after market movements or changes in the client's objectives, with associated transaction costs and tax consequences.

The analysis that decomposes portfolio return into components such as asset allocation, security selection and market movement, to explain how results were achieved.

The periodic disclosure to clients of holdings, transactions, valuation and returns, usually at least monthly, in a format that permits comparison with the agreed benchmark.

The documented process by which a client can complain about the service, including escalation levels, response timelines and referral to an external ombudsman or regulator.

The client's right to exit part or all of the portfolio, including notice periods, settlement timelines, exit-load treatment and how holdings are transferred out.

A charge deducted when a client withdraws funds or terminates the mandate within a specified period, designed to recover acquisition and setup costs.

A situation where the manager's own interests, related-party dealings or proprietary trading could disadvantage clients, requiring disclosure and often pre-trade allocation policies.

The duty to execute client orders on terms most favourable to the client, considering price, cost, speed and likelihood of settlement, and to document the policy followed.