General Studies · Portfolio Management Services
Under a Non-Discretionary Portfolio Management Services (PMS) contract, what is the legally correct course of action for the Portfolio Manager if a major holding is crashing severely but the client is completely unreachable for communication?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The Manager should transfer the stock to a temporary suspense account and sell it from there to bypass the specific contract restrictions.
- 2The Manager can use emergency powers granted under the SEBI Code of Conduct to override the client's non-discretionary status for a limited period.
- 3The Manager must wait for the client's explicit instructions and cannot execute the trade, even if it leads to a total loss of the investment in that stock.✓
- 4The Manager should sell the stock immediately to fulfill his fiduciary duty of protecting the client's capital and inform the client later.
Correct answer
The Manager must wait for the client's explicit instructions and cannot execute the trade, even if it leads to a total loss of the investment in that stock.
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