SEBI/HO/IMD/IMD-POD-1/P/CIR/2024/80 June 7, 2024
To,
All Portfolio Managers
Association of Portfolio Managers in India (‘APMI’)
Sir / Madam,
Subject: Master Circular for Portfolio Managers
A. For effective regulation of Portfolio Managers, the Securities and Exchange Board of India (“SEBI”) has been issuing various circulars from time to time. In order to enable the stakeholders to have an access to all the applicable requirements at one place, the provisions of the said circulars issued till November 30, 2022 were incorporated in the Master Circular for Portfolio Managers dated March 20, 2023.
B. Subsequently, various guidelines/directions were issued to Portfolio Managers by way of circulars/letters. In view of the same, the Master Circular dated March 20, 2023 has been updated to include all relevant circulars that were issued on/before March 31, 2024. The instant Master Circular supersedes the Master Circular for Portfolio Managers dated March 20, 2023.
C. Vide Master Circular for Portfolio Managers dated March 20, 2023, the guidelines/directions contained in the circulars listed out in the Annexure Z to that Master Circular were rescinded. In addition, with the issuance of this Master Circular, the guidelines/directions contained in the circulars listed out at Sr. Nos.33-36 in the Appendix to this Master Circular, to the extent they relate to the Portfolio Managers, shall stand rescinded.
D. With respect to the directions or other guidance issued by SEBI, as specifically applicable to Portfolio Managers, the same shall continue to remain in force in addition to the provisions of any other law for the time being in force. Terms not defined in this Master Circular shall have the same meaning as provided under the relevant Regulations.
E. Notwithstanding such rescission,
E1. anything done or any action taken or purported to have been done or taken under the rescinded circulars, including registrations or approvals granted, fees collected, registration suspended or cancelled, any inspection or investigation or enquiry or adjudication commenced or show cause notice issued prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular;
E2. any application made to SEBI under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular;
E3. the previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the rescinded circulars, any penalty, incurred in respect of any violation committed against the rescinded circulars, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if the rescinded circulars have never been rescinded;
F. Pursuant to issuance of this Master Circular, the entities which are required to ensure compliance with various provisions shall submit necessary reports as envisaged in this Master Circular on a periodic/ continuous basis.
G. This Master Circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
H. This Master Circular is available on the SEBI website at https://www.sebi.gov.in/ under the category “Legal -> Master Circulars”.
Yours faithfully,
Peter Mardi
Deputy General Manager
Investment Management Department
Tel: 022 – 26449233
Email: [email protected]
TABLE OF CONTENTS
ABBREVIATIONS ……………………………………………………………………………………………………….. 7
1. REGISTRATION AND POST-REGISTRATION ACTIVITY ………………………………….. 8
1.1. Application procedure for registration as Portfolio Manager …………………. 8
1.2. General Registration Guidelines ……………………………………………………………….. 8
1.3. Clarification for Same Group Entities ……………………………………………………….. 9
1.4. Co-investment Portfolio Management Services …………………………………….. 11
1.5. Procedure for seeking prior approval for change in control of SEBI registered Portfolio Managers …………………………………………………………………………….. 12
1.6. Format of Net worth calculation ………………………………………………………………. 14
1.7. Certificate of associated persons in the Securities Markets …………………. 15
2. OPERATING GUIDELINES ……………………………………………………………………………….. 18
2.1 Guidelines for advertisement by Portfolio Managers …………………………….. 18
2.2 Maintenance of Clients’ Funds in a separate Bank Account by Portfolio Managers ……………………………………………………………………………………………………………….. 18
2.3 Direct on-boarding of clients by Portfolio Managers …………………………….. 19
2.4 Supervision of Distributors ……………………………………………………………………… 20
2.5 Clarification on minimum investment amount by clients and schemes 21
2.6 Written down policies by Portfolio Manager…………………………………………… 22
2.7 Fair and equitable treatment of all clients ………………………………………………. 22
2.8 Cyber Security and Cyber Resilience framework for Portfolio Managers ……………………………………………………………………………………………………………….. 24
2.9 Valuation of Securities by Portfolio Managers……………………………………….. 25
3. INVESTMENTS BY PORTFOLIO MANAGERS ………………………………………………… 27
3.1 Transaction in Corporate Bonds through Request for Quote platform by Portfolio Management Services (PMS)………………………………………………………………… 27
3.2 Investment in Derivatives ………………………………………………………………………… 28
3.3 Participation of Portfolio Managers in Commodity Derivatives Market in India ………………………………………………………………………………………………………………….. 29
3.4 Limits on investment in securities of associates/ related parties of Portfolio Managers ……………………………………………………………………………………………….. 31
3.5 Prior consent of the client regarding investments in the securities of associates/related parties…………………………………………………………………………………….. 32
3.6 Minimum credit rating of securities for investments by Portfolio Managers ………………………………………………………………………………………………………………. 34
3.7 Applicability of above provisions: …………………………………………………………… 35
4. DISCLOSURE REQUIREMENTS ………………………………………………………………………. 37
4.1 Material change in Disclosure Document ……………………………………………….. 37
4.2 Clause in Disclosure Document/ Client agreement/ Power of attorney .. 37
4.3 Disclosure of fees and charges……………………………………………………………….. 38
4.4 Publishing of Investor Charter by Portfolio Managers on their websites ………………………………………………………………………………………………………………… 38
4.5 Performance Disclosure by Portfolio Managers …………………………………….. 39
4.6 Nomenclature ‘Investment Approach’ …………………………………………………….. 41
4.6A. Performance Benchmarking ………………………………………………………………………. 42
4.7 Disclosure of details of related party investments by Portfolio Managers ………………………………………………………………………………………………………………. 43
5. REPORTING REQUIREMENTS ………………………………………………………………………… 45
5.1 Submission of monthly report by Portfolio Managers …………………………… 45
5.2 Submission of compliance reports by Portfolio Manager …………………….. 46
5.3 Firm-level performance reporting by Portfolio Managers ……………………… 47
5.4 Offsite Inspection data reporting to SEBI ……………………………………………….. 49
5.5 Reporting to clients by Portfolio Managers ……………………………………………. 51
5.6 Reporting of Performance to Clients ………………………………………………………. 51
6. FEES AND CHARGES ………………………………………………………………………………………. 55
6.1 Regulation of Fees and Charges ……………………………………………………………… 55
7. GRIEVANCE REDRESSAL ……………………………………………………………………………….. 59
7.1 Dispute Resolution …………………………………………………………………………………… 59
7.2 Disclosure of Investor Complaints by Portfolio Managers on their websites ………………………………………………………………………………………………………………… 59
ANNEXURES …………………………………………………………………………………………………………….. 60
Annexure 1A: Online Processing of Portfolio Manager Applications ………………. 61
Annexure 2A: Guidelines for Advertisements by Registered Portfolio Managers …………………….. 63
Annexure 2B: Code of Conduct for Distributors of Portfolio Management Services ……………………… 65
Annexure 2C: Cyber Security and Cyber Resilience framework ………………………. 67
Annexure 3A: Format of obtaining the consent from the client ………………………… 80
Annexure 4A: Illustration for Annexure on Fees and Charges………………………….. 83
Annexure 4B: Format of Investor Charter in Respect of Portfolio Management Services …………… 86
Annexure 4C: Format for disclosure of Performance of the Portfolio Manager . 96
Annexure 5A: Format for Monthly Report to SEBI ……………………………………………… 97
Annexure 5B: Offsite Inspection Reporting Formats ……………………………………….. 103
Annexure 5C: Details of reporting requirements as per the provisions of the
Master Circular ……………………………………………………………………………………………………. 139
Annexure 5D: Format of Quarterly Reporting to Client ……………………………………. 141
Annexure 7A: Format of Complaint data to be displayed by the Portfolio Managers ………………….. 148
APPENDIX: LIST OF CIRCULARS RESCINDED ……………………………………………………….. 150
POLICY RELATED LETTERS/EMAILS ISSUED BY SEBI……………………………………. 154
- Performance benchmarking of Portfolio Managers …………………………………….. 154
- Reply to your queries raised for the matter pertaining to Performance
- Benchmarking of Portfolio Managers …………………………………………………………………… 157
- Formats for annual submissions by Portfolio Managers- Proposal on the Formats …… 160
- Clarification regarding Clause 2.6 and 2.7 of SEBI Master Circular for Portfolio Managers . 166
- Provision for Submission of Compliance Reports of PMS through the SEBI Intermediary Portal …………………………………………………………………………………………………. 168
APMI Guidelines/Circulars—————————————————– Refer APMI Website
ABBREBRIATIONS
Alternative Investment Fund | AIF |
Assets Under Management | AUM |
Association of Mutual Funds in India | AMFI |
AMFI Registration Number | ARN |
Bombay Stock Exchange | BSE |
Chartered Accountant | CA |
Company Secretary | CS |
Corporate Bonds s | CBs |
Dealing Team | DT |
Financial Year | FY |
Foreign Portfolio Investor | FPI |
Know Your Client | KYC |
National Company Law Tribunal | NCLT |
National Institute of Securities Markets | NISM |
One to Many | OTM |
One to One | OTO |
Portfolio Management Services | PMS |
Portfolio Manager | PM |
Request for Quote platform of stock exchanges | RFQ |
SEBI (Portfolio Managers) Regulations 2020 | the PM Regulations |
SEBI Complaints Redress System | SCORES |
Securities and Exchange Board of India | SEBI |
Time Weighted Rate of Return | TWRR |
1. REGISTRATION & POST REGISTRATION ACTIVITIES
1. REGISTRATION AND POST-REGISTRATION ACTIVITY
1.1. Application procedure for registration as Portfolio Manager[1]
1.1.1. All entities desirous to be registered as Portfolio Manager, are required to file an online application on SEBI Intermediary Portal (https://siportal.sebi.gov.in)[2].
1.1.2. An applicant is required to furnish the application in Form A as specified in the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 (“PM Regulations”), to SEBI for registration as a Portfolio Manager. On receipt of ‘Form A’, SEBI may seek further information for processing the application. Any information sought by SEBI has to be responded in detail and supported by relevant documents.
1.1.3. The information submitted to SEBI at the time of registration, shall be full and complete in all respects, otherwise it may delay processing of the registration application.
1.1.4. Online process for Fresh Registrations and Updation of Information is given in Annexure 1A of this Master Circular[3].
1.2. General Registration Guidelines[4]
1.2.1. The registration granted to a portfolio manager under Chapter II of the PM Regulations is for the principal office as well as for all the branch offices of the portfolio manager in India.
1.2.2. The portfolio manager shall mention its registration number contained in the certificate of registration in all the correspondence with SEBI, other authorities, Stock Exchanges and the clients of the portfolio manager.
1.2.3. With a view to ensuring that all Rules, Regulations, Guidelines, Notifications etc. issued by SEBI, the Government of India and other regulatory authorities are complied with, the Portfolio Manager shall designate a senior 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 inter alia ensure that the observations made / the deficiencies pointed out by SEBI in the functioning of the portfolio managers do not recur.
1.2.4. 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 any of its branch offices.
1.2.5. The portfolio managers shall have a code of conduct as envisaged under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.
1.3. Clarification for Same Group Entities[5]
1.3.1. SEBI may consider grant of certificate to an applicant, notwithstanding that another entity in the same group has been previously granted registration by SEBI, if the following conditions are fulfilled:
1.3.1.1. The entities are incorporated as separate legal entities.
1.3.1.2. The entities have independent Board of Directors.
Explanation: Independent Board of Directors for this purpose means that common directors should not be in majority in both the Boards.
1.3.1.3. There is arm’s length relationship with reference to their operations.
1.3.1.4. The key personnel and infrastructure are independently available for each entity.
1.3.1.5. Each entity has independent regulatory control and supervisory mechanism.
1.3.2. It is also clarified that whenever as per the above policy, two entities in the same group are granted registration, any action by way of suspension or cancellation of registration taken by SEBI against one entity, may entail action against other entities of the same group, under the Intermediaries Regulations.
Explanation: For the purposes of this Master Circular, two entities are considered to be in the same group if:
1.3.2.1. the same person, by himself or in combination with relatives, directly or indirectly exercises control over both the entities or,
1.3.2.2. one is an ‘associate company’ of another and for this purpose, ‘associate company’ shall mean ‘associate company’ as defined under sub-section (6) of section 2 of the Companies Act,2013, or
1.3.2.3. where one entity directly or indirectly exercises ‘control’ over the other entity and for this purpose, ‘control’ as defined under the Regulation 2(1)(e) of the PM Regulations shall be referred.
1.4. Co-investment Portfolio Management Services
1.4.1. [6]The Co-investment portfolio management services shall be provided in the following manner:
1.4.1.1. A Manager of Category I or Category II Alternative Investment Fund (“AIF”) who is also a SEBI registered Portfolio Manager, and intends to act as Co-investment Portfolio Manager and offer Co-investment services through portfolio management route, shall do so only under prior intimation to SEBI.
1.4.1.2. Any other Manager of Category I or Category II AIF, who is not a SEBI registered Portfolio Manager, and intends to act as Co-investment Portfolio Manager and offer Co-investment services through portfolio management route, shall seek registration from SEBI as a Portfolio Manager in terms of the PM Regulations. Pursuant to the grant of registration, if such Portfolio Manager is desirous of offering portfolio management services other than Co-investment, the same shall be subject to compliance with all provisions of the PM Regulations including eligibility criteria, and with the prior approval of SEBI.
1.5. Procedure for seeking prior approval for change in control of SEBI registered Portfolio Managers[7] [8]
1.5.1. The PM Regulations provides that a Portfolio Manager shall obtain prior approval of SEBI in case of change in control in such manner as may be specified by SEBI. Accordingly, it has been decided that all SEBI registered Portfolio Managers shall comply with the following in case they propose a change in control:
1.5.1.1. An online application shall be made by Portfolio Manager to SEBI for prior approval through the SEBI Intermediary Portal (https://siportal.sebi.gov.in).
1.5.1.2. The prior approval granted by SEBI shall be valid for a period of six months from the date of such approval.
1.5.1.3. Applications for fresh registration pursuant to change in control shall be made to SEBI within six months from the date of prior approval.
1.5.1.4. Pursuant to grant of prior approval by SEBI, in order to enable existing investors/ clients to take well informed decision regarding their continuance or otherwise with the changed management, the Portfolio Manager shall inform its existing investors/ clients about the proposed change prior to effecting the same and give an option to exit without any exit load, within a period of not less than 30 calendar days, from the date of such communication.
1.5.1.5. In matters which involves scheme(s) of arrangement which needs sanction of the National Company Law Tribunal (“NCLT”) in terms of the provisions of the Companies Act, 2013, the Portfolio Managers shall ensure the following:
1.5.1.5.1. The application seeking approval for the proposed change in control under PM Regulations shall be filed with SEBI prior to filing the application with NCLT;
1.5.1.5.2. Upon being satisfied with compliance of the applicable regulatory requirements, in-principle approval shall be granted by SEBI;
1.5.1.5.3. The validity of such in-principle approval shall be three months from the date of such approval, within which the relevant application shall be made to NCLT;
1.5.1.5.4. Within 15 days from the date of order of NCLT, Portfolio Manager shall submit an online application in terms of paragraph 1.5.1.1 of this Master Circular along with the following documents to SEBI for final approval:
- Copy of the NCLT Order approving the scheme;
- Copy of the approved scheme;
- Statement explaining modifications, if any, in the approved scheme vis-à-vis the draft scheme and the reasons for the same; and
- Details of compliance with the conditions/ observations mentioned in the in-principle approval provided by SEBI.
1.5.1.5.5. All other provisions mentioned at paragraphs 1.5.1.2 to 1.5.1.4 of this Master Circular regarding the procedure for seeking prior approval for change in control of Portfolio Managers, shall also apply.
1.6 Format of Net Worth Calculation9
1.6.1 Following format shall be followed by Portfolio Managers for calculation of Networth:
The statement of networth of ………. based on audited/unaudited accounts as on ……..
Amount | |
Paid up Capital | |
Add: Free Reserves (excluding reserves created out of revaluation) | |
Less: Deferred expenditure not written off (including miscellaneous expenses not written off) | |
Less: Minimum Capital Adequacy / networth requirement for any other activity undertaken other than SEBI Regulations | |
Networth | xxxxx |
1.7. Certificate of associated persons in the Securities Markets
1.7.1. For employees of Portfolio Managers10
9 SEBI Circular No. IMD/DOF I/PMS/Cir- 5/2009 dated July 31, 2009
10 Gazette No. SEBI/LAD-NRO/GN/2021/49 dated September 7, 2021
1.7.1.1. The associated persons functioning as principal officer of a Portfolio Manager or employee(s) of the Portfolio Manager having decision making authority related to fund management, shall obtain certification from the National Institute of Securities Markets by passing the NISMSeries-XXI-B: Portfolio Managers Certification Examination as mentioned in the communiqué No. NISM/ Certification/Series-XXI-B: Portfolio Managers (PM) Certification/2021/01 dated June 15, 2021 issued by the National Institute of Securities Markets.
1.7.1.2. The Portfolio Managers shall ensure that all such associated persons who are principal officers or employees having decision making authority related to fund management as on the date of this notification obtain the certification by passing the NISM-Series-XXI-B: Portfolio Managers Certification Examination within two years from the date[9] of the notification:
Provided that a Portfolio Manager, who engages or employs any such associated person who is a principal officer or an employee having decision making authority related to fund management, after the date[10] of the Gazette Notification No. SEBI/LAD-NRO/GN/2021/49, shall ensure that such person obtains certification by passing the NISMSeries-XXI-B: Portfolio Managers Certification Examination within one year from the date of their employment.
1.7.2. For distributors of Portfolio Managers[11]
1.7.2.1. The associated persons, engaged by a Portfolio Manager as a distributor of the Portfolio Management Services, shall obtain certification from the National Institute of Securities Markets by passing the NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination as mentioned in the communiqué No. NISM/Certification/Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination/2021/01 dated February 16, 2021 issued by the National Institute of Securities Markets.
1.7.2.2. The Portfolio Managers shall ensure that all such associated persons who are distributors of the Portfolio Management Services as on the date[12] of the notification obtain the certification by passing the NISMSeries-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination within two years from the date of the notification:
Provided that a portfolio manager, who engages or employs any such associated person who is a distributor of the Portfolio Management Services, after the date[13] of the notification, shall ensure that such person obtains certification by passing the NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination within one year from the date of their employment:
Provided further that an associated person, who being a distributor of the Portfolio Management Services, has obtained any of the following registration/ certification as on the date of this notification
(a) a valid AMFI Registration Number (ARN)
(b) NISM Series-V-A exam certification
shall be exempted from the requirement of obtaining certification by passing the NISM Series XXI-A Portfolio Management Services (PMS) Distributors Certification Examination till the validity of the said Registration/Certification.
[1] SEBI/RPM CIRCULAR NO.2 (2002-2003) dated January 14, 2003
[2] SEBI/HO/MIRSD/MIRSD1/CIR/P/2017/38 dated May 02, 2017
[3] Online Process of Portfolio Manager applications dated September 21, 2010
[4] RPM circular No.1(93-94) dated October 20, 1993
[5] SEBI RPM CIRCULAR NO.1 (2002-2003) dated September 17, 2002
[6] SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 dated December 10, 2021
[7] SEBI/HO/IMD-I/DOF1/P/CIR/2021/564 dated May 12, 2021
[8] SEBI/HO/IMD-1/DOF1/P/CIR/2022/77 dated June 02, 2022
[9] SEBI Gazette No. SEBI/LAD-NRO/GN/2021/49 dated September 7, 2021
[10] SEBI Gazette No. SEBI/LAD-NRO/GN/2021/49 dated September 7, 2021
[11] SEBI Gazette No. SEBI/LAD-NRO/GN/2021/48 dated September 7, 2021
[12] SEBI Gazette No. SEBI/LAD-NRO/GN/2021/48 dated September 7, 2021
[13] SEBI Gazette No. SEBI/LAD-NRO/GN/2021/48 dated September 7, 2021
2. OPERATING GUIDELINES
2.1. Guidelines for advertisement by Portfolio Managers[1]
2.1.1. SEBI has formulated a Code of Advertisement governing any advertisements issued by the Portfolio Managers in connection with their activities. All Portfolio Managers registered with SEBI are required to strictly observe the Code of Advertisement set out in Annexure 2A of this Master Circular.
2.2. Maintenance of Clients’ Funds in a separate Bank Account by Portfolio Managers[2]
2.2.1. The PM Regulations[3] states that “the portfolio manager shall segregate each client’s funds and portfolio of securities and keep them separately from his own funds and securities and be responsible for safekeeping of clients’ funds and securities.”
2.2.2. With regard to the above, it is clarified that Portfolio Managers may keep the funds of all clients in a separate bank account maintained by the Portfolio Managers subject to the following conditions:
2.2.2.1. There shall be a clear segregation of each client’s fund through proper and clear maintenance of back office records,
2.2.2.2. Portfolio Managers shall not use the funds of one client for another client,
2.2.2.3. Portfolio Managers shall also maintain an accounting system containing separate client-wise data for their funds and provide statement to clients for such accounts at least on monthly basis,
2.2.2.4. Portfolio Managers shall reconcile the client-wise funds with the funds in the aforesaid bank account on daily basis.
2.2.3. With respect to investment in short term Liquid Mutual Funds by Portfolio Managers, it is clarified that pending investment of funds, any short term deployment of funds in Liquid Mutual Funds for the purpose of cash management shall be maintained on the lines as per paragraph 2.2.2 of this Master Circular[4].
2.3. Direct on-boarding of clients by Portfolio Managers[5]
2.3.1. Portfolio Managers shall provide an option to clients to be on-boarded directly, without intermediation of persons engaged in distribution services.
2.3.2. Portfolio Managers shall prominently disclose in its Disclosure Documents, marketing material and on its website, about the option for direct on-boarding.
2.3.3. At the time of on-boarding of clients directly, no charges except statutory charges shall be levied.
2.3.4. The above provisions with respect to direct on-boarding of clients shall not be applicable to Co-investment portfolio management services[6].
2.4. Supervision of Distributors[7]
2.4.1. The Portfolio Managers shall:
2.4.1.1. Ensure that any person or entity involved in the distribution of its services is carrying out the distribution activities in compliance with the PM Regulations and circulars issued thereunder from time to time.
2.4.1.2. Pay fees or commission to distributors only on trail-basis. Further, any fees or commission paid shall be only from the fees received by Portfolio Managers.
2.4.1.3. Ensure that prospective clients are informed about the fees or commission to be earned by the distributors for on-boarding them to specific investment approaches.
2.4.1.4. Ensure that distributors abide by the Code of Conduct as specified in Annexure 2B of this Master Circular.
2.4.1.5. Have mechanism to independently verify the compliance of its distributors with the Code of Conduct.
2.4.1.6. Ensure that, within 15 days from the end of every financial year, a selfcertification is also received from distributors with regard to compliance with Code of conduct.
2.5. Clarification on minimum investment amount by clients and schemes [8]
2.5.1. The Portfolio Managers shall ensure the following;
2.5.1.1. To ensure compliance with the PM Regulations, the first single lumpsum investment amount received as funds or securities from clients should not be less than ₹50 Lakh[9].
2.5.1.2. Portfolio Managers shall not organize investment portfolios as ‘Schemes’ akin to Mutual Fund Schemes while marketing their services to clients.
2.6. Written down policies by Portfolio Manager25
2.6.1. Portfolio Managers shall put in place a written down policy (“policy”), in compliance with the PM Regulations and circulars issued thereunder, which inter-alia detail the specific activities, role and responsibilities of various teams engaged in fund management, dealing, compliance, risk management, back-office, etc., with regard to management of client funds and securities including the order placement, execution of order, trade allocation amongst clients and other related matters.
2.6.2. Portfolio Managers shall also put in place a specific policy, in compliance with the PM Regulations and circulars issued thereunder, which shall interalia provide for the following:
2.6.2.1. Specific situations (not generic) wherein the orders shall be placed for each client individually or pooled from trading account of Portfolio Manager.
2.6.2.2. Scenarios / situations in which deviation from the allotment of securities as intended at the time of placement of order would be permissible, if at all.
2.6.2.3. Scenarios, wherein, the Portfolio Manager is required to place certain margins / collaterals in order to execute certain transactions, details on how such margins / collaterals shall be segregated / placed from amongst various clients, without affecting the interest of any client.
2.6.2.4. Deviations, if any, shall be on account of exigency only and require prior written approval of the Principal Officer and Compliance officer of the Portfolio Manager with a detailed rationale for such deviation.
2.6.3. The aforesaid policies as mentioned at paragraphs 2.6.1 & 2.6.2 shall be approved by the Board / equivalent body of the Portfolio Manager.
2.7. Fair and equitable treatment of all clients
2.7.1. Portfolio Managers shall ensure that all clients are treated in a fair and equitable manner and ensure compliance with the following:
2.7.2. Requirements with respect to investments in all instruments: 26
2.7.2.1. Portfolio Managers shall constitute a dealing team (DT) which shall be responsible for order placement and execution of all orders in accordance with the aforesaid policies of the Portfolio Manager. DT may include the Principal Officer or the person appointed in terms of Regulation 7(2) (e) of the PM Regulations.
2.7.2.2. Portfolio Managers shall ensure that DT is suitably staffed and comply with the following:
2.7.2.2.1. All conversations of DT shall be only through the dedicated recorded telephone lines or through emails from authorized email ids.
2.7.2.2.2. Mobile phones or any other communication devices other than the recorded telephone lines shall not be allowed inside the dealing room.
2.7.2.2.3. Access to internet facilities on computers and other devices inside
the dealing room shall be restricted and shall only be used for activities related to trade execution.
2.7.2.2.4. Entry/access to the dealing room shall be restricted to authorized employees as defined in the aforementioned policies of the Portfolio Manager.
2.7.2.2.5. There shall be no sharing of information through any mode, except for trade execution under the approved policies of the Portfolio Manager.
2.7.3. For equity, equity-related instruments and Mutual Funds units
2.7.3.1. Portfolio Managers with assets under management of INR 1000 crores or more under discretionary and non-discretionary services, shall have in place an automated system with minimal manual intervention for ensuring effective funds and securities management including order management and allocation of securities to each client.
2.7.3.2 The aforesaid system shall inter-alia clearly capture details with respect to pre-order placement allocation as well as final allocation of trades to clients along with instances of deviation, if any, as mentioned at paragraph 2.6.2.4 above.
2.7.4. Portfolio Managers shall maintain an audit trail of all activities related to management of funds and securities of clients including order placement, trade execution and allocation. Further, there shall be time stamping with respect to order placement, order execution and trade allocation.
2.8 Cyber Security and Cyber Resilience framework for Portfolio Managers[1]
2.8.1. With rapid technological advancement in the securities market, there is a greater need for maintaining robust cyber security and to have a cyberresilience framework to protect the integrity of data and guard against breaches of privacy.
2.8.2. As part of the operational risk management, the Portfolio Managers need to have robust cyber security and cyber resilience framework in order to provide essential facilities and services and perform critical functions in the securities market as Portfolio Manager.
2.8.3. Accordingly, all Portfolio Managers with asset under management of INR 3000 crore or more, under discretionary and non-discretionary portfolio management service taken together, as on the last date of the previous calendar month shall comply with the provisions of Cyber Security and Cyber Resilience as placed at Annexure 2C.
2.8.4. Portfolio Managers and APMI shall take necessary steps for implementing the above provisions, including putting the required processes and systems in place to ensure compliance with these provisions.
2.9. Valuation of Securities by Portfolio Managers[2]
2.9.1. APMI shall prescribe standardized valuation norms for Portfolio Managers, same as the corresponding norms applicable to the Mutual Funds. Valuation of the portfolio debt and money market securities by portfolio managers shall be carried out in accordance with these standardized valuation norms prescribed by APMI.
2.9.2. APMI shall empanel valuation agencies for the purpose of providing security level prices to Portfolio Managers. Portfolio Managers shall mandatorily use valuation services obtained only from one or more of such empanelled valuation agencies for the purpose of valuation of debt and money market securities in portfolios managed by them. The ultimate responsibility for fair valuation shall be that of the Portfolio Manager.
[1] Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/046 dated March 29, 2023
[2] Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2022/172 dated December 16, 2022
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[1] RPM circular No.1(93-94) dated October 20, 1993
[2] IMD/DOF I/PMS/Cir- 4/2009 dated June 23, 2009
[3] Regulation 24 (14) of the SEBI (Portfolio Managers) Regulations, 2020
[4] Cir. /IMD/DF-1/16/2012 dated July 16, 2012
[5] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[6] SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 dated December 10, 2021
[7] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[8] Cir. /IMD/DF/16/2010 dated November 02, 2010
[9] Gazette notification No. LAD-NRO/GN/2011-12/37/3689 read with Regulations 23(2) of SEBI (Portfolio Managers) Regulations, 2020
3. INVESTMENTS BY PORTFOLIO 3. MANAGERS
3.1. Transaction in Corporate Bonds through Request for Quote platform by Portfolio Management Services (PMS)[1]
3.1.1. In order to enhance transparency pertaining to debt investments by Portfolio Managers in Corporate Bonds (“CBs”) and to increase liquidity on exchange platform, the following shall be followed by Portfolio Managers:
3.1.1.1. On a monthly basis, Portfolio Managers shall undertake at least 10% of their total secondary market trades by value in CBs in that month by placing/seeking quotes through one-to-one (OTO) or one-to-many (OTM) mode on the Request for Quote platform of stock exchanges (RFQ).
3.1.1.2. In order to ensure compliance with the abovementioned 10 percent requirement, Portfolio Managers shall consider the trades executed by value through OTO or OTM mode of RFQ with respect to the total secondary market trades in CBs, during the current month and immediate preceding two months on a rolling basis.
3.1.1.3. All transactions in CBs wherein Portfolio Managers is on both sides of the trade shall be executed through RFQ in OTO mode. However, any transaction entered by Portfolio Managers in CBs in OTM mode which gets executed with another Portfolio Managers, shall be counted in OTM mode.
3.1.1.4. Portfolio Managers are permitted to accept the Contract Note from the stock brokers for transactions carried out in OTO and OTM modes of RFQ.
3.1.2. Portfolio Managers shall ensure that at least 10% (by value) of their secondary market trades in CBs in current month and immediate preceding two months are executed by placing / seeking quotes through OTO or OTM mode of RFQ. For example, for the month of May 2022, the secondary market trades executed in CBs in the months of March 2022, April 2022 and May 2022 shall be considered for the purpose of aforesaid calculation.
3.2. Investment in Derivatives[2]
3.2.1. Portfolio Managers are permitted to invest in derivatives, including transactions for the purpose of hedging and portfolio rebalancing, through recognized stock exchanges.
3.2.2. Portfolio Managers can invest in derivatives on the terms specified in the Portfolio Management Agreement. The Agreement should contain complete details pertaining to the manner and terms of usage of derivative product including quantum of exposure to derivatives (in absolute terms and as a percentage of investments in other securities in the portfolio), type of derivative instruments, purpose of using derivatives, type of derivative position and the exposure thereof, terms of valuing and liquidating derivative contracts in the event of liquidation of portfolio management scheme, prior permission from investors in the event of any changes in the manner or terms of usage of derivative contracts etc.
3.2.3. The total exposure of the portfolio client in derivatives should not exceed his portfolio funds placed with the Portfolio Manager and the Portfolio Manager should, in essence, invest and not borrow on behalf of his clients.
3.2.4. It may be noted that investment in derivatives shall be only on the terms mutually agreed between the Portfolio Manager and the client through the portfolio management agreement. In the event of the any violation of the terms of the agreement, the Portfolio Manager shall be responsible.
3.2.5. Portfolio Managers are required to provide necessary disclosures in Disclosure Document in terms of the PM Regulations.
3.3. Participation of Portfolio Managers in Commodity Derivatives Market in India[3]
3.3.1. Portfolio Managers are permitted to participate in Exchange Traded Commodity Derivatives on behalf of their clients.
3.3.2. The participation of Portfolio Managers in the exchange traded commodity derivatives shall be subject to the following:
3.3.2.1. Portfolio Managers shall appoint SEBI registered Custodians before dealing in Exchange Traded Commodity Derivatives.
3.3.2.2. Portfolio Managers may participate in Exchange Traded Commodity Derivatives on behalf of their clients and such participation shall be in compliance with all the rules, regulations including the PM Regulations and circulars/guidelines and position limit norms as may be applicable to ‘clients’, issued by SEBI and recognized stock exchanges from time to time.
3.3.2.3. Portfolio Managers may participate in Exchange Traded Commodity Derivatives after entering into an agreement with the clients. Portfolio Managers may execute addendums to the agreement with their existing clients, permitting the Portfolio Managers to participate in the Exchange Traded Commodity Derivatives on their behalf.
3.3.2.4. Portfolio Managers shall provide adequate disclosures in the Disclosure Document as well as the agreement with the client pertaining to their participation in the Exchange Traded Commodity Derivatives, including but not limited to the risk factors, margin requirements, position limits, prior experience of the Portfolio Manager in Exchange Traded Commodity Derivatives, valuation of goods, etc.
3.3.2.5. In case dealing in commodity derivatives lead to delivery of physical goods, there is a possibility that, the Portfolio Manager remains in possession of the physical commodity. In such cases, the goods need to be disposed off at the earliest, within the timelines as agreed upon between the client and the Portfolio Manager. The responsibility of liquidating the physical goods shall be with the Portfolio Manager.
3.3.2.6. Since Foreign Portfolio Investors (“FPIs”) are allowed to participate in the Exchange Traded Commodity Derivatives market, subject to conditions specified by SEBI; Portfolio Managers shall, while onboarding FPIs as clients and executing transactions in Exchange Traded Commodity Derivatives market, ensure that all conditions specified by SEBI are complied with.
3.3.2.7. Portfolio Managers shall also provide periodic reports to the clients as per the PM Regulations[4] regarding their exposure in Exchange Traded Commodity Derivatives.
3.3.2.8. Portfolio Managers shall report the exposure in Exchange Traded Commodity Derivatives under the heading of ‘Commodity Derivatives’ in the monthly reports submitted to SEBI.
3.4. Limits on investment in securities of associates/ related parties of Portfolio Managers[5]
3.4.1. Regulation 24 (3A) of the PM Regulations inter-alia provides that the Portfolio Manager shall ensure compliance with the prudential limits on investment as may be specified by the Board. Accordingly, the Portfolio Managers shall ensure the following:
3.4.2. Portfolio Manager shall invest up to a maximum of 30 percent of their client’s portfolio (as a percentage of the client’s assets under management) in the securities of their own associates/related parties. Further, the Portfolio Manager shall ensure compliance with the following limits:
Security | Limit for investment in associate/related party percentage of client’s AUM) | single (as | Limit for investment across multiple associates/related parties (as percentage of client’s AUM) |
Equity | 15% | 25% | |
Debt and hybrid securities | 15% | 25% | |
Equity + Debt + Hybrid securities | 30% |
3.4.3. The aforementioned limits shall be applicable only to direct investments by Portfolio Managers in equity and debt/hybrid securities of their own associates/related parties and not to any investments in the Mutual Funds.
3.4.4. Hybrid securities includes units of Real Estate Investment Trusts (REITs), units of Infrastructure Investment Trusts (InvITs), convertible debt securities and other securities of like nature.
3.5. Prior consent of the client regarding investments in the securities of associates/related parties[6]
Regulation 22(1A) of the PM Regulations provides that the Portfolio Manager may make investments in the securities of its related parties or its associates only after obtaining the prior consent of the client in such manner as may be specified by the Board from time to time. Accordingly, the Portfolio Managers shall ensure compliance with the following:
3.5.1. Portfolio Managers shall obtain a one-time prior positive consent of client in the format specified at Annexure 3A (consent form), as a part of the agreement mandated under Regulation 22(1) of the PM Regulations.
3.5.2. The consent form shall have an option to indicate dissent, in case the client does not want to undertake any investment in the securities of associates/related parties of respective Portfolio Manager. The client shall also have an option to specify a limit on investments in the securities of associates/related parties of respective Portfolio Manager, below the ceiling specified in paragraph 3.4.2 above.
3.5.3. The text and figures of the consent form shall be prominently highlighted and not be below size 12 font.
3.5.4. For new clients, the aforementioned consent shall be obtained at the time of entering into agreement, in terms of Regulation 22 (1) of the PM Regulations (i.e., at the time of onboarding of a new client).
3.5.5. For existing clients, the aforementioned consent shall be obtained by way of execution of a supplementary agreement with the clients. In cases where the agreements entered with existing clients contain provision for obtaining consent for investments through a specified mode, the same mode can be used for obtaining aforesaid prior consent for investments in the securities of associates/related parties of the Portfolio Manager as well.
3.5.6. Portfolio Manager shall not make any investments in the securities of associates/related parties without the prior consent of the client at the time of on boarding new clients. For existing clients, fresh investments in the securities of associates/related parties of Portfolio Managers can be made only after obtaining consent from the client.
3.5.7. In the event of passive breach of the specified investment limits, (i.e., occurrence of instances not arising out of omission and/or commission of portfolio manager), a rebalancing of the portfolio shall be completed by Portfolio Managers within a period of 90 days from the date of such breach. Notwithstanding the same, the client may give an informed, prior positive consent to the Portfolio Manager for waiver from the rebalancing of the portfolio to rectify any passive breach of the investment limits.
3.5.8. Such requirement of rebalancing in the event of a passive breach of investment limits shall be suitably disclosed in the consent form mentioned at paragraph 3.5.2 above and any waiver from the same shall also be obtained in the same document.
3.5.9. In accordance with Regulation 27 (1) of the PM Regulations, Portfolio Managers shall maintain records and documents pertaining to:
- Prior positive consent or dissent, as the case may be.
- Instances of the passive breach of investment limits, if any.
- Steps taken, if any to rectify the passive breach of investments limits.
- Waiver obtained from the client regarding rebalancing in the event of a passive breach of investment limits.
3.6. Minimum credit rating of securities for investments by Portfolio Managers [7]
3.6.1. Regulation 24 (3C) of the PM Regulations provides that Portfolio Managers shall not be allowed to invest clients’ funds in unrated securities of their related parties or their associates. Further, Regulation 24 (3E) of the PM Regulations provides that the Portfolio Manager shall ensure investment of its clients’ funds on the basis of the credit rating of securities as may be specified by the Board. Accordingly, with respect to investments in debt and hybrid securities, the Portfolio Managers shall ensure compliance with the following:
3.6.2. Portfolio Managers offering discretionary portfolio management services shall not make any investment in below investment grade securities.
3.6.3. Portfolio Managers offering non-discretionary portfolio management services shall not make any investment in below investment grade listed securities. However, Portfolio Manager may invest up to 10% of the assets under management of such clients in unlisted unrated securities of issuers other than associates/related parties of Portfolio Manager. The said investment in unlisted unrated debt and hybrid securities shall be within the maximum specified limit of 25% for investment in unlisted securities under Regulation 24(4) of the PM Regulations.
3.7. Applicability of above provisions: [8]
3.7.1. The requirements as specified at paragraphs 3.4, 3.5 & 3.6 above and in Regulations 22 (1A), 22(4) (da) & (db), 24 (3A) to 3(E) of the PM Regulations shall not be applicable for advisory portfolio management services, co-investment portfolio management services and for client categories who in turn manage funds under government mandates and/or are governed under specific Acts of State and/or Parliament.
3.7.2. Notwithstanding the above, for advisory portfolio management services, Portfolio Managers shall make suitable disclosure to the client regarding conflict of interest with respect to investments in the securities of the associates/related parties, while giving advice. The term “associate” for this purpose shall have the same meaning as defined under explanation to Regulation 24 (3C) of the PM Regulations. Further, Portfolio Managers shall disclose the credit rating of all securities, while giving advice.
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[1] SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/678 dated December 09, 2021
[2] SEBI/RPM CIRCULAR NO.3 (2002-2003) dated February 5, 2003, and for clarification on hedging and portfolio rebalancing, the Portfolio Managers may refer to SEBI Circular No. MFD/CIR/21/25467/2002 dated December 31, 2002.
[3] SEBI/HO/IMD/DF1/CIR/P/2019/066 dated May 22, 2019
[4] Regulation 31 of SEBI (Portfolio Managers) Regulations, 2020
[5] SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
[6] SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
[7] SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
[8] SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
4. DISCLOSURE DOCUMENTS
4.1. Material change in Disclosure Document[1]
4.1.1. Material change, for the purpose of the PM Regulations[2], shall include change in control of the Portfolio Manager, Principal Officer, fees charged, charges associated with the services offered, investment approaches offered (along with the impact of such change) and such other changes as specified by SEBI from time to time.
4.2. Clause in Disclosure Document/ Client agreement/ Power of attorney[3]
4.2.1. It has come to the notice of SEBI while perusing disclosure documents/ agreements/ Power of Attorney entered into by the Portfolio Managers with the clients that many Portfolio Managers are using the following clause or a similar clause.
‘The portfolio managers’ decision in deployment of the Clients’ account is absolute and final and can never be called in question or be open to review at any time during currency of the agreement or any time thereafter.’
4.2.2. It is felt that every client should have the prerogative to question the decision of portfolio manager and the exercise of discretion by him.
4.2.3. Therefore, it is advised that Portfolio Managers who have incorporated the said clause or similar clause shall modify it as below:-
‘The portfolio managers’ decision (taken in good faith) in deployment of the Clients’ account is absolute and final and cannot be called in question or be open to review at time during the currency of the agreement or any time thereafter except on the ground of malafide, fraud, conflict of interest or gross negligence.
4.3. Disclosure of fees and charges[4]
4.3.1. To ensure transparency and adequate disclosure regarding fees and charges, the client agreement shall contain a separate annexure which shall list all fees and charges payable to the portfolio manager. The said annexure shall contain details of levy of all applicable charges on a sample portfolio of Rs.50 lacs[5] over a period of one year. The fees and charges shall be shown for 3 scenarios viz. when the portfolio value increases by 20%, decreases by 20% or remains unchanged. An illustration of the same is enclosed as Annexure 4A of this Master Circular.
4.3.2. All text and figures in the annexure on fees and charges shall be at least in size 11 font.
4.3.3. New clients shall be required to separately sign the annexure on fees and charges and add in their own handwriting that they have understood the fees/ charges structure.
4.4. Publishing of Investor Charter by Portfolio Managers on their websites[6]
4.4.1. With a view to enhancing awareness of investors about the various activities which an investor deals with while availing the services provided by portfolio managers, an investor charter has been prepared by SEBI, which is enclosed as Annexure 4B of this Master Circular.
4.4.2. The investor charter is a document in an easy to understand language. It details different services provided by the Portfolio Managers to the investors along with estimated timelines, like account opening, agreement with the portfolio manager, periodic statements to the investors, investor grievance redressal mechanism, responsibilities of investors etc. at one single place for ease of reference. All registered Portfolio Managers are advised to bring to the notice of their clients the Investor Charter by prominently displaying on their websites.
4.5. Reporting of Performance by Portfolio Managers
4.5.1. To ensure compliance with the PM Regulations[7], Portfolio Managers shall disclose the performance of portfolios grouped by investment category for the past three years as per Annexure 4C of this Master Circular[8].
4.5.2. Performance Benchmark reporting to clients[9] :
4.5.2.1. All portfolio managers are required to disclose the performance of their portfolios to their clients, including disclosure of the performance indicators calculated on the basis of ‘time weighted rate of return’[10] method taking each individual category of investments for the immediately preceding three years in case of discretionary portfolio managers. In order to make the investors fully aware about how their funds have been deployed and also to give them an objective analysis of the performance of the portfolios being managed by the portfolio managers on discretionary basis in comparison with the rise or fall in the markets, portfolio managers shall disclose the performance of benchmark indices in the periodical reports to be furnished to the client in terms of the PM Regulations[11].
4.5.2.2. The portfolio managers may select any of the indices available, e.g. BSE (Sensitive) index, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX 500, depending on the investment objective and portfolio of the client. These benchmark indices may be decided by the portfolio managers and any change at a later date shall be recorded and justified with specific reasons thereof.
4.5.2.3. As the purpose of introducing benchmarks is to indicate the performance of the portfolios vis-à-vis markets to the investors, the portfolio managers may give performance of more than one index if they so desire. Also, they have the option to give their management perception on the performance of their schemes.
4.5.2.4. The Boards of portfolio managers may review the performance of the funds managed by them for each client separately in their meetings and should take corrective action wherever necessary. They may also compare the performance of the portfolios with benchmarks.
4.5.3. In relation to performance of the portfolio manager, it is also clarified that the Portfolio Managers shall:[12]
4.5.3.1. Consider all cash holdings and investments in liquid funds, for calculation of performance.
4.5.3.2. Report performance data net of all fees and all expenses (including taxes).
4.5.3.3. Clearly disclose any change in investment approach that may impact the performance of client portfolio, in the marketing material.
4.5.3.4. Ensure that performance reported in all marketing material and website of the Portfolio Manager is the same as that reported to SEBI.
4.5.3.5. Ensure that the aggregate performance of the Portfolio Manager (firm level performance) reported in any document shall be same as the combined performance of all the portfolios managed by the Portfolio Manager.
4.5.3.6. Provide a disclaimer in all marketing material that the performance related information provided therein is not verified by SEBI.
4.6. Nomenclature ‘Investment Approach’[13]
4.6.1. The information about Investment Approaches offered by Portfolio Managers, shall be uniform across all types of regulatory reporting, client reporting, disclosure document, marketing materials and any such document which refer to services offered by Portfolio Managers.
4.6.2. Any description of investment approach provided by Portfolio Managers shall, inter alia, include:
4.6.2.1. investment objective
4.6.2.2. description of types of securities e.g. equity or debt, listed or unlisted, convertible instruments, etc.
4.6.2.3. basis of selection of such types of securities as part of the investment approach
4.6.2.4. allocation of portfolio across types of securities
4.6.2.5. appropriate benchmark to compare performance and basis for choice of benchmark
4.6.2.6. indicative tenure or investment horizon
4.6.2.7. risks associated with the investment approach
4.6.2.8. other salient features, if any.
4.6A. Performance Benchmarking[1]
In order to help investors in assessing the performance of a Portfolio Manager, the applicable requirements related to performance reporting and benchmarking by Portfolio Managers has been reviewed as under:
4.6A.1. In addition to Investment Approach, an additional layer of broadly defined investment themes called “Strategies” shall be adopted by Portfolio Managers. These broad Strategies shall be ‘Equity’, ‘Debt’, ‘Hybrid’ and ‘Multi Asset’.
4.6A.2 Each IA shall be tagged to one and only one Strategy from the Strategies as above. This tagging shall be at the discretion of the concerned Portfolio Manager. A Portfolio Manager may tag more than one IA to a Strategy, but each IA must be tagged to only one Strategy.
4.6A.3 APMI shall prescribe a maximum of three benchmarks for each Strategy. These benchmarks shall reflect the core philosophy of the Strategy. While tagging an IA to a particular Strategy, the Portfolio Manager shall select one benchmark from those prescribed for that Strategy to enable the investor to evaluate relative performance of the Portfolio Managers.
4.6A.4 The Board of the Portfolio Managers shall be responsible for ensuring appropriate selection of Strategy and benchmark for each IA.
4.6A.5 Once an IA is tagged to a Strategy and/or to a benchmark, the tagging shall be changed only after offering an option to subscribers to the IA to exit without any exit load. The performance track record (of the specific IA whose tagging with Strategy/ benchmark was changed) prior to the change shall not be used by the Portfolio Manager for performance reporting. Further, the same shall be verified as part of annual audit under the Regulations[2].
4.6A.6 The changes in Strategy and/ or benchmark shall be recorded with proper justification and shall be verified as part of the annual audit under the Regulations[3][4].
[1] Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2022/172 dated December 16, 2022, & refer SEBI Letter No. SEBI/HO/IMD/IMD-PoD-2/P/OW/2022/62571/1 dated December 16, 2022, and SEBI
Letter No. SEBI/HO/IMD/POD-II/P/OW/2023/12814/1 dated March 29, 2023
[2] Regulation 30 of the SEBI (Portfolio Managers) Regulations, 2020
[3] Regulation 30 of the SEBI (Portfolio Managers) Regulations, 2020
[4] SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
4.7. Disclosure of details of related party investments by Portfolio Managers49
4.7.1. Regulations 22 (4) (da) & (db) of the PM Regulations provides that the Portfolio Manager shall disclose in the Disclosure Document the details of its diversification policy and the details of investment of clients’ funds by the Portfolio Manager in the securities of its related parties or associates. Accordingly, the Portfolio Manager shall ensure compliance with the following:
4.7.2. Disclosure of the details of investment of clients’ funds in the securities of associate/related parties in the Disclosure Document under the head “Details of investments in the securities of related parties of the Portfolio Manager”, in the following format:
Investments in the securities of associates/related parties of Portfolio Manager:
Sr. No. | Investment Approach, if any | Name of the associate/ related party | Investment amount (cost of investment) as on last day of the previous calendar quarter (INR in crores) | Value of investment as on last day of the previous calendar quarter (INR in crores) | Percentage of total AUM as on last day of the previous calendar quarter |
4.7.3. Portfolio Managers shall ensure that any material changes in the above information is updated in the Disclosure Document and uploaded on their respective websites within 7 days.
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49 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
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[1] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[2] Regulation 22 (7) of the SEBI (Portfolio Managers) Regulations, 2020
[3] SEBI/IMD/CIR No.1/ 70353 /2006 dated June 28, 2006
[4] SEBI Cir. /IMD/DF/13/2010 dated October 5, 2010
[5] Clause 3 (v) of SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[6] SEBI/HO/IMD/IMD-II_DOF7/P/CIR/2021/681 dated December 10, 2021
[7] Regulation 22(4)(e) & Regulation 22(6) of SEBI (Portfolio Managers) Regulations, 2020
[8] Cir. /IMD/DF/16/2010 dated November 02, 2010
[9] IMD/PMS/CIR/1/21727/03 dated November 18, 2003
[10] Regulation 22(4)(e) of the SEBI (Portfolio Managers) Regulations, 2020
[11] Regulation 31 of the SEBI (Portfolio Managers) Regulations, 2020
[12] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[13] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
5. REPORTING REQUIREMENTS
5.1. Submission of monthly report by Portfolio Managers
5.1.1. [1]All Registered Portfolio Managers are required to submit monthly report regarding their portfolio management activity as per the format enclosed as Annexure 5A[2][3] of this Master Circular.
5.1.2. All Registered Portfolio Managers shall upload the report on SEBI Intermediaries Portal within 7 working days of the end of each month52 and there is no requirement of sending hard copy of the said report to SEBI.
5.1.3. In the said report data pertaining to Assets under Management (“AUM”) of the portfolio manager as on the last calendar day of each month shall be indicated in Rupees in crores.
5.1.4. Procedure to upload monthly report on portal is as follows:
5.1.4.1. Log on to SEBI Portal at https://siportal.sebi.gov.in using the Username and Password provided at the time of Registration/ Renewal as a portfolio manager.
5.1.4.2. Select the portfolio manager tab
5.1.4.3. Select the link: PM Monthly Report
5.1.4.4. Fill the data in the format provided
5.1.4.5. Save the data and then Submit
5.1.5. In terms of the PM Regulations[4], Compliance Officer of the portfolio managers shall also be responsible for ensuring compliance with this Master Circular.
5.2. Submission of compliance reports by Portfolio Manager[5]
5.2.1. With effect from Financial Year 2019-20, Portfolio Managers are required to submit the following information to SEBI:[6]
5.2.1.1. A certificate from the qualified Chartered Accountant certifying the networth as on March 31, every year based on audited account within 6 months from the end of Financial Year.
5.2.1.2. A certificate of compliance with PM Regulations and circulars issued thereunder, duly signed by the Principal Officer, within 60 days of end of each financial year. Further, details of non-compliance along with the corrective actions, if any, duly approved by Board of the Portfolio Manager.
5.2.2. Submission of Corporate Governance Report:
5.2.2.1. Boards of the Portfolio Managers should review the compliance of regulations in their periodical meetings. They should develop a system of getting quarterly reports of compliance of SEBI Regulations and Guidelines and also that due diligence has been exercised by their officials in their operations and that the interests of investors are protected. Such reports may be placed before the Boards of the Portfolio Managers by the compliance officers. Boards of the Portfolio Managers should also review redressal of investors’ grievances. Any deficiency letters or warning letters issued to the Portfolio Managers by SEBI should also be placed before the Boards of the Portfolio Managers.
5.2.2.2. There shall be internal audit by a practicing Chartered Accountant (“CA”) or Company Secretary (“CS”) so as to judge the quality of internal procedures being followed by the Portfolio Manager. The report of the internal audit shall be submitted to the Board of the Portfolio Manager.
5.2.2.3. Portfolio Managers shall exercise due diligence in all their operational activities.
5.2.2.4. Portfolio Managers shall report to SEBI on compliance with the provisions of the above guidelines while submitting the annual reports. The report should reach SEBI within thirty days from the end of the financial year.
5.2.3. Failure to submit reports as mentioned in this master circular shall constitute a default and render the Portfolio Managers liable for action under the Intermediaries Regulations.
5.3. Firm-level performance reporting by Portfolio Managers[7]
5.3.1. The firm-level performance data of Portfolio Managers shall be audited annually. Confirmation of compliance with paragraph 4.5.3 of this Master Circular shall be reported to SEBI within sixty days of end of each financial year. The said report to SEBI shall be certified by the Directors/Partners of the Portfolio Manager or by person(s) authorized by the Board of Directors/Partners of the Portfolio Manager.
5.3.2. Accordingly, Portfolio Managers are required to consider all clients’ portfolios managed (i.e. clients of both discretionary and non-discretionary portfolio management services) for the purpose of audit of firm-level performance data.
5.3.3. Standard Terms of Reference by APMI:
5.3.3.1. In order to have uniformity, APMI, in consultation with SEBI, shall specify standardised Terms of Reference (‘ToR’) for aforesaid audit of firm-level performance data.
5.3.3.2. The standard ToR shall inter-alia include requirement for Portfolio Managers to consider clients’ portfolios under all services for the purpose of audit of firm-level performance data. Performance of advisory clients may be excluded only if performance of such clients, either individually or cumulatively, is not reported or published in any marketing material or website.
5.3.3.3. The standard ToR specified by APMI (available on APMI website: link) is applicable with effect from October 01, 2023, and shall be mandatorily followed by all Portfolio Managers for the purpose of annual audit of firm-level performance data.
5.3.4. Submission of reports:
5.3.4.1. Portfolio Managers shall submit the confirmation of compliance with the requirement of annual audit of firm-level performance data in line with the standard ToR specified by APMI, to SEBI within sixty days from the end of each financial year. The aforesaid report on confirmation of compliance to SEBI shall be certified by Directors/ Partners of the Portfolio Manager or by person(s) authorized by the Board of Directors/Partners of the Portfolio Manager.
5.3.4.2. Portfolio Managers shall submit audit report on firm-level performance data to SEBI within sixty days from end of each financial year.
5.4. Offsite Inspection data reporting to SEBI
5.4.1. As a part of off-site inspection and surveillance of Portfolio Managers and to monitor the compliance of the PM Regulations and circulars issued therein, SEBI has framed the data structure and all the Portfolio Managers are required to furnish the data to SEBI under the following heads/reporting formats:
S. No. | Table Name |
1 | PM Master |
2 | Client Master |
3 | Client Folio Master |
4 | Client Folio AUM |
5 | Client Capital Transactions |
6 | Client Expense Master |
7 | PM Holding Master |
8 | PM Operating Expense |
9 | PM Pool Account Master |
10 | PM Associated Security Details |
5.4.2. The data to be submitted by Portfolio Managers in the aforementioned reporting formats is prescribed in Annexure 5B.
5.4.3. Portfolio Managers shall submit data as per the specified formats for all its clients on quarterly basis within 10 days from end of the quarter. Day-wise data shall be furnished for table headings: “Client Folio AUM”, “PM Pool Demat Account Holding” and “Client Holding Master”.
5.4.4. In their first time reporting, Portfolio Managers shall submit data for all their clients from April 01, 2020 to September 30, 2023.
5.4.5. Details of the requirements prescribed under various clauses of this Master Circular that are covered through the reporting formats, as mentioned in the paragraph 5.4.1 above, are specified in Annexure 5C.
5.5. Reporting to clients by Portfolio Managers
5.5.1. Portfolio Managers shall furnish a report in the format provided at Annexure 5D[8][9] of this Master Circular, to their clients on a quarterly basis [10] which inter-alia includes the following[11]:
5.5.1.1. Details of investment of client’s funds in the securities of associates/related parties of the Portfolio Manager.
5.5.1.2. Details of instances of passive breach of investment limits, if any, and steps taken to rectify the same.
5.5.1.3. Details of credit ratings of investments in debt and hybrid securities.
5.6. Reporting of Performance to Clients[1]
5.6.1. Portfolio Manager shall present the Time-weighted Rate of Return (‘TWRR’) of the IA along with the trailing return of the selected benchmark when communicating/ advertising/ publishing/ mentioning performance of an Investment Approach.
5.6.2. Portfolio Manager shall present the Extended Internal Rate of Return (‘XIRR’) for each IA the investor invests in when reporting performance to an investor. This shall be accompanied by the minimum, maximum and median XIRR return generated across all investors in each of the IA the investor has invested in. The TWRR of the respective IA(s) and the trailing return of the benchmark(s) selected shall also be presented separately.
Following disclaimer must accompany this disclosure:
“Please note that performance of your portfolio may vary from that of other investors and that generated by the Investment Approach across all investors because of
- the timing of inflows and outflows of funds; and
- differences in the portfolio composition because of restrictions and other constraints.”
5.6.3. The following shall not be mentioned or implied in performance reporting or in any other communication in any form by the Portfolio Managers:
5.6.3.1. Any other categorization/ classification of IAs, except for the Strategy that they are tagged to.
5.6.3.2. Model Portfolio returns
5.6.3.3. The performance of one or more cherry-picked investor(s)
However, aggregated performance statistics of all investors in an IA may be used by a Portfolio Manager for aggregated performance reporting.
5.6.4. Portfolio Manager shall disclose relative performance of its investment approach in all the marketing material where performance of the concerned investment approach is being presented. Such disclosure of relative performance shall, at minimum, include the following:
5.6.4.1. Performance relative to the selected benchmark
5.6.4.2. Performance relative to other Portfolio Managers within the selected Strategy
5.6.5. Verification of all the above performance statistics shall be carried out in the annual audit under the Regulations[2].
5.6.6. Portfolio Managers shall also submit the monthly reports to APMI in addition to SEBI within 7 working days from the end of each month. APMI shall make available the monthly reports of the Portfolio Managers on APMI website in an intuitive and user-friendly manner facilitating ease of comparison so as to provide access to portfolio level, investment approach level, portfolio manager level and industry level information to all the stakeholders. APMI shall also make available relative performance of each investment approach within the strategy to concerned portfolio manager and also disclose the same on its website.
5.6.7. The above provisions under para 5.6.1 to 5.6.6 shall be applicable to any entity reporting/ publishing/ advertising performance of any Investment Approach of any Portfolio Manager.
5.6.8. Portfolio of investors/clients of portfolio manager shall not be covered under provisions 2.9, 4.6.1A, 4.6A, 5.6, if, :
5.6.8.1. Investors are governed by separate statutes like Provident Funds (Employees’ Provident Fund Organization, Coal Mines Provident Fund Organization, Exempted Provident Fund Trusts), Employee State Insurance Corporation, Postal Life Insurance, etc.
5.6.8.2. The non-individual Investors are regulated by RBI, IRDA & PFRDA for whom specific valuation and/or benchmarking norms have been specified by the concerned regulator(s).
subject to verification of compliance with the above conditions in the annual audit under Regulation 30 of the PM Regulations.
5.6.9 Portfolio Managers shall not advertise/ publish/ mention to any entity other than those belonging to the investor category to which said Investment Approach is offered the returns of the Investment Approaches where exception as above has been exercised. Portfolio Managers may, however, include the assets managed in such Investment Approaches in their total AUM when communicating publicly as well as in regulatory reporting.
5.6.10 Letters issued to APMI with respect to Performance Benchmarking are enclosed under ‘Policy related letters/emails issued by SEBI’
[1] Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2022/172 dated December 16, 2022,
SEBI/HO/IMD/IMD-PoD-2/P/OW/2022/62571/1 dated December 16, 2022, SEBI/HO/IMD/PODII/P/OW/2023/12814/1 dated March 29, 2023
[2] Regulation 30 of the SEBI (Portfolio Managers) Regulations, 2020.
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[1] SEBI/IMD/PMS/CIR-3/2009 dated June 11, 2009
[2] Revised format as per SEBI circular SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 dated December
[3] , 2021 to include details of Co-investment Portfolio Management services offered by Portfolio Manager 52 SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[4] Regulation 34 of the SEBI (Portfolio Managers) Regulation, 2020
[5] IMD/PMS/CIR/1/21727/03 dated November 18, 2003
[6] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[7] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[8] Revised format as per SEBI circular SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 dated December
[9] , 2021 to include details of Co-investment Portfolio Management services offered by Portfolio Manager
[10] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[11] SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 dated August 26, 2022
6. FEES AND CHARGES
6.1. Regulation of Fees and Charges
6.1.1. The inter se relationship between the portfolio manager and client, mutual rights, liabilities and obligations relating to management of funds or portfolio of securities are required to be specified in the agreement signed between the portfolio manager and the client. The contents of the portfolio manager-client agreement are laid out in the PM Regulations[1].
6.1.2. In order to bring about greater uniformity, clarity and transparency with regard to fees and charges, portfolio managers are advised to take the following measures in respect of all client agreements:
6.1.3. Fees and Charges[2] [3]
6.1.3.1. As provided in the PM Regulations[4], no upfront fees shall be charged by the Portfolio Managers, either directly or indirectly, to the clients[5].
6.1.3.2. Brokerage at actuals shall be charged to clients as expense.
6.1.3.3. Operating expenses excluding brokerage, over and above the fees charged for Portfolio Management Service, shall not exceed 0.50% per annum of the client’s average daily AUM.
6.1.3.4. Charges for all transactions in a financial year (Broking, Demat, custody etc.) through self or associates shall be capped at 20% by value per associate (including self) per service. Any charges to self/associate shall not be at rates more than that paid to the non associates providing the same service.
6.1.3.5. The provisions with respect to fees and charges shall not be applicable to Co-investment services[6].
6.1.3.6. Profit/ performance shall be computed on the basis of high water mark principle over the life of the investment, for charging of performance / profit sharing fee.
High Water Mark Principle: High Water Mark shall be the highest value that the portfolio/account has reached. Value of the portfolio for computation of high watermark shall be taken to be the value on the date when performance fees are charged. For the purpose of charging performance fee, the frequency shall not be less than quarterly. The portfolio manager shall charge performance based fee only on increase in portfolio value in excess of the previously achieved high water mark.
Illustration: Consider that frequency of charging of performance fees is annual. A client’s initial contribution is ₹50,00,000, which then rises to ₹60,00,000 in its first year; a performance fee/ profit sharing would be payable on the ₹10,00,000 return. In the next year the portfolio value drops to ₹55,00,000 hence no performance fee would be payable. If in the third year the Portfolio rises to ₹65,00,000, a performance fee/profit sharing would be payable only on the ₹5,00,000 profit which is portfolio value in excess of the previously achieved high water mark of ₹60,00,000, rather than on the full return during that year from ₹55,00,000 to ₹65,00,000.
6.1.3.7. All fees and charges shall be levied on the actual amount of clients’ assets under management.
6.1.3.8. High Water Mark shall be applicable for discretionary and nondiscretionary services and not for advisory services.
6.1.3.9. In case of interim contributions/ withdrawals by clients, performance fees may be charged after appropriately adjusting the high water mark on proportionate basis.
6.1.4. Exit Load:[7]
6.1.4.1. In case client portfolio is redeemed in part or full, the exit load charged shall be as under:
6.1.4.1.1. In the first year of investment, maximum of 3% of the amount redeemed.
6.1.4.1.2. In the second year of investment, maximum of 2% of the amount redeemed.
6.1.4.1.3. In the third year of investment, maximum of 1% of the amount redeemed.
6.1.4.1.4. After a period of three years from the date of investment, no exit load.
6.1.4.2. The provisions with respect to exit load as specified at paragraph
6.1.4.1 shall not be applicable to Co-investment services[8].
6.1.5. In case of large value accredited investors, the quantum and manner of exit load applicable to the client of the Portfolio Manager shall be governed through bilaterally negotiated contractual terms and the provisions of paragraph 6.1.4 of this Master Circular shall not be applicable[9].
6.1.5.1. “Accredited Investor” shall have the same meaning as assigned to it under clause (ab) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
6.1.6. Maximum Liability[10]
6.1.6.1. The PM Regulations[11] provide that the agreement between the portfolio manager and the client shall, inter alia, contain, in case of a discretionary portfolio manager, a condition that the liability of a client shall not exceed his investment with the portfolio manager.
6.1.6.2. Portfolio managers shall strictly comply with the aforesaid Regulation.
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[1] Regulation 22 read with Schedule IV of the SEBI (Portfolio Managers) Regulations, 2020
[2] SEBI Cir. /IMD/DF/13/2010 dated October 5, 2010
[3] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[4] Regulation 22 (11) of the SEBI (Portfolio Managers) Regulations, 2020
[5] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[6] SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 dated December 10, 2021
[7] SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[8] SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 dated December 10, 2021
[9] SEBI/HO/IMD/IMD-I DOF1/P/CIR/2021/693 dated December 21, 2021
[10] SEBI Cir. /IMD/DF/13/2010 dated October 5, 2010
[11] Regulation 22(2)(m) of the SEBI (Portfolio Managers) Regulations, 2020
7. GRIEVANCE HANDLING
7.1. Dispute Resolution[1]
7.1.1. The PM Regulations[2] provide for settlement of grievances/disputes and provision for arbitration in the portfolio manager – client agreement.
7.1.2. In case of any dispute regarding fees and charges, the same shall be referred to arbitration for settlement as per the terms of the agreement, under the Arbitration and Conciliation Act, 1996.
7.2. Disclosure of Investor Complaints by Portfolio Managers on their websites[3]
7.2.1. In order to enhance transparency in the Investor Grievance Redressal Mechanism, all Portfolio Managers on a monthly basis shall disclose on their websites, the data pertaining to all complaints including SCORES complaints received by them in the format mentioned in Annexure 7A of this Master Circular. The information shall be made available by 07th of the succeeding month.
7.2.2. Further, the Portfolio Managers are advised to display link/option on their websites and mobile apps so as to enable their clients to lodge complaint with them directly. Additionally, link to SEBI Complaints Redress System (“SCORES”) website and the link to download the SCORES mobile app may also be provided by the Portfolio Managers on their websites.
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[1] SEBI Cir. /IMD/DF/13/2010 dated October 5, 2010
[2] Regulation 22 read with clause 18 of Schedule IV of the SEBI (Portfolio Managers) Regulations, 2020
[3] SEBI/HO/IMD/IMD-II_DOF7/P/CIR/2021/681 dated December 10, 2021
ANNEXURES
- Annexure 1A: Online Processing of Portfolio Manager Applications
- Annexure 2A: Guidelines for Advertisements by Registered Portfolio Managers
- Annexure 2B: Code of Conduct for Distributors of Portfolio Management Services
- Annexure 2C: Cyber Security and Cyber Resilience framework
- Annexure 3A: Format of obtaining the consent from the client
- Annexure 4A: Illustration Annexure on Fees and Charges
- Annexure 4B: Format of Investor Charter in Respect of Portfolio Management Services
- Annexure 4C: Format for disclosure of Performance of the Portfolio Manager
- Annexure 5A: Format for Monthly Report to SEBI
- Annexure 5B: Offsite Inspection Reporting Formats for Portfolio Managers
- Annexure 5C:Details of reporting requirements as per the provisions of the Master Circular
- Annexure 5D: Format of Quarterly Reporting to Client
- Annexure 7A: Format of Complaint Data to be displayed by Portfolio Managers
Annexure 1A: Online Processing of Portfolio Manager Applications
Online Process for Fresh Registration
a. Log-in ID and Password will be generated on receipt of a fresh application for registration as a Portfolio Manager.
b. The URL of the SEBI portal, the Log-in ID and Password will be e-mailed to the Compliance Officer or the Principal Officer only.
c. On receipt of the Log-in ID and Password the applicant should fill up all the details by clicking “Fresh Registration” under the tab “Portfolio Manager” given on the SEBI Intermediary Portal (“SI Portal”).
d. All instructions on how to fill the details under every tab should be read before filling the online form. The same can be accessed by clicking the “Blue Question Mark” on the top right hand corner of every page.
e. The details filled under every tab should be saved by clicking on the “Saved Draft” button as soon as a particular tab is completely filled up.
f. Once all the details are filled up, the applicant should submit the online application form by clicking the “Final Submit” button.
g. After SEBI approval, the applicant will be required to fill the fee details. The same will be sent through a mail which can be accessed by clicking the link
“My Worklist” on the home page of SEBI Intermediary Portal.
h. Inside the mail, there will be a link “Enter Fee Details” through which the applicant has to enter the fee details and save it.
i. Once the details relating to fees are entered and saved, it must be adjusted against the outstanding amount as per the instructions given in the “blue question mark” on the top right hand corner of the page.
j. Once the fees are adjusted, the fee details must be saved and then submitted, by clicking the “Submit” button in the e-mail, to SEBI for final approval.
Online Process for Updation of Information
a. There can be any change in information that a registered Portfolio Managers can undergo during its operations.
b. Apart from sending the physical copy of such changes in information to SEBI, the same should be updated on the SEBI Intermediary Portal.
c. It can be done by clicking “Updation of Registration” under the tab “Portfolio Manager” given on the SEBI Intermediary Portal.
d. All instructions to fill the details under every tab can be accessed by clicking the “Blue Question Mark” on the top right hand corner of every page
e. The details changed under every tab should be saved by clicking on the “Saved Draft” button
f. Once the changed details are updated, the applicant should submit the updation form by clicking the “Final Submit” button
g. On receipt of the updation form, the online updation shall be approved by SEBI.
Annexure 2A: 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
- An advertisement shall be truthful, fair and clear and shall not contain any statement, promise or forecast which is untrue or misleading.
- An advertisement shall be considered to be misleading if it contains –
- 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.
- An inaccurate portrayal of the past performance or portrayal in a manner which implies that past gains or income will be repeated in future.
- 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.
- The publicity literature should contain only information, the details of which are contained in the Portfolio Managers scheme particulars.
- 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.
- The advertisement shall not contain information, the accuracy of which is to any extent dependent on assumptions.
- The advertisement shall not contain any promise or guarantee of assured/fixed return to the investors, either directly or indirectly.
- 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
- Every Portfolio Manager shall strictly observe the Code of Advertisement set out in paragraph 1 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, 2020.
Annexure 2B: Code of Conduct for Distributors of Portfolio Management Services
1. The Code of Conduct, as provided hereunder, shall be applicable to all persons involved in the distribution of Portfolio Management Services.
2. All distributors shall:
i. Adhere to the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 and circulars issued from time to time related to distributors, distribution, advertising practices of Portfolio Management Services, etc.
ii. Maintain high standards of integrity, promptitude and fairness in the conduct of all their business.
iii. Act with due skill, care and diligence in the conduct of all their business.
iv. Consider investor’s interest, risk profiling and suitability to their financial needs while marketing Portfolio Management Services.
v. Take necessary steps to ensure that the clients’ interest is protected.
vi. Ensure that commission or incentive shall never form the basis for recommending Portfolio Management Services.
vii. Be fully conversant with the Disclosure Document, Investment Approaches, fees and charges and the terms of agreement to be entered between the client and the Portfolio Manager.
viii. Disclose to the clients all material information including the details of distribution commissions for various Investment Approaches.
ix. Assist clients in completing Know Your Client (“KYC”) and In-Person Verification related procedures.
x. Provide full and latest information about investment approaches and also highlight the assumptions made in performance calculations, risk assessments, performance projections etc., if any, for such investment approaches.
xi. Inform the clients about the risks and level of control over the administration of Portfolio associated with the type of Portfolio Management Services offered (i.e. Discretionary, Non-discretionary or Advisory).
xii. Abstain from assuring returns in any type of Investment Approach and from any kind of mis-representation.
xiii. Abstain from attracting clients through unethical means such as offer of rebate/gifts etc.
xiv. Maintain necessary infrastructure to provide support to clients in timely receipt of disclosure document, statement of portfolio and performance, statement of fees, audit report, etc.
xv. Maintain confidentiality of clients’ details, deals and transactions, which they come to know in their business relationship.
xvi. Abstain from making negative statements about other Portfolio Managers or Investment Approaches. Make comparisons, if any, only with the similar and comparable products along with complete facts.
xvii. Not indulge in any manipulative, fraudulent or deceptive practices or spread rumours with a view to make personal gain.
xviii. Hold valid Certification, as specified by SEBI, at all times.
Annexure 2C - Cyber Security & Cyber Resilience
1. Cyber-attacks and threats attempt to compromise the Confidentiality, Integrity, and Availability (CIA) of the computer systems, networks, and databases (Confidentiality refers to limiting access of systems and information to authorized users, Integrity is the assurance that the information is reliable and accurate, and Availability refers to guarantee of reliable access to the systems and information by authorized users). The cyber security framework includes measures, tools, and processes that are intended to prevent cyber-attacks and improve cyber resilience. Cyber Resilience is an organization’s ability to prepare and respond to a cyber-attack and to continue operations during, and recover from, a cyberattack.
Governance
2. As part of the operational risk management framework to manage risk to systems, networks, and databases from cyber-attacks and threats, Portfolio Managers should formulate comprehensive cyber security and cyber resilience policy document encompassing the framework mentioned hereunder. The policy document should be approved by the Board or equivalent body of the Portfolio Manager, and in case of deviations from the suggested framework, reasons for such deviations should also be provided in the policy document. The policy document should be reviewed by the Board or equivalent body of the Portfolio Manager at least once annually with the view to strengthen and improve its cyber security and cyber resilience framework.
3. The cyber security and cyber resilience policy should include the following process to identify, assess, and manage cyber security risks associated with processes, information, networks, and systems;
a. ‘Identify’ critical IT assets and risks associated with such assets,
b. ‘Protect’ assets by deploying suitable controls, tools, and measures,
c. ‘Detect’ incidents, anomalies, and attacks through appropriate monitoring tools/processes,
d. ‘Respond’ by taking immediate steps after identification of the incident, anomaly, or attack,
e. ‘Recover’ from incident through incident management, disaster recovery, and business continuity framework.
4. The Cyber security policy should encompass the principles prescribed by the National Critical Information Infrastructure Protection Centre (NCIIPC) of the National Technical Research Organization (NTRO), Government of India, in the report titled ’Guidelines for Protection of National Critical Information Infrastructure’ and subsequent revisions, if any, from time to time.
5. Portfolio Managers should also incorporate best practices from standards such as ISO 27001, ISO 27002, COBIT 5, etc., or their subsequent revisions, if any, from time to time.
6. Portfolio Managers should designate a senior official as Chief Information Security Officer (CISO) whose function would be to assess, identify and reduce cyber security risks, respond to incidents, establish appropriate standards and controls, and direct the establishment and implementation of processes and procedures as per the cyber security and resilience policy approved by the Board or equivalent body of Portfolio Manager.
7. The Board or equivalent body of the Portfolio Manager shall constitute a Technology Committee comprising experts proficient in technology. This Technology Committee should on a half yearly basis review the implementation of the cyber security and cyber resilience policy approved by their Board or equivalent body, and such review should include a review of their current IT and cyber security and cyber resilience capabilities, set goals for a target level of cyber resilience, and establish a plan to improve and strengthen cyber security and cyber resilience. The review shall be placed before the Board or equivalent body of the Portfolio Manager for appropriate action.
8. The Portfolio Managers should establish a reporting procedure to facilitate communication of unusual activities and events to CISO or to the senior management in a timely manner.
9. The aforementioned committee and the senior management of the Portfolio Manager, including the CISO, should periodically review instances of cyberattacks, if any, domestically and globally, and take steps to strengthen cyber security and cyber resilience framework.
10. Portfolio Managers should define the responsibilities of its employees, outsourced staff, and employees of vendors and other entities, who may have access to or use systems/networks of the Portfolio Managers, towards ensuring the goal of cyber security.
Identify
11. Portfolio Manager shall identify and classify critical assets based on their sensitivity and criticality for business operations, services, and data management. The critical assets shall include business-critical systems, internet-facing applications/ systems, systems that contain sensitive data, sensitive personal data, sensitive financial data, Personally Identifiable Information (PII) data, etc. All the ancillary systems used for accessing/ communicating with critical systems either for operations or maintenance shall also be classified as critical assets. The Board or equivalent body of the Portfolio Manager shall approve the list of critical assets.
To this end, Portfolio Manager shall maintain an up-to-date inventory of its hardware and systems, software and information assets (internal and external), details of its network resources, connections to its network and data flows.
12. Portfolio Managers should accordingly identify cyber risks (threats and vulnerabilities) that it may face, along with the likelihood of such threats and impact on the business and thereby, deploy controls commensurate to the criticality.
13. Portfolio Managers should also encourage its third-party service providers, if any, such as Custodians, Brokers, Distributors, etc. to have similar standards of Information Security.
Protection
Access Controls
14. No person by virtue of rank or position should have any intrinsic right to access confidential data, applications, system resources or facilities.
15. Any access to Portfolio Manager’s systems, applications, networks, databases, etc., should be for a defined purpose and for a defined period. Portfolio Manager should grant access to IT systems, applications, databases, and networks on a need-to-use basis and based on the principle of least privilege. Such access should be for the period when the access is required and should be authorized using strong authentication mechanisms.
16. Portfolio Manager should implement strong password controls for users’ access to systems, applications, networks and databases. Password controls should include a change of password upon first log-on, minimum password length and history, password complexity as well as maximum validity period. The user credential data should be stored using strong and latest hashing algorithms.
17. Portfolio Managers should ensure that records of user access are uniquely identified and logged for audit and review purposes. Such logs should be maintained and stored in encrypted form for a time period not less than two (2) years.
18. Portfolio Managers should deploy additional controls and security measures to supervise staff with elevated system access entitlements (such as admin or privileged users). Such controls and measures should inter-alia include restricting the number of privileged users, periodic review of privileged users’ activities, disallowing privileged users from accessing systems logs in which their activities are being captured, strong controls over remote access by privileged users, etc.
19. Account access lock policies after failure attempts should be implemented for all accounts.
20. Employees and outsourced staff such as employees of vendors or service providers, who may be given authorized access to the Portfolio Manager’s critical systems, networks, and other computer resources, should be subject to stringent supervision, monitoring, and access restrictions.
21. Two-factor authentication at log-in should be implemented for all users that connect using online/ internet facility.
22. Portfolio Managers should formulate an Internet access policy to monitor and regulate the use of internet and internet based services such as social media sites, cloud-based internet storage sites, etc.
23. Proper ‘end of life’ mechanism should be adopted to deactivate access privileges of users who are leaving the organization or whose access privileges have been withdrawn.
Physical Security
24. Physical access to the critical systems should be restricted to minimum. Physical access of outsourced staff or visitors should be properly supervised by ensuring at the minimum that outsourced staff or visitors are accompanied at all times by authorized employees.
25. Physical access to the critical systems should be revoked immediately if the same is no longer required.
26. Portfolio Managers should ensure that the perimeter of the critical equipment rooms is physically secured and monitored by employing physical, human and procedural controls such as the use of security guards, CCTVs, card access systems, mantraps, bollards, etc. where appropriate.
Network Security Management
27. Portfolio Managers should establish baseline standards to facilitate consistent application of security configurations to operating systems, databases, network devices, and enterprise mobile devices within the IT environment. The Portfolio Manager should conduct regular enforcement checks to ensure that the baseline standards are applied uniformly. The checks should be done at least once in a year.
28. Portfolio Managers should install network security devices, such as firewalls as well as intrusion detection and prevention systems, to protect their IT infrastructure from security exposures originating from internal and external sources.
29. Anti-virus software should be installed on servers and other computer systems. Updation of anti-virus definition files and automatic anti-virus scanning should be done on a regular basis.
Security of Data
30. Data-in motion and Data-at-rest should be in encrypted form by using strong encryption methods such as Advanced Encryption Standard (AES), RSA, SHA-2, etc.
31. Portfolio Managers should implement measures to prevent unauthorized access or copying or transmission of data / information held in contractual or fiduciary capacity. It should be ensured that confidentiality of information is not compromised during the process of exchanging and transferring information with external parties.
32. The information security policy should also cover use of devices such as mobile phone, faxes, photocopiers, scanners, etc. that can be used for capturing and transmission of data.
33. Portfolio Managers should allow only authorized data storage devices through appropriate validation processes.
Hardening of Hardware and Software
34. Only a hardened and vetted hardware / software should be deployed by the Portfolio Managers. During the hardening process, Portfolio Managers should inter-alia ensure that default passwords are replaced with strong passwords and all unnecessary services are removed or disabled in equipments/software.
35. All open ports which are not in use or can potentially be used for exploitation of data should be blocked. Other open ports should be monitored and appropriate measures should be taken to secure the ports.
Application Security and Testing
36. Portfolio Managers should ensure that regression testing is undertaken before new or modified system is implemented. The scope of tests should cover business logic, security controls and system performance under various stressload scenarios and recovery conditions.
Patch Management
37. Portfolio Managers should establish and ensure that the patch management procedures include the identification, categorization and prioritization of security patches. An implementation timeframe for each category of security patches should be established to implement security patches in a timely manner.
38. Portfolio Managers should perform rigorous testing of security patches before deployment into the production environment so as to ensure that the application of patches do not impact other systems.
Disposal of systems and storage devices
39. Portfolio Managers should frame suitable policy for disposals of the storage media and systems. The data / information on such devices and systems should be removed by using methods viz. wiping / cleaning / overwrite, degauss and physical destruction, as applicable.
Vulnerability Assessment and Penetration Testing (VAPT)
40. Portfolio Managers shall carry out periodic VAPT, inter-alia, including critical assets and infrastructure components like servers, networking systems, security devices, load balancers, other IT systems pertaining to the activities done as Portfolio Manager, etc., in order to detect security vulnerabilities in the IT environment and in-depth evaluation of the security posture of the system through simulations of actual attacks on its systems and networks.
Portfolio Managers shall conduct VAPT at least once in a financial year. However, for the Portfolio Managers, whose systems have been identified as “protected system” by National Critical Information Infrastructure Protection Centre (NCIIPC) under the Information Technology (IT) Act, 2000, VAPT shall be conducted at least twice in a financial year.
Further, all Portfolio Managers shall engage only Indian Computer Emergency Response Team (CERT-In) empanelled organizations for conducting VAPT. The final report on said VAPT shall be submitted to SEBI after approval from Technology Committee of respective Portfolio Manager, within 1 month of completion of VAPT activity.
41. Any gaps or vulnerabilities detected shall be remedied on immediate basis and compliance of closure of findings identified during VAPT shall be submitted to SEBI within 3 months post the submission of final VAPT report.
42. In addition, Portfolio Managers shall perform vulnerability scanning and conduct penetration testing prior to the commissioning of a new system which is a critical system or part of an existing critical system.
Monitoring and Detection
43. Portfolio Managers should establish appropriate security monitoring systems and processes to facilitate continuous monitoring of security events and timely detection of unauthorized or malicious activities, unauthorized changes, unauthorized access and unauthorized copying or transmission of data / information held in contractual or fiduciary capacity, by internal and external parties. The security logs of systems, applications and network devices should also be monitored for anomalies.
44. Further, to ensure high resilience, high availability and timely detection of attacks on systems and networks, Portfolio Managers should implement suitable mechanism to monitor capacity utilization of its critical systems and networks.
45. Suitable alerts should be generated in the event of detection of unauthorized or abnormal system activities, transmission errors or unusual online transactions.
Response and Recovery
46. Alerts generated from monitoring and detection systems should be suitably investigated, including impact and forensic analysis of such alerts, in order to determine activities that are to be performed to prevent expansion of such incident of cyber-attack or breach, mitigate its effect and eradicate the incident.
47. The response and recovery plan of the Portfolio Manager should aim at the timely restoration of systems affected by incidents of cyber-attacks or breaches.
Portfolio Managers should have Recovery Time Objective (RTO) and Recovery Point Objective (RPO) not more than 4 hours and 30 minutes, respectively
48. The response plan should define responsibilities and actions to be performed by its employees and support or outsourced staff in the event of cyber-attacks or breach of cyber security mechanism.
49. Any incident of loss or destruction of data or systems should be thoroughly analyzed and lessons learned from such incidents should be incorporated to strengthen the security mechanism and improve recovery planning and processes.
50. Portfolio Managers should also conduct suitable periodic drills to test the adequacy and effectiveness of response and recovery plan.
Sharing of information
51. All cyber-attacks, threats, cyber-incidents, and breaches experienced by Portfolio Managers shall be reported to SEBI within 6 hours of noticing/ detecting such incidents or being brought to their notice about such incidents. The incident shall also be reported to CERT-In in accordance with the guidelines/ directions issued by CERT-In from time to time. Additionally, the Portfolio Manager, whose systems have been identified as “protected system” by NCIIPC, shall also report the incident to NCIIPC. The quarterly reports containing information on cyberattacks, threats, cyber-incidents, and breaches experienced by Portfolio Manager and measures taken to mitigate vulnerabilities, threats and attacks including information on bugs/ vulnerabilities/ threats that may be useful for other Portfolio Managers shall be submitted to SEBI within 15 days from the quarter ended June, September, December and March of every year.
The above information/ reports shall be shared through the dedicated e-mail ids:
[email protected] and [email protected]
52. Such details as are felt useful for sharing with other Portfolio Managers in masked and anonymous manner shall be shared using mechanism to be specified by SEBI from time to time.
Training
53. Portfolio Managers should conduct periodic training programs to enhance awareness level among the employees and outsourced staff, vendors, etc. on IT / Cyber security policy and standards. Special focus should be given to build awareness levels and skills of staff from non-technical disciplines.
54. The training program should be reviewed and updated to ensure that the contents of the program remain current and relevant.
Periodic Audit
55. Portfolio Managers shall arrange to have its systems audited on an annual basis by an independent CISA / CISM qualified or CERT-IN empanelled auditor to check compliance with the above areas and shall submit the report to SEBI along with the comments of the Board or equivalent body of Portfolio Manager within three months of the end of the financial year.
Vendors or Service Providers
56. Portfolio Managers have outsourced many of their critical activities to different agencies / vendors / service providers. The responsibility, accountability and ownership of those outsourced activities lies primarily with Portfolio Manager. Therefore, Portfolio Manager have to come out with appropriate monitoring mechanism through clearly defined framework to ensure that all the requirements as specified in this circular is complied with. The periodic report submitted to SEBI should highlight the critical activities handled by the agencies and to certify the above requirement is complied.
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Annexure 3A: Format of obtaining the consent from the client
1. This document is for obtaining the consent/dissent for investment by Portfolio Manager in its associates/related parties.
2. As per SEBI (Portfolio Managers) Regulations, 2020, the limits applicable for investment in the securities of associates/related parties of Portfolio Manager are as under:
Security | Limit for investment in single associate / related party [as a percentage of the client’s AUM] | Limit for investment across multiple associate / related party [as a percentage of the client’s AUM] |
Equity | 15% | 25% |
Debt and Hybrid Securities | 15% | 25% |
Equity + Debt + Hybrid Securities | 30% | |
3. The client may choose not to invest in the securities of associates/related parties of the Portfolio Manager. Further, the client may choose a limit lower than limits prescribed at paragraph 2 above.
4. The risks and conflict of interest associated with investment by Portfolio Manager in the securities of its associates / related parties are as under:
Risks:
Conflict of Interest:
5. In case the client wants the Portfolio Manager to invest in the securities issued by associated/related parties of Portfolio Manager and provides the consent for the same, the investments shall be subject to the following limits:
Security | Limit for investment in single associate/ related party (as percentage of client’s AUM) | Limit for investment across multiple associates/related parties (as percentage of client’s AUM) |
Equity |
|
|
Debt and hybrid securities |
|
|
Equity + Debt + Hybrid Securities |
| |
6. In case of passive breach of investment limits (i.e., occurrence of instances not arising out of omission and/or commission of Portfolio Manager) as decided at paragraph 5 above, a rebalancing of the portfolio is required to be completed by Portfolio Managers within a period of 90 days from the date of such breach. However, the client may give an informed, prior positive consent to the Portfolio Manager for a waiver from the requirement of rebalancing of the portfolio to rectify the passive breach of investment limits. The client may choose not to provide any waiver.
7. Please indicate consent or dissent as under:
Limits on investment
Consent: Portfolio Manager can invest in the securities of its associates/related parties within the limits agreed upon at paragraph 5 above.
Dissent: Portfolio Manager cannot invest in the securities of its associates/related parties.
Waiver from rebalancing of portfolio on passive breach of investment limits Consent: Portfolio Manager need not rebalance the portfolio on passive breach of investment limits.
Dissent: Portfolio Manager should rebalance the portfolio on passive breach of investment limits.
Signature of the client
Annexure 4A: Illustration for Annexure on Fees and Charges
This computation is for illustrative purpose only. Portfolio Managers may suitably modify this to reflect their fees and charges.
The assumptions for the illustration are as follows:
- Size of sample portfolio: ₹50 lacs[1][2] over
- Period: 1 year
- Hurdle Rate: 10% of amount invested
- Brokerage/ DP charges/ transaction charges: Weighted Average of such charges (as a percentage of assets under management) levied in the past year/ in case of new portfolio managers indicative charges as a percentage of assets under management (e.g. 2%)
- Management fee (e.g. 2%)
- Performance fee (e.g. 20% of profits over hurdle rate)
- The frequency of calculating all fees is annual.
[1] Clause 3 (v) of SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020
[2] Illustration has been suitably updated to consider minimum investment amount of ₹50 lakh.
Portfolio performance: Gain of 20%
Nature of Fees | Amount in ₹ | Amount in ₹ |
Capital Contribution | 50,00,00076 XX | 60,00,000 3,00,000 |
Less: Any other fees (please enumerate) | ||
Assets under Management | 50,00,000 10,00,000 | |
Add: Profits on investment during the year @ 20% on assets under management | ||
Gross value of the portfolio at the end of the year | 1,00,000 1,00,000 1,00,000 XX | |
Less: Brokerage/DP charges/any other similar charges (e.g. 2% of ₹50,00,000) | ||
Less: Management Fees (if any) (e.g. 2% of ₹50,00,000) | ||
Less: Performance fees (if any) (e.g 20% of ₹5,00,000 – working given below) | ||
Less: Any other fees (please enumerate) | ||
Total charges during the year | ||
Net value of the portfolio at the end of the year | 57,00,000 | |
% change over capital contributed | 14.00% |
Calculation of Performance Fees for above
Serial | Nature of Fees | Amount in ₹ |
A | Profit for the year | 10,00,000 |
B | Less: Minimum profit level (Hurdle Rate @10% on ₹50,00,000) | 5,00,000 |
C | Amount on which Profit Sharing Fees to be calculated (B-A) | 5,00,000 |
D | Performance Fees (@20% of C) | 1,00,000 |
Portfolio performance: Loss of 20%
Nature of Fees | Amount in ₹ | Amount in ₹ |
Capital Contribution | 50,00,000 XX |
40,00,000
2,00,000
Less: Any other fees (please enumerate)
Assets under Management
50,00,000
10,00,000
Less: Loss on investment during the year @ 20% on assets under management year
1,00,000
1,00,000 XX
XX
Less: Brokerage/DP charges/any other similar charges (e.g. 2% of ₹50,00,000)
Less: Management Fees (if any) (e.g. 2% of ₹50,00,000)
Less: Performance fees (if any)
Less: Any other fees (please enumerate)
Total charges during the year
Net value of the portfolio at the end of the year
38,00,000
% change over capital contributed
(24.00%)
Charges on Portfolio performance: No change
Nature of Fees | Amount in ₹ | Amount in ₹ |
Capital Contribution | 50,00,000 XX |
Less: Any other fees (please enumerate)
Assets under Management
50,00,000
0
Add: Profits/Losses on investment during the year @ 0% on assets under management
Gross value of the portfolio at the end of the year | 1,00,000 1,00,000 0 XX | 50,00,000 2,00,000 |
Less: Brokerage/DP charges/any other similar charges (e.g. 2% of ₹50,00,000) | ||
Less: Management Fees (if any) (e.g. 2% of ₹50,00,000) | ||
Less: Performance fees (if any) | ||
Less: Any other fees (please enumerate) | ||
Total charges during the year | ||
Net value of the portfolio at the end of the year | 48,00,000 | |
% change over capital contributed | (4.00%) |
Note: The frequency of charging fees may be specified for every type
Annexure 4B: Format of Investor Charter in Respect of Portfolio Management Services
A. Vision and Mission Statements for investors.
Vision:
To implement diligently researched customised investment strategies which help investors meet their long-term financial goals in a risk appropriate manner.
Mission:
To ensure that the Portfolio Management Services industry provides a viable investment avenue for wealth creation by adopting high levels of skill, integrity, transparency and accountability.
B. Details of business transacted by the organization with respect to the investors.
a. appropriate risk profiling of investors
b. to provide Disclosure Document to investors
c. executing the PMS agreement
d. Making investment decisions on behalf of investors (discretionary) or investment decisions taken at the discretion of the Investor (nondiscretionary) or advising investors regarding their investment decisions (advisory), as the case may be.
C. Details of services provided to investors and estimated timelines:-
i. Discretionary & Non-Discretionary Portfolio Management Services (PMS):- Under these services, all an investor has to do, is to give his portfolio in any form i.e. in stocks or cash or a combination of both. The minimum size of the portfolio under the Discretionary and/ or Non-Discretionary Funds Management Service should be Rs.50 lakhs as per the current SEBI Regulations. However, the PMS provider reserves the right to prescribe a higher threshold product-wise or in any other manner at its sole discretion.
The PMS provider will ascertain the investor’s investment objectives to achieve optimal returns based on his risk profile. Under the Discretionary Portfolio Management service, investment decisions are at the sole discretion of the PMS provider if they are in sync with the investor’s investment objectives. Under the Non-Discretionary Portfolio Management service, investment decisions taken at the discretion of the Investor.
ii. Investment Advisory Services: –
Under these services, the Client is advised on buy/sell decision within the overall profile without any back-office responsibility for trade execution, custody of securities or accounting functions. The PMS provider shall be solely acting as an Advisor to the Client and shall not be responsible for the investment/divestment of securities and/or administrative activities on the client’s portfolio. The PMS provider shall act in a fiduciary capacity towards its Client and shall maintain arm’s length relationship with its other activities. The PMS provider shall provide advisory services in accordance with guidelines and/or directives issued by the regulatory authorities and/or the Client from time to time in this regard.
iii. Client On-boarding
a. Ensuring compliance with KYC and AML guidelines.
b. franking & signing the Power of Attorney to make investment decisions on behalf of the investor.
c. opening demat account and funding of the same from the investor’s verified bank account and/or transfer of securities from verified demat account of the investor and
d. Mapping the said demat account with Custodian.
iv. Ongoing activities
a. To provide periodic statements to investors as provided under the PM Regulations 2020 and other SEBI notifications and circulars (“PM Regulations”) and
b. Providing each client an audited account statement on an annual basis which includes all the details as required under the PM Regulations.
v. Fees and Expenses
Charging and disclosure of appropriate fees & expenses in accordance with the PM Regulations.
vi. Closure and Termination
Upon termination of PMS Agreement by either party, the securities and the funds lying in the account of the investor shall be transferred to the verified bank account/ demat account of the investor.
vii. Grievance Redressal
Addressing in a time bound manner investor’s queries, service requests and grievances, if any, on an ongoing basis.
Timelines of the services provided to investors are as follows:
Sr. No. | Service / Activity | Timeline |
1 | Opening of PMS account (including demat account) for residents. | 7 days from receipt of all requisite documents from the client, subject to review of the documents for accuracy and completeness by portfolio manager and allied third party service providers as may be applicable. |
2 3 | Opening of PMS account (including demat account) for non-individual clients. Opening of PMS account (including demat account, bank account and trading account) for non-resident clients. | 14 days from receipt of all requisite documents from the client, subject to review of the documents for accuracy and completeness by portfolio manager and allied third party service providers as may be applicable. |
4 | Registration of nominee in PMS account and demat account. | Registration of nominee should happen along with account opening, therefore turnaround time should be same as account opening turnaround time. |
5 | Modification of nominee in PMS account and demat account. | 10 days from receipt of requisite nominee modification form, subject to review of the documents for accuracy and completeness by portfolio manager and allied third party service providers as may be applicable. |
6 | Uploading of PMS account in KRA and CKYC database. | 10 days from date of account opening (Portfolio Manager may rely on the custodian for updating the same). |
7 | Whether portfolio manager is registered with SEBI, then SEBI registration number. | At the time of client signing the agreement; this information should be a part of the account opening form and disclosure document. |
8 | Disclosure about latest networth of portfolio manager and total AUM. | |
9 | Intimation of type of PMS account – discretionary. | At the time of client signing the agreement; this information should be a part of the account opening form. |
10 | Intimation of type of PMS account – non discretionary. | At the time of client signing the agreement; this information should be a part of the account opening form. |
11 | Intimation to client what discretionary account entails and powers that can be exercised by portfolio manager. | At the time of client signing the agreement; this information should be a part of the account opening form. |
Sr. No. | Service / Activity | Timeline |
12 | Intimation to client what nondiscretionary account entails and powers that can be exercised by portfolio manager. | At the time of client signing the agreement; this information should be a part of the account opening form. |
13 | Copy of executed PMS agreement sent to client. | Within 3 days of client request. |
14 | Frequency of disclosures of available eligible funds. | All details regarding client portfolios should be shared quarterly (point 26). |
15 | Issuance of funds and securities balance statements held by client. | |
16 | Intimation of name and demat account number of custodian for PMS account. | Within 3 days of PMS and demat account opening. |
17 | Conditions of termination of contract. | At the time of client signing the agreement; this information should be a part of the account opening form. |
18 | Intimation regarding PMS fees and modes of payment or frequency of deduction. | At the time of client signing the agreement; this information should be a part of the account opening form. |
19 | POA taken copy providing to client. | Within 3 days of client request.
|
20 | Intimation to client about what all transactions can portfolio manager do using PoA. | At the time of client signing the agreement; this information should be a part of the account opening form. |
21 | Frequency of providing audited reports to clients | Annual. |
22 | Explanation of risks involved in investment. | At the time of client signing the agreement; this information should be a part of the account opening form. |
23 | Intimation of tenure of portfolio investments. | |
24 | Intimation clearly providing restrictions imposed by the investor on portfolio manager. | Negative list of securities should be taken from the client at the time of client signing the agreement; this information should be a part of the account opening form. |
25 | Intimation regarding settling of client funds and securities. | Settlement of funds and securities is done by the Custodian. The details of clients’ funds and securities should be sent to the clients in the prescribed format not later than on a quarterly basis. |
Sr. No. | Service / Activity | Timeline |
26 | Frequency of intimation of transactions undertaken in portfolio account. | Not later than on a quarterly basis or upon clients’ request. |
27 | Intimation regarding conflict of interest in any transaction. | The portfolio manager should provide details of related party transactions and conflict of interest in the Disclosure Document which should be available on website of portfolio manager at all times. |
28 | Timeline for providing disclosure document to investor. | |
29 | Intimation to investor about details of bank accounts where client funds are kept. | Within 3 days of PMS and demat account |
30 | Redressal of investor grievances. | Within 30 days, subject to all the information required to redress the complaint is provided by the complainant to the portfolio manager |
Notes:
1. The number of days in the above timelines indicate clear working days
D. Details of grievance redressal mechanism and how to access it
a. It is mandatory for every PMS provider to register itself on SEBI SCORES (SEBI Complaint Redress System). SCORES is a centralised online complaint resolution system through which the complainant can take up his grievance against the PMS provider and subsequently view its status.
(https://scores.gov.in/scores/Welcome.html )
b. The details such as the name, address and telephone number of the investor relations officer of the PMS provider who attends to the investor queries and complaint should be provided in the PMS Disclosure document.
c. The grievance redressal and dispute mechanism should be mentioned in the Disclosure Document.
d. Investors can approach SEBI for redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned PMS provider and follows up with them.
e. Investors may send their complaints to: Office of Investor Assistance and Education, Securities and Exchange Board of India, SEBI Bhavan. Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051.
E. Expectations from the investors (Responsibilities of investors)
1. Check registration status of the intermediary from SEBI website before availing services.
2. Submission of KYC documents and application form in a timely manner with signatures in appropriate places and with requisite supporting documents.
3. Read carefully terms and conditions of the agreement before signing the same.
4. Thorough study of the Disclosure Documents of the PMS to accurately understand the risks entailed by the said investment in PMS.
5. Accurate and sincere answers given to the questions asked in the ‘Risk Questionnaire’ shall help the PMS provider properly assess the risk profile of the investor.
6. Thorough study of the quarterly statements sent by the PMS provider to the investor intimating him about the portfolio’s absolute and relative performance, its constituents and its risk profile.
7. Ensure providing complete details of negative lists of securities as part of freeze instructions at the time of entering into the PMS agreement and every time thereafter for changes, if any, in a timely manner.
8. To update the PMS provider in case of any change in the KYC documents & personal details and to provide the updated KYC along with the required proof.
Annexure 4C: Format for disclosure of Performance of the Portfolio Manager
(As per Regulation 22 (4) (e) of SEBI (Portfolio Managers) Regulations, 2020)
Current Year April 1 – as on date | Year 1 (Financial Year) | Year 2 (Financial Year) | Year 3 (Financial Year) | |
Portfolio Performance (%), Net of all fees and charges levied by the PM | ||||
Benchmark Performance |
Annexure 5A: Format for Monthly Report to SEBI
Report for the month of ________ FY _____
Type of Services Offered
Sl. No. | Type of Service Offered | Whether the service is offered |
1 | Discretionary Service | Yes/No |
2 | Non-Discretionary Service | Yes/No |
3 | Advisory Service | Yes/No |
4 | Co-investment Service | Yes/No |
Annexure 5B: Offsite Inspection Reporting Formats
Table 1: PM_MASTER:
PM_MASTER | |||
SN | Field Name | Type | Remarks |
1 | REPORTING DATE | Date | Date for which the details are provided in DDMMYYYY |
2 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
3 | PM_NAME | VARCHAR2(100) | Name of Portfolio Manager |
4 | PM_PAN | VARCHAR2(10) | PAN of Portfolio Manager |
5 | PM_PO_PAN | VARCHAR2(10) | PAN of Principle Officer |
6 | PM_PO_NAME | VARCHAR2(100) | Name of Principal Officer |
7 | PM_CO_PAN | VARCHAR2(10) | PAN of Compliance Officer |
8 | PM_CO_NAME | VARCHAR2(100) | Name of Compliance Officer |
9 | NET WORTH | VARCHAR2(24,4) | Net worth of PM as on March 31 of previous year |
10 | PO_NISM | VARCHAR2(20) | Principal Office NISM Certificate Number |
11 | FIU_REG_NO | VARCHAR2(20) | FIU Reg Number |
12 | KRA_REG_NO | Institution code issued by KRA. In case of registration with multiple KRA agencies, provide any one KRA agency registration number | |
13 | CERSAI_REG_NO | VARCHAR2(20) | Institution code issued by CERSAI |
14 | SCORE_REG_NO | VARCHAR2(20) | SEBI SCORE registration number |
15 | WEBLINK_DIRECT | VARCHAR2(100) | Web site link for Direct On-boarding of client |
16 | FO_SYSTEM_NAME | VARCHAR2(100) | Name of Front Office Trading System |
17 | BO_SYSTEM_NAME | VARCHAR2(100) | Name of Back Office Accounting System or Fund accountant |
18 | POOL_DP_ID * | VARCHAR2(20) | Pool DP ID |
19 | POOL_DP_NAME * | VARCHAR2(50) | Pool Name of DP |
20 | POOL_NAME* | VARCHAR2(50) | Pool Account title |
21 | POOL_BOID * | VARCHAR2(20) | Pool BOID |
*PMS may have multiple pool demat accounts | |||
Table 2: CLIENT_MASTER:
SN | Field Name | Type | Remarks |
1 | REPORTING DATE | Date | Date for which the details are provided in DDMMYYYY |
2 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
3 | CLIENT_PAN | VARCHAR2(10) | PAN of each client |
4 | CLIENT_CATEGORY | VARCHAR2(30) | Individual_Resident Individual_Non Resident HUF Corporate_Resident Corpoarte_Non reisdent Assocation of Persons Body Of Individuals Partnership Firm Limited Liability Partnership Trust FPI Others |
5 | CLIENT_SUB_CAT EGORY | VARCHAR2(30) | General, Accredited, Large value accredited, Coinvestment# |
6 | CLIENT_FIRST_NA ME | VARCHAR2(150) | Client First Name |
7 | CLIENT_MIDDLE_ NAME | VARCHAR2(35) | Client Middle Name |
8 | CLIENT_LAST_NA ME | VARCHAR2(35) | Client Last Name |
9 | ADDRESS1 | VARCHAR2(120) | Address 1 |
10 | ADDRESS2 | VARCHAR2(120) | Address 2 |
11 | ADDRESS3 | VARCHAR2(120) | Address 3 |
12 | ADDRESS4 | VARCHAR2(120) | Address 4 |
13 | CITY | VARCHAR2(100) | City |
14 | STATE | VARCHAR2(35) | State Name |
15 | PINCODE | VARCHAR2(6) | PIN Code |
16 | COUNTRY | VARCHAR2(35) | Country Name |
17 | MOBILE_NO | VARCHAR2(40) | Primary Mobile No |
18 | VARCHAR2(500) | Email Id | |
19 | JH1 | VARCHAR2(150) | Second Holder name (Joint holder 1) |
20 | JH2 | VARCHAR2(150) | Third Holder name (Joint Holder 2) |
21 | JH1_PAN_NO | VARCHAR2(10) | Joint Holder 1 PAN |
22 | JH2_PAN_NO | VARCHAR2(10) | Joint Holder 2 PAN |
23 | NOMINEE1_PAN_ NO | VARCHAR2(10) | Noimnee 1 PAN. NA if not applicable |
24 | NOMINEE1_NAME | VARCHAR2(100) | Nominee 1 Name. NA if not applicable |
25 | NOMINEE2_PAN_ NO | VARCHAR2(10) | Noimnee 2 PAN. NA if not applicable |
26 | NOMINEE2_NAME | VARCHAR2(100) | Nominee 2 Name. NA if not applicable |
27 | NOMINEE3_PAN_ NO | VARCHAR2(10) | Noimnee 3 PAN. NA if not applicable |
28 | NOMINEE3_NAME | VARCHAR2(100) | Nominee 4 Name. NA if not applicable |
29 | HOLDING_NATURE | VARCHAR2(35) | SINGLE ANYONE OR SURVIOR JOINT FIRST OR SURVIOR NOT APPLICABLE (FOR NON INDIVIDUALS) |
30 | GENDER | VARCHAR2(10) | Gender of First holder- MALE FEMALE NA OTHERS |
31 | DOB | Date of Birth in YYYY-MM-DD format of First holder For non-individuals, date of incorporation will be captured wherever available | |
32 | NATIONALITY | VARCHAR2(40) | Nationality of First holder |
33 | OCCUPATION | VARCHAR2(100) | Occupation of First Holder |
34 | DATE OF PMS ACCOUNT ACTIVATION | DATE | PMS Account Activation date |
Table 3: CLIENT_FOLIO_MASTER:
SN | Field Name | Type | Remarks |
1 | DATE OF AGREEMENT | Date | Date of agreement |
2 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
3 | CLIENT_PAN | VARCHAR2(10) | PAN of client |
4 | FOLIO_NUMBER | VARCHAR2(20) | Folio no. of the client |
5 | CATEGORY OF SERVICE | VARCHAR2(20) | Discretionary Non Discretionary Advisory |
6 | INVESTMENT_APPROACH | VARCHAR2(50) | Name of Investment Approach |
7 | INVESTMENT_STRATEGY | VARCHAR2(50) | EQUITY, DEBT, HYBRID, MULTI |
8 | BENCHMARK | VARCHAR2(50) | BENCHMARK INDEX selected by PM for the strategy |
9 | CONSENT_ASSOCIATES | VARCHAR2(10) | Whether client has given permission for investments in associates/related parties (Y/N) |
10 | CONSENT % INDIVIDUAL_EQUITY | NUMERIC(2,2) | Percent of AUM which can be invested by PM in the equity shares of one associate/related party |
11 | CONSENT % TOTAL_EQUITY | NUMERIC(2,2) | Percent of AUM which can be invested by PM in the equity shares of all its associate/related party |
12 | CONSENT % INDIVIDUAL_DEBT | NUMERIC(2,2) | Percent of AUM which can be invested by PM in the debt and hybrid securities of one associate/related party |
13 | CONSENT % TOTAL_DEBT | NUMERIC(2,2) | Percent of AUM which can be invested by PM in the debt and hybrid securities of all its associate/related party |
14 | CONSENT % TOTAL_LIMIT | Percent of AUM which can be invested by PM in the equity, debt and hybrid securities of all its associate/related party | |
15 | CONSENT_EQUITY_DERIVATIVES | VARCHAR2(10) | Consent for investment in Equity Derivatives (Y/N) |
16 | CONSENT_COM_DERIVATIVES | VARCHAR2(10) | Consent for investment in Commodity Derivatives (Y/N) |
17 | CONSENT_DERIVATIVE_PER | NUMERIC(2,2) | Percent of AUM which can be invested in derivatives |
18 | CLIENT_BOID | VARCHAR2(20) | BOID of the client |
19 | CUST_REG_NO | VARCHAR2(20) | SEBI Registration Number of Custodian |
20 | CUST_NAME | VARCHAR2(100) | Name of Custodian |
21 | CUSTODY_CODE | VARCHAR2(20) | Custodian code of the client |
22 | CLIENT_POA | VARCHAR2(50) | Yes or No for Power of Attorney executed in favour of PM |
23 | PM_DISTRIBUTOR_NAME | VARCHAR2(50) | Name of the Distributor |
24 | PM_DISTRIBUTOR_PAN | VARCHAR2(10) | PAN of the Distributor |
25 | PERFORMANCE_FEES_PER | NUMERIC(2,2) | Performance fees to be charged (in %) |
Table 4: CLIENT_FOLIO_MASTER
CLIENT_FOLIO_AUM | |||
SN | Field Name | Type | Remarks |
1 | AUM_DATE | Date | Date of AUM |
2 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
3 | CLIENT_PAN | VARCHAR2(10) | PAN of client |
4 | CLIENT_FOLIO_NO | VARCHAR2(20) | folio no. of the client for which aum is provided |
5 | CLIENT_FOLIO_UNITS* | Numeric (24,4) | No. of units under the folio |
6 | CLIENT_FOLIO_AUM | Numeric (24,4) | AUM of the folio |
*If exit load is charged, number of units to be provided and number of units should not be kept blank | |||
Table 5: CLIENT_CAP_TRANSACTIONS
CLIENT_CAP_TRANSACTIONS | |||
SN | Field Name | Type | Remarks |
1 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
2 | CLIENT_FOLIO | VARCHAR2(20) | Folio Number of the Investor |
3 | TRN_TYPE | VARCHAR2(20) | Initial Inflow/Top up/Partial Redemption/Full redemption |
4 | TRAN_DATE | Date | Date on which transaction processed in DDMMYYYY |
5 | TRAN_AMT | NUMERIC(24,4) | Value of Transaction |
6 | Tran_Units | NUMERIC(24,4) | No. of Units |
7 | Exit_load | NUMERIC(20,4) | Exit load charged by the PMS (in case of Full redemption/partial redemption) |
PM_POOL DEMAT ACCOUNT HOLDING | |||
SN | Field Name | Type | Remarks |
1 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
2 | PM_PAN | VARCHAR2(10) | PAN of PMS |
3 | PM_BOID | VARCHAR2(20) | BOID of the PMS (Pool Account) |
4 | ISIN | VARCHAR2(20) | ISIN of the security |
5 | HOLDING QTY | NUMERIC(24,4) | Holding in qty/units (with Fraction) |
6 | HOLDING DATE | Date | In DDMMYYYY format |
*Client may have multiple pool demat accounts. Rows 3,4,5 and 6 shall be reapeated if PM has more than one pool account | |||
Table 6: PM_POOL DEMAT ACCOUNT HOLDING Table 7: CLINET_HOLDING_MASTER
SN | Field Name | Type | Remarks |
1 | HOLDING DATE | DATE | Holding date in YYYY-MM-DD format |
2 | PMS REG NO | VARCHAR2(30) | SEBI registration of the Portfolio Manager |
3 | CLIENT_FOLIO | VARCHAR2(20) | Folio number of the client |
4 | INVESTMENT_TYPE | VARCHAR2(20) | Nature of Investment (Equity/Debt/Derivatives/Mutual Fund/Others) |
5 | ASSET_TYPE | VARCHAR2(20) | Asset Type (For Equity – Equity Shares For Debt – Plain Debt, Structure Debt For Derivatives – Futures, Options For Mutual Funds – MF Units, Overseas Units Others – REIT/INVIT/Others) |
6 | ISSUER_NAME | VARCHAR2(20) | issuer name |
7 | SECURITY_NAME | VARCHAR2(20) | Name of the security |
8 | ISIN | VARCHAR2(20) | ISIN of security |
9 | ASSOCIATION_FLAG | 0 – if security is not of associate/related party 1 – if security is of associate/related party. | |
10 | LISTING STATUS | NUMBER(25,2) | 0 – If security is unlisted 1- If security is listed |
11 | RATING | NUMBER(25,2) | Security rating in case of Debt/hybrid securities |
12 | RATING_AGENCY | VARCHAR2(20) | Rating agency |
13 | QUANTITY | VARCHAR2(20) | Quantity |
14 | UNIT_PRICE | NUMBER(30,6) | Market Price or valuation price of the security |
15 | MARKET_VALUE | NUMBER(30,6) | Market Value of securities |
16 | MATURITY_DATE | Date | Maturity Date (in case of debt instrument) |
17 | OPTION_TYPE | VARCHAR2(20) | Option Type (Call or Put) |
Table 8: PM_LEVEL_EXPENSE:
PM_LEVEL_EXPENSE | |||
SN | Field Name | Type | Remarks |
1 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
2 | accrual_date | Date | Date of booking the expense |
3 | expense_date | Date | Date of payment to the vendor |
4 | VENDOR_PAN | VARCHAR2(20) | PAN of the vendor from whom the service taken |
5 | VENDOR_NAME | Name of the vendor from whom the service taken | |
6 | NATURE_OF_SERVICE | VARCHAR2(20) | Nature of Service provided by Vendor, i.e. Broking Custody DP Fund Accounting RTA Distributor Commission Others |
7 | ASSOCIATE_FLAG | VARCHAR2(20) | Whether the vendor is associate of PMS (0 for No and 1 for Yes) |
8 | AMOUNT_PAID | VARCHAR2(20) | Amount paid |
9 | frequency | VARCHAR2(20) | whether monthly, quarterly, yearly, etc. |
Table 9: CLIENT_EXPENSE_MASTER: | |||
SN | Field Name | Type | Remarks |
1 | Expense_Date | Date | Date of the expense charged |
2 | PM_SEBI_REG_NO | VARCHAR2(20) | SEBI Registration Number of Portfolio Manager |
3 | CLIENT_FOLIO | VARCHAR2(10) | Folio Number of the client |
4 | EXPENSE_TYPE | VARCHAR2(20) | Type of Fees (i) PMS Fees (ii) Operating Fees |
5 | EXPENSE_SUB_TYPE | VARCHAR2(50 | In case of PMS Fees, either Management Fees (fixed) or Performance Fees (variable). In case of Operating Expenses: (Account Opening charges including stamp duty /Audit Fee/ Bank charges/Fund Accounting charges/Custody Fee/demat charges or other miscellaneous expense)* In case of STT, actual STT charged to the client |
6 | EXPENSE_VALUE | NUMERIC(20,4) | Amount of the expense charged |
*for each sub type, additional row may be provided. | |||
Annexure 5C: Details of reporting requirements as per the provisions of the Master Circular
Details of the requirements prescribed under various clauses of this Master Circular that are covered through the offsite inspection reporting formats, are as under:
Paragraph No. | Requirement | Table Reference |
2.3.3 | At the time of on-boarding of clients directly, no charges except statutory charges shall be levied. | Client Master, Client Folio Master and Client Expense Master |
2.5.1.1 | The first single lump-sum investment amount received as funds or securities from clients should not be less than Rs.50 Lakh | Client Master and Client Capital Transaction |
3.2.2 | Portfolio Managers can invest in derivatives on the terms specified in the Portfolio Management Agreement. | Client Folio Master |
3.2.3 | Client Folio AUM and Client Holding Master | |
3.3.2.3 | Portfolio Managers may participate in Exchange Traded Commodity Derivatives after entering into an agreement with the clients. | Client Folio Master |
3.4.2 | Portfolio Manager shall invest up to a maximum of 30 percent of their client’s portfolio (as a percentage of the client’s assets under management) in the securities of their own associates/related parties. | Client Folio Master, Client Folio AUM and Client Holding Master |
3.6.2 | Portfolio Managers offering discretionary portfolio management services shall not make any investment in below investment grade securities. | Client Holding Master |
3.6.3 | Portfolio Managers offering non-discretionary portfolio management services shall not make any investment in below investment grade listed securities. However, Portfolio Manager may invest up to 10% of the assets under management of such clients in unlisted unrated securities of issuers other than associates/related parties of Portfolio Manager. | Client Folio AUM and Client Holding Master |
Paragraph No. | Requirement | Table Reference |
6.1.3.3 | Operating expenses excluding brokerage, over and above the fees charged for Portfolio Management Service, shall not exceed 0.50% per annum of the client’s average daily AUM. | Client Folio AUM and Client Expense Master |
6.1.3.4 | Charges for all transactions in a financial year (Broking, Demat, custody etc.) through self or associates shall be capped at 20% by value per associate (including self) per service. | PM Level Expense Master |
6.1.3.6 | Profit/ performance shall be computed on the basis of high water mark principle over the life of the investment, for charging of performance / profit sharing fee. | Client Expense Master |
6.1.4.1 | Exit Load levied by PMS | Client Capital Transaction |
Name of the Client* |
|
PAN* |
|
Address |
|
| |
Phone number |
|
Unique Client Code |
|
Account Activation date |
|
Type of Portfolio Management Service |
|
Investment approach for the account |
|
Benchmark for the investment approach |
|
Amount managed under the Investment Approach |
|
% AUM under investment approach |
|
Annexure 5D: Format of Quarterly Reporting to Client
Account Statement for Quarter ended ___________
Email ID:_________
Tel Number:________
Name of Distributor:_________ A. Account Overview:
Name of the Client* |
|
PAN* |
|
Address |
|
| |
Phone number |
|
Unique Client Code |
|
Account Activation date |
|
Type of Portfolio Management Service |
|
Investment approach for the account |
|
Benchmark for the investment approach |
|
Amount managed under the Investment Approach |
|
% AUM under investment approach |
|
Notes:
- If multiple investment approaches are used for management of the client account, separate reports may be used for each such Investment Approach.
- Details of joint holder, if applicable, needs to be provided
- In case of Clients coming from Direct plan, provide input as “Direct Plan” under head Name of Distributor
- For any request for change of facts as appearing above, kindly get in touch with [Email ID] or [Phone Number]
- AUM reported shall be the total assets managed by the Portfolio Manager for the particular Client PAN
- Inputs with regards to investment approach and benchmark may not be applicable for Co-investment services
B. Portfolio Details
Portfolio Allocation | |||
Type of Security | Purchase Value | Market Value (as on Quarter end) | % of Assets under Management |
Equity |
|
|
|
Plain Debt |
|
|
|
Structured Debt |
|
|
|
Equity Derivatives |
|
|
|
Commodities Derivatives |
|
|
|
Goods |
|
|
|
Mutual Funds |
|
|
|
Cash & Equivalent |
|
|
|
Other Assets |
|
|
|
Total |
|
|
|
Note:
(i) Portfolio Managers offering Co Investment Services may offer details as applicable, for assets permitted to be managed by them.
Portfolio Summary
| |
Particulars | (in Rs) |
Portfolio Value at the beginning of quarter |
|
Portfolio Value at the end of quarter |
|
|
|
For the quarter |
|
1. Capital Inflow |
|
2. Capital Outflow |
|
3. Interest Income |
|
4. Dividend Income |
|
5. Other Income |
|
6. Management Fee |
|
7. Performance Fee |
|
8. Expenses at actuals |
|
9. Other expenses |
|
10. Realized Gain/ Loss |
|
11. Unrealized Gain/ Loss |
|
|
|
Commission paid to Distributor |
|
Brokerage paid |
|
Note:
(i) Portfolio Managers offering Co Investment Services may offer details as applicable, for assets permitted to be managed by them.
Annexure 7A: Format of Complaint data to be displayed by the Portfolio Managers
Appendix: List of Circulars Rescinded
Appendix – List of Circulars rescinded
| Sr. No. | Date of Circular | Subject | Circular Ref. No. |
| 1 | October 20, 1993 | Format of Half Yearly Report and Guidelines for advertisement | RPM circular No.1(93-94) |
| 2 | September 17, 2002 | Clarification for definition of associates | RPM CIRCULAR NO.1 (20022003) |
| 3 | January 14, 2003 | Application procedure for registration/renewal as PM | SEBI/RPM CIRCULAR NO.2 (2002-2003) |
| 4 | February 05, 2003 | Clarification for amendment to Reg.16(1)(b) & Reg. 16(3) | SEBI/RPM CIRCULAR NO.3 (2002 – 2003) |
| 5 | November 18, 2003 | Improvement in corporate governance | IMD/PMS/CIR/1/21727/03 |
| 6 | June 28, 2006 | Clause in disclosure document/ agreement/ power of attorney | SEBI/IMD/CIR No.1/ 70353 /2006 |
| 7 | May 11, 2007 | Renewal of certificate of registration | SEBI/IMD/DOF-I/SRP/Cir No. 1/93251 /2007 |
| 8 | February 27, 2009 | Extension in time for compliance with Regulation 16(8) of SEBI PM Regulations | IMD/CIR No.1/155740/2009 |
| 9 | May 11, 2009 | Compliance with Regulation 16(8) of SEBI PM Regulations 1993 | IMD/PMS/2/2009/11/05 |
| 10 | June 11, 2009 | Submission of Monthly Report | SEBI/IMD/PMS/CIR-3/2009 |
| 11 | June 23, 2009 | Maintenance of Clients’ Funds in a separate Bank Account by Portfolio Managers | IMD/DOF I/PMS/Cir- 4/2009 |
| 12 | July 31, 2009 | Amendment to Additional Information for registration / renewal applications | IMD/DOF I/PMS/Cir- 5/2009 |
| 13 | September 10, 2009 | Compliance with Regulation 16(8) of SEBI (Portfolio Managers) Regulations, 1993 | IMD/DOF-1/PMS/CIR-6/2009 |
| 14 | March 15, 2010 | Half Yearly Reporting by Portfolio Managers | IMD/DOF-1/PMS/Cir-1/2010 |
| 15 | September 21, 2010 | Online processing of Portfolio Manager Applications | N.A. |
| 16 | October 05, 2010 | Portfolio Managers – Regulation of fees and charges | Cir. /IMD/DF/13/2010 |
| 17 | October 08, 2010 | Portfolio Managers – Monthly Report | Cir. /IMD/DF/14/2010 |
| 18 | November 02, 2010 | Portfolio Managers – clarification on minimum investment amount by clients, performance of portfolio and schemes | Cir. /IMD/DF/16/2010 |
| 19 | July 16, 2012 | Deployment of client funds in liquid mutual fund | Cir. /IMD/DF-1/16/2012 |
| 20 | May 22, 2019 | Participation of Portfolio Managers in Commodity Derivatives Market in India | SEBI/HO/IMD/DF1/CIR/P/2019/066 |
| 21 | February 13, 2020 | Guidelines for Portfolio Managers | SEBI/HO/IMD/DF1/CIR/P/2020/26 |
| 22 | March 30, 2020 | Relaxation in compliance with requirements pertaining to Portfolio Managers | SEBI/HO/IMD/DF1/CIR/P/2020/57 |
| 23 | September 09, 2020 | Operating Guidelines for PMs in IFSC | SEBI/HO/IMD/DF1/CIR/P/2020/169 |
| 24 | January 08, 2021 | Monthly Reporting of PMs | SEBI/HO/IMD/DF1/CIR/P/2021/02 |
| 25 | May 12, 2021 | Procedure for seeking prior approval for change in control of SEBI registered Portfolio Managers | SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/564 |
| 26 | December 09, 2021 | Transaction in Corporate Bonds through Request for Quote platform by Portfolio Management Services | SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/678 |
| 27 | December 10, 2021 | Publishing of Investor Charter & disclosure of Investor Complaints by PMs on their websites | SEBI/HO/IMD/IMD-II_DOF7/P/CIR/2021/681 |
| 28 | December 10, 2021 | Clarification regarding amendment to SEBI (Portfolio Managers) Regulations, 2020 | SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/0000000679 |
| 29 | December 21, 2021 | Portfolio Management Services for Accredited Investors | SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/693 |
| 30 | June 02, 2022 | Procedure for seeking prior approval for change in control of Portfolio Managers (NCLT) | SEBI/HO/IMD-1/ DOF1/P/CIR/2022/77 |
| 31 | August 26, 2022 | Circular for Portfolio Managers | SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112 |
| 32 | September 30, 2022 | Circular for Portfolio Managers | SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/133 |
| 33 | December 16, 2022 | Performance Benchmarking and Reporting of Performance by Portfolio Managers | SEBI/HO/IMD/IMD-PoD2/P/CIR/2022/172 |
| 34 | January 10, 2023 | Change in control of Portfolio Managers providing Co-investment services | SEBI/HO/IMD/IMD-PoD1/P/CIR/2023/8 |
| 35 | March 29, 2023 | Cyber Security and Cyber Resilience framework for Portfolio Managers | SEBI/HO/IMD/IMD-PoD1/P/CIR/2023/046 |
| 36 | August 02, 2023 | Audit of firm-level performance data of Portfolio Managers | SEBI/HO/IMD/IMD-PoD1/P/CIR/2023/133 |
