SEBI mandated certain guidelines for Portfolio Managers

Feb 14, 2020 | by Avantis RegTech Legal Research Team

Industry Specific Compliance

The Securities and Exchange Board of India (SEBI) on February 13, 2020, has decided to make certain changes to the regulatory framework for portfolio managers and the SEBI (Portfolio Managers) Regulations, 2020 as notified on January 16, 2020. 

The followings are the changes made under the above-mentioned Regulations:-

 SEBI modifies measures specified in Cir./IMD/DF/13/2010 dated October 05, 2010 on Regulation of Fees and Charges-

o No upfront fees shall be charged by the Portfolio Managers, either directly or indirectly, to the clients.

o Brokerage at actuals shall be charged to clients as expense.

o 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 Assets under Management (AUM).

o In case client portfolio is redeemed in part or full, the exit load charged shall be maximum of 3%, 2% and 1% of the amount redeemed in the 1st year, 2nd and 3rd of investment. After the period of 3 years from the date of investment, no exit load.

o The charges for all transactions in a financial year through self or associates shall be capped at 20% by value per associate per service. Any charges to self or associate shall not be at rates more than that paid to the non-associates providing the same service.

 Portfolio Managers shall provide an option to clients to be on-boarded directly, without intermediation of persons engaged in distribution services. At the time of on-boarding of clients directly, no charges except statutory charges shall be levied.

 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.

 Portfolio Managers shall report to SEBI on compliance with the provisions of the Circular IMD/PMS/CIR/1/21727/03 dated November 18, 2003 on ‘Improvement in Corporate Governance’, on an annual basis as against bi-annual submission. Portfolio Managers shall submit a monthly report regarding their portfolio management activity, on SEBI Intermediaries Portal within 7 working days of the end of each month as per the revised Annexure A and shall furnish a report in the format provided at Annexure B, to their clients on a quarterly basis.

 The firm-level performance data of Portfolio Managers shall be audited annually and confirmation of compliance shall be reported to SEBI within 60 days of end of each financial year.

 Material change shall include change in control of the Portfolio Manager, Principal Officer, fees charged, charges associated with the services offered, investment approaches offered.

The provisions of this Circular shall be applicable with effect from May 01, 2020.

[SEBI Circular NO. SEBI/HO/IMD/DF1/CIR/P/2020/26] 


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