SECURITIES AND EXCHANGE BOARD OF INDIA
PRIMARY MARKET DEPARTMENT
Earnest House, 14th Floor, Nariman Point, Bombay 400 021
RPM circular No.1(93-94) October 20, 1993
To All Registered Portfolio Managers And Merchant Bankers in Category I & II Undertaking Portfolio Management Activities
Dear Sir,
With the passing of the Securities and Exchange Board of India Act, 1992 and notification of the Portfolio Managers Rules and Regulations, 1993, no person shall carry on any activity as a Portfolio Manager unless he is registered with SEBI under Section 12 of the Act. SEBI has granted Certificate of Registration to certain portfolio managers in terms of Rule 4 and Regulation 8 of SEBI (Portfolio Managers) Rules & Regulations, 1993. Besides this, certain Merchant Bankers in Category I and II covered under the proviso to Rule 3 of SEBI (Portfolio Managers) Rules, 1993 are also authorized to undertake portfolio management activities, whether as a registered portfolio manager or as a registered merchant banker, will hereinafter be referred to as Registered Portfolio Managers (RPM).
In terms of powers conferred on it under Section 11 of SEBI Act, 1992, SEBI shall, from time to time, issue operational guidelines / instructions to the Registered Portfolio Managers by means of circulars. This is the first circular in the series. Further circulars would bear continuous serial numbers, valid for the relevant financial year. All RPM should ensure compliance with instructions contained in such circulars.
A. REGISTRATION
1. The registration granted pursuant to Chapter II of the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, (hereinafter referred to as the “Regulations”) will be for the principal as well as for all the branch offices in India of the Portfolio Managers.
2. The registration number contained in the certificate of registration should be quoted in all the correspondence with SEBI, Government authorities, Stock Exchanges and its clients.
B. GENERAL
1. With a view to ensuring that all Rules, Regulations, Guidelines, Notifications etc. issued by SEBI, the Government of India and other regulatory organizations are complied with the Portfolio Manager shall designate a senor officer, as compliance Officer, who shall co-ordinate with regulatory authorities in various matters and provide necessary guidance as also ensure compliance internally. The Compliance Officer shall also ensure that observations made / deficiencies pointed out by SBEI in the functioning of the portfolio managers do not recur.
2. Correspondence relating to registration and clarifications on Guidelines / Circulars issued by SEBI shall be made only by the Principal Office of the Portfolio manager and not by the branch offices.
3. Necessary code of conduct for the officers and employees of the portfolio managers should be framed to prevent insider trading, in the light of SEBI (Insider Trading) Regulations, 1992.
4. Regulations 31 and 32 provide for penalty of suspension / cancellation of registration for persistent defaults by the Portfolio Managers. However, in order to give an opportunity to the Portfolio Managers to make up the deficiencies in their functioning and to strengthen their machinery, SEBI may issue warning letters or penalty point advices by which Portfolio Managers would be forewarned in respect of their omissions. A Portfolio Manager who despite the receipt of three warning letters or penalty point advices, does not show improvement or fails to make up the deficiencies, may be subjected to action for default in terms of Regulation 31 or 32 as the case may be.
C. REPORTING REQUIREMENTS FOR PORTFOLIO MANAGEMENT ACTIVITIES :
1. In terms of Regulations 20 & 23 of SEBI (Portfolio Managers) Regulations, 1993, the Board prescribes herewith the format (as given in Annexure I) in which a half-yearly report containing information on portfolio management activities is to be submitted to the Board by the RPMs.
2. The report is to be submitted twice a year, as on 31stMarch and 30th September.
3. The Report should reach the Board within thirty days of the period to which it relates.
4. Failure to submit the Report as above shall constitute a default and would render the RPM liable for action under Regulations 31 and 32 of SEBI (Portfolio Managers) Regulations, 1993.
D. GUIDELINES FOR ADVERTISEMENT BY PORTFOLIO MANAGERS
SEBI had circulated a Consultative Paper No. VIII on August 18, 1993 suggesting a Code of Advertisement to be followed by Portfolio Managers. On the basis of various suggestions and comments received from Merchant Bankers, Financial Institutions, Banks and Advertising Agencies, SEBI has since formulated a Code of Advertisement governing advertisements to be issued by Registered Portfolio Managers in connection with their activities. All RPMs are required to strictly observe the Code of Advertisement set out in Annexure II.
Please acknowledge receipt of this Circular.
Yours faithfully,
M.D. PATEL
EXECUTIVE DIRECTOR
Encl : as above
Annexure I
HALF YEARLY REPORTING REQURIEMENTS FOR PORTFOLIO MANAGEMENT ACTIVITIES
(To be submitted within 30 days, for the period ended 30/9 & 31/3 of each year after the end of respective period)
1. GENERAL INFORMATION
1.1 Name
1.2 Carrying on PMS activities as :-Merchant Banker (Cat I/II)OR Portfolio Manager
1.3 Registration no:-
2. INFORMATION RELATING TO CHANGES IN DIRECTORS / KEY MANAGEMENT PERSONNEL / NETWORTH
2.1 Directors resigned / appointed (during the reporting period).
Name of the directors; Date of registration; Reason for resignation.
Name & address of the New directors; Qualification; Experience; Date of appointment; directorships held in other companies.
2.2 Key management personnel resigned / appointed;
Names of persons left during the period; Designation; Reasons for leaving.
Names of persons joined during the period; Designation; Qualifications; Experience.
2.3 Capital Adequacy :-
Net worth as on 30/9 or 31/3 as the case may be;
(Issued Capital + Reserves – Loss – Misc Exp)
3. OTHER INFORMATION
3.1 Details of all settled and pending disputes;
(Names of the party / Nature of dispute/Pending/settled)
3.2 Indictment or involvement in any economic offence during this reporting period.]
3.3 Any other information considered relevant to the nature of services rendered by the Portfolio Manager.
3.4 Describe portfolio management schemes; Floated during the half year (Enclose a copy of typical contract entered into with the client for each sheme).
3.5 Enclose a list of approved share brokers whose services were utilised for PMS activities and state whether any of them were suspended for more than one week / had defaulted with any Stock Exchange authority
4. BUSINESS HANDLED DURING THE HALF YEAR
4.1 Portfolio Management Business
Individual Client Corporate Client
Res. Non-Res. Res Non-Res
(Discretionary Nature)
- Types of services offered
- No. of Portfolio clients
- Total amount of funds managed
- Average size of portfolio
- Average return to the client
- Average period of PM Schemes.
(Non-discretionary Nature)
- Types of services offered
- No. of Portfolio clients
- Total amount of funds managed
- Average size of portfolio
- Average return to the client
- Average period of PM Schemes
4.2 Only Portfolio Advisory Services i.e. without dealing in funds of clients :
(Indicate for both Resident / Non-resident clients)
4.3 List of Clients (Corporate clients only)
- Name and place
- Amount of portfolio fund managed
- service rendered.
4.4 Complaints :
- Total number of complaints received during the period
- No. of unresolved complaints
- Period for which complaints are pending (No. of days)
- Nature of pending complaints / reason for the same
- Average time taken for complaints redressal.
5. IRREGULARITIES (If any)
6. SPECIAL MATTER (if any)
Place : Authorised Signatory
Date :
Please enclose :
(1) A certificate duly signed by the Principal Officer stating that the information required under Regulation No. 23(ii) of SEBI (Portfolio Managers) Regulations, 1993 has been reported to SEBI.
(2) A certificate from the auditors relating to Portfolio Management activities are required under Regulation No. 20(2) of SEBI (Portfolio Managers) Regulations, 1993 and management’s comments on the adverse remarks if any, made by the auditor.
(If report pertains to the period ended March 31)
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Annexure II
Guidelines for Advertisements by Registered Portfolio Managers
For the purpose of these guidelines, the expression “advertisement” means notices, brochures, pamphlets, circulars, showcards, catalogues, hoardings, placards, posters, insertions in newspapers, pictures, films, radio / television programmes or through any electronic media”.
1. CODE OF ADVERTISEMENT
1.1 An advertisement shall be truthful, fair and clear and shall not contain any statement, promise or forecast which is untrue or misleading.
1.2 An advertisement shall be considered to be misleading if it contains –
(i) Statements made about the performance or activities of the Portfolio Manager in the absence of necessary explanatory or qualifying statements, which may give an exaggerated picture of the performance or activities of the Portfolio Manager, than what it really is.
(ii) An inaccurate portrayal of the past performance or portrayal in a manner which implies that past gains or income will be repeated in future.
1.3 The advertisement shall not be so designed in content and format or in print as to be likely to be misunderstood, or likely to disguise the significance of any statement. Advertisement shall not contain statements which directly or by implication or by omission mislead the investor.
1.4 The publicity literature should contain only information, the details of which are contained in the Portfolio Managers scheme particulars.
1.5 As the investors may not be sophisticated in legal or financial matters, care should be taken that the advertisement is set forth in a clear, concise and understandable manner. Extensive use of technical or legal terminology or complex language and the inclusion of excessive details which may detract the investors should be avoided.
1.6 The advertisement shall not contain information, the accuracy of which is to any extent dependent on assumptions.
1.7 If however, in any advertisement the Portfolio Manager, indicates any minimum rate of return or yield to the prospective investors, resources to back such a guarantee shall also be indicated.
1.8 The advertisement shall not compare one Portfolio Manager with another, implicitly or explicitly, unless the comparison is fair and all information relevant to the comparison is included in the advertisement.
2. OBSERVANCE OF CODE OF ADVERTISEMENT
2.1 Every Portfolio Manager shall strictly observe the Code of Advertisement set out in paragraph in I given above. Any breach of the Code would be construed as breach of Code of conduct set out in Schedule III to the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993.
3. AUTHORITY FOR ISSUE OF GUIDELINES
3.1 These guidelines have been issued in pursuance of sub-section (1) of Section 11 of Securities and Exchange Board of India Act, 1992 by way of measures for protection of the interests of investors in Securities and for orderly development and growth of the securities market.
