Informal Guidance – ABN Amro Bank NV

Sep 29, 2004
Informal Guidance


Investment Management Department



September 29, 2004





Sakhar Bhavan,

Nariman Point,

Mumbai – 400 021





Sub: Request under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003.

Re: Your letter dated July 15, 2004


1. Please refer to your letter dated July 15, 2004, seeking “Interpretative Letter” under the captioned scheme. The “Interpretative Letter” has been sought on the issue of

i. Applicability of Regulation 20 (3) and 20(4) of the SEBI ( Portfolio Managers) Regulations 1993 to portfolio manager rendering portfolio advisory services

ii. Requirement of providing accounts as specified under Regulation 14 (2) (b) (v) of the SEBI ( Portfolio Managers) Regulations 1993.

iii. Disclosure of providing tax provisions in the agreement with the client and the disclosure document as per Schedule IV & V under Regulation 14 of the SEBI ( Portfolio Managers ) Regulations 1993.


2. It is, inter-alia, informed by you that the services rendered by you are purely advisory in nature. Further ABN is a SEBI registered portfolio manager rendering only portfolio advisory services to its clients. They do not decide on the type of instruments, proportion of exposure and tenure of portfolio investments. Such decisions are taken by their clients. Since, services rendered are advisory only, there are no accounts for the clients that can be maintained.

3. On the basis of the information submitted by you, our views on the query raised by you are as under :-

i. Regulation 20 (3) of the SEBI (Portfolio Managers) Regulations, 1993 provides for annual audit of the portfolio accounts by an independent chartered accountant and the issue of the copy of the certificate to the client. Regulation 20(4) of the said regulations provides for the appointment of a chartered accountant by the client to audit the books and accounts of the portfolio manager relating to his transactions and the co-operation by the portfolio manager with such chartered accountant in course of the audit. These regulations apply in case the Portfolio Manager undertakes management of portfolio or the funds of the client.

In view of the above, a portfolio manager rendering only advisory services may not be required to comply with regulation 20 (3) and (4) of the SEBI (Portfolio Managers) Regulations 1993, so long as he renders portfolio advisory services only.

ii. Regulation 14 (2) (b) provides for the disclosure of the audited financial statements of the portfolio manager for the immediately preceding three years in the disclosure document to be provided to the client.

Therefore, you shall be required to comply with Regulation 14(2) (b) (v) of the SEBI (Portfolio Managers) Regulations 1993.

iii. Schedule IV and V of the SEBI (Portfolio Managers) Regulations, 1993 provides for the disclosure of taxation aspects in the agreement entered into between the portfolio manager and the client and the disclosure document.


In this regard, it is informed that disclosure of the taxation aspects be made in the instant case as good corporate practice.


4. This position is based on the representation made to the Division in your letters under reference. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred.


5. You may note that the above views are expressed only with respect to the clarification sought on applicability of SEBI (Portfolio Managers) Rules and Regulations, 1993 and do not affect the applicability of any other law or requirements.



Yours faithfully,


Medha Dev

Asst. Gen. Manager