The correct answer is B because the restriction described is a legal and regulatory constraint. Such constraints are imposed by governing bodies to ensure compliance with laws and regulations, particularly for institutional investors like pension funds. These restrictions may include limits on asset types (e.g., equities) or geographic allocations (e.g., overseas investments).

• A is incorrect because liquidity constraints pertain to the ability to withdraw funds from the portfolio, not the composition of assets.
• C is incorrect because time horizon constraints relate to the duration over which investments are held, not the regulatory limits on asset types.