SEBI permits Portfolio Managers to participate in Commodity Derivatives Market in India

May 23, 2019 | by Avantis RegTech Legal Research Team

The Securities and Exchange Board of India (SEBI) on May 22, 2019, has permitted the Portfolio Managers to participate in the Exchange Traded Commodity Derivatives on behalf of their clients in order to promote institutional participation. SEBI has made mandatory for the Portfolio Managers to appoint SEBI registered Custodian before dealing in Exchange Traded Commodity Derivatives vide Notification No. SEBI/LAD-NRO/GN/2019/17 dated May 10, 2019.

The participation of Portfolio Managers in the exchange rate would subject to the following:

Portfolio Managers may participate in Exchange Traded Commodity Derivatives after entering into an agreement with the clients and shall make adequate disclosures in the disclosure document as well as the agreement with the client.

Where the Commodity Derivatives leading to delivery of physical goods, there is a possibility that the Portfolio Managers remains in possession of the physical commodity, in such case 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 lies to Portfolio Manager.

Portfolio Managers shall not onboard foreign portfolio investors as they are not allowed to participate in Exchange Traded Commodity Derivatives.

Portfolio Managers shall also provide periodic reports to the clients and monthly reports submitted to SEBI as per the provisions of SEBI (Portfolio Managers) Regulations, 1993.

[Circular No. SEBI/HO/IMD/DF1/CIR/P/2019/066]

Click here to download the Circular.




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