1. Securities and Exchange Board of India (SEBI), based on the recommendations of a Working Group and inputs from public consultation, reviewed the framework for regulation of Portfolio Managers and the SEBI (Portfolio Managers) Regulations, 2020 (“PMS Regulations”) has been notified on January 16, 2020. (Available at Link)
2. In addition to the above, certain changes to the regulatory framework for Portfolio Managers are mandated as under:
3. In partial modification to Cir. /IMD/DF/13/2010 dated October 05, 2010 on Regulation of Fees and Charges, the following is mandated:
(i) As provided in Regulation 22 (11) of the PMS Regulations, no upfront fees shall be charged by the Portfolio Managers, either directly or indirectly, to the clients.
(ii) Brokerage at actuals shall be charged to clients as expense.
(iii) 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).
(iv) In case client portfolio is redeemed in part or full, the exit load charged shall be as under:
(a) In the first year of investment, maximum of 3% of the amount redeemed.
(b) In the second year of investment, maximum of 2% of the amount redeemed.
(c) In the third year of investment, maximum of 1% of the amount redeemed.
(d) After a period of three years from the date of investment, no exit load.
(iv) The Annexure to the Client agreement referred in Paragraph 4 g) of the aforementioned Circular shall be suitably modified for a sample portfolio of INR 50 Lacs as against the present illustration for INR 10 Lacs.
(v) 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.
4. Portfolio Managers shall provide an option to clients to be on-boarded directly, without intermediation of persons engaged in distribution services.
5. Portfolio Managers shall prominently disclose in its Disclosure Documents, marketing material and on its website, about the option for direct on-boarding.
6. At the time of on-boarding of clients directly, no charges except statutory charges shall be levied.
7. 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.
8. Any description of investment approach provided by Portfolio Managers shall, inter-alia, include:
(i) investment objective
(ii) description of types of securities e.g. equity or debt, listed or unlisted, convertible instruments, etc.
(iii) basis of selection of such types of securities as part of the investment approach
(iv) allocation of portfolio across types of securities
(v) appropriate benchmark to compare performance and basis for choice of benchmark
(vi) indicative tenure or investment horizon
(vii) risks associated with the investment approach
(viii) other salient features, if any.
9. In partial modification to Circular IMD/PMS/CIR/1/21727/03 dated November 18, 2003 on ‘Improvement in Corporate Governance’, Portfolio Managers shall report to SEBI on compliance with the provisions of the said Circular on an annual basis as against bi-annual submission.
10. SEBI Circular No. IMD/DOF-1/PMS/Cir-1/2010 dated March 15, 2010 stands superseded. However, with effect from Financial Year 2019-20, Portfolio Managers shall submit the following information to the Board:
(i) A certificate from the qualified Chartered Accountant certifying the net-worth as on March 31, every year based on audited account within 6 months from the end of Financial Year.
(ii) A certificate of compliance with PMS Regulations and circulars issued thereunder, duly signed by the Principal Officer, within 60 days of end of each financial year. Further, details of noncompliance along with the corrective actions, if any, duly approved by Board of the portfolio manager.
11. Further, in partial modification to Cir. /IMD/DF/14/2010 dated October 08, 2010, 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 format enclosed in Annexure A.
12. Portfolio Managers shall furnish a report in the format provided at Annexure B, to their clients on a quarterly basis.
13. Further to Regulation 22 (4)(e) of PMS Regulations, it is clarified that the Portfolio Managers shall:
(i) Consider all cash holdings and investments in liquid funds, for calculation of performance.
(ii) Report performance data net of all fees and all expenses (including taxes).
(iii) Clearly disclose any change in investment approach that may impact the performance of client portfolio, in the marketing material.
(iv) Ensure that performance reported in all marketing material and website of the Portfolio Manager is the same as that reported to SEBI.
(v) 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.
(vi) Provide a disclaimer in all marketing material that the performance related information provided therein is not verified by SEBI.
14. The firm-level performance data of Portfolio Managers shall be audited annually. Confirmation of compliance with Paragraph 13 of this Circular shall be reported to SEBI within 60 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.
15. Material change, for the purpose of Regulation 22 (7) of PMS Regulations, 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.
16. Further to Regulation 23(10) of PMS Regulations, it is clarified that Portfolio Managers shall:
(i) Utilize services of only such distributors (whether known as Channel Partners, Agents, Referral Interfaces or by any other name) who have a valid AMFI Registration Number or have cleared NISM Series-V-A exam.
(ii) 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.
(iii) 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.
(iv) Ensure that distributors abide by the Code of Conduct as specified in Annexure C.
(v) Have mechanism to independently verify the compliance of its distributors with the Code of Conduct.
(vi) Ensure that, within 15 days from the end of every financial year, a self-certification is also received from distributors with regard to compliance with Code of conduct.
17. The provisions of this Circular shall be applicable with effect from May 01, 2020.
18. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 43 of the SEBI (Portfolio Managers) Regulations, 2020, to protect the interests of investors in securities market and to promote the development of, and to regulate the securities market.
19. This circular is available on SEBI website at www.sebi.gov.in under the category “Circulars” and “Info for – Portfolio Managers”.
Format for Monthly Report to SEBI
I. Data for Discretionary Services
A. Break-up of clients of the Portfolio Manager
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Particulars |
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Domestic Clients |
Foreign Clients |
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PF/ EPFO |
Corporates |
Non- Corporates |
Non Residents |
FPI |
Others |
Total |
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No. of unique Clients as on last day of the month |
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Assets under Management (AUM) as on last day of the month |
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B. Break-up of assets under management of the Portfolio Manager
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Investment Approach |
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Assets Under Management as on last day of the month (in INR crores) |
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Equity |
Plain Debt |
Structured Debt |
Derivatives |
Mutual Funds |
Others |
Total |
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Listed |
Unlisted |
Listed |
Unlisted |
Listed |
Unlisted |
Equity |
Commodity |
Others |
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Approach 1 |
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Approach 2 |
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… |
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Approach ‘N’ |
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Total |
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C. Transaction Data
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Sl. No |
Particulars |
Figures |
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1 |
Sales in the month (in INR crores ) |
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2 |
Purchases in the month (in INR crores ) |
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3 |
Portfolio Turnover Ratio = (Higher of Purchases or Sales in the month /Average AUM) |
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D. Performance Data
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Investment Approach |
AUM (in INR Cr) |
Returns (%) |
Portfolio Turnover Ratio |
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1 month |
1 year |
1 month |
1 year |
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Investment Approach 1 |
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Benchmark 1 |
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Investment Approach 2 |
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Benchmark 2 |
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Investment Approach ‘N’ |
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Benchmark ‘N’ |
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Total |
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II. Data for Non Discretionary Services
E. Break-up of clients of the Portfolio Manager
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Particulars |
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Domestic Clients |
Foreign Clients |
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PF/ EPFO |
Corporates |
Non- Corporates |
Non Residents |
FPI |
Others |
Total |
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No. of unique Clients as on last day of the month |
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Assets under Management (AUM) as on last day of the month |
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F. Break-up of assets under management of the Portfolio Manager
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Assets Under Management as on last day of the month (in INR crores) |
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Equity |
Plain Debt |
Structured Debt |
Derivatives |
Mutual Funds |
Others |
Total |
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Listed |
Unlisted |
Listed |
Unlisted |
Listed |
Unlisted |
Equity |
Commodity |
Others |
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G. Transaction Data
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Sl. No |
Particulars |
Figures |
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1 |
Sales in the month (in INR crores ) |
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2 |
Purchases in the month (in INR crores ) |
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3 |
Portfolio Turnover Ratio = (Higher of Purchases or Sales in the month /Average AUM) |
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H. Performance Data
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AUM (in INR Cr) |
Returns (%) |
Portfolio Turnover Ratio |
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1 month |
1 year |
1 month |
1 year |
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III. Data for Advisory Services
I. Break-up of client base of the Portfolio Manager
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Type of Client |
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Domestic Clients |
Foreign Clients |
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PF/ EPFO |
Corporates |
Non- Corporates |
Non Residents |
FPI |
Others |
Total |
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No. of Clients as on last day of the month |
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Value of the Assets for which Advisory Services are being given (Amount in INR crores) |
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IV. Data on complaints
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Type of Client |
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Total No. of complaints |
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Pending at the beginning of the month |
Received during the month |
Resolved during the month |
Pending at the end of the month |
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Domestic – PF/ EPFO |
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Domestic Corporates |
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Domestic Non- Corporates |
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Foreign – NR |
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Foreign – FPI |
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Foreign -Others |
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Total |
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Notes:
Data on investor complaints registered through SCORES or which are directly received by Portfolio Manager to be provided
_________________________________________________________________________________________
Account Statement for Quarter ended ___________
Email ID:_________
Tel Number:________
Name of Distributor:_________
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Particulars |
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Name of the Client |
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PAN |
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Address |
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Phone number |
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Unique Client Code |
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Account Activation date |
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Type of Portfolio Management Service |
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Investment approach for the account |
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Benchmark for the investment approach |
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Amount managed under the Investment Approach |
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Notes:
(i) If multiple investment approaches are used for management of the client account, separate reports may be used for each such Investment Approach.
(ii) Details of joint holder, if applicable, needs to be provided.
(iii) In case of Clients coming from Direct plan, provide input as “Direct Plan” under head Name of Distributor.
(iv) For any request for change of facts as appearing above, kindly get in touch with [Email ID] or [Phone Number].
B. Portfolio Details:
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Portfolio Allocation |
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Type of Security |
Purchase Value |
Market Value (as on quarter end) |
Assets Under Management |
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(in INR) |
(in INR) |
(%) |
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Equity |
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Plain Debt |
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Structured Debt |
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Equity Derivatives |
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Commodity Derivatives |
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Portfolio Allocation |
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Type of Security |
Purchase Value |
Market Value (as on quarter end) |
Assets Under Management |
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(in INR) |
(in INR) |
(%) |
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Goods |
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Mutual Funds |
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Cash and equivalent |
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Other Assets |
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Total |
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Portfolio Summary
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Particulars |
(in INR) |
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Portfolio Value at the beginning of quarter |
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Portfolio Value at the end of quarter |
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For the quarter |
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1. Capital Inflow |
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2. Capital Outflow |
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3. Interest Income |
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4. Dividend Income |
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5. Other Income |
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6. Management Fee |
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7. Performance Fee |
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8. Expenses at actuals |
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9. Other expenses |
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10. Realized Gain/ Loss |
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11. Unrealized Gain/ Loss |
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Commission paid to Distributor |
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Brokerage paid |
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C. Performance of Portfolio
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Performance report for Client Portfolio and Investment Approach (%)
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Particulars |
1 Year |
3 Years |
5 Years |
10 Years |
Since Inception |
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Returns of Client Portfolio |
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Aggregate Returns of Investment Approach |
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Benchmark Performance |
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[Disclaimer: Performance data for Portfolio Manager and Investment Approach provided hereunder is not verified by any regulatory authority]
D. Transaction Details:
(i) Capital Contribution (from inception till end of reporting period)
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Date |
Capital Inflow |
Capital Outflow |
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Total |
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(ii) Investments (during the reporting period)
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Security Name |
Transaction Date |
Buy / Sell |
Quantity |
Gross Rate |
Net Rate |
Net Transaction Value |
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(iii) Holding Report as of end of the quarter
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Security Name |
Quantity |
Average Cost |
Market Rate |
Total Cost |
Market Value |
% to Portfolio |
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Equity A: B: |
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Debt A: B: |
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Mutual Funds A: B: |
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Commodities A: B: |
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Other Assets |
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Cash & Cash Equivalent |
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Total |
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E. Other Important Information
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Nature of Asset |
Outstanding amount (In Rs.) |
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a. Coupon Payments |
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b. Dividends |
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c. Others |
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Total |
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6. Any other important information
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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 SEBI (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 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.