Mar 18, 2005
Investment Management Department
IMD/ 36428 /2005
March 18, 2005
Union Bank of India
Union Bank Bhavan,
239, Vidhan Bhavan Marg,
Mumbai – 21
Sub: Guidance under SEBI (Informal Guidance ) Scheme 2003
1.0 This has reference to your letter ref. no. IBD:WT:1528 dated November 20, 2004 and your subsequent correspondence dated January 3, 2005 seeking informal guidance under clause 5 (ii) of SEBI(Informal Guidance) Scheme 2003.
It is interalia informed by you that :-
- You have sought approval from the RBI for launching a new Deposit Scheme with an option to invest in the Units of Mutual Funds.
- While conveying approval, RBI has advised you to seek guidance under the SEBI (Informal Guidance) Scheme 2003.
- The product features of the proposed scheme specifically state that the scheme is exclusively meant for NRIs.
- The NRIs are required to keep a deposit with Union Bank of India [ hereinafter referred to as ‘UBI’ ] , a portion of which is proposed to be invested through a Mutual Fund Product. The aggregate amount proposed to be invested will be apportioned and invested in Bank Deposit and Units of Mutual Fund in such a way that the maturity value of both together will be equal to or more than the aggregate initial investment.
- You have also furnished a list of documents required to be given to the customers.
In view of the above, the informal guidance has been sought on the interpretation of whether Union Bank of India qualifies as a ‘portfolio manager’ under section 2 (e) of the SEBI (Portfolio Managers) Rules, 1993 consequent to the proposed deposit product viz. Union Principal Protect.
2.0 On the basis of the information submitted by you, our views on the query raised by you are as under :
2.1 The definition of ‘portfolio manager’ as per clause (e) of the SEBI (Portfolio Managers) Rules, 1993 means any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise ) the management or administration of a portfolio of securities or the funds of the client, as the case may be.
2.2 In the instant case, it is also observed from the product features of the proposed deposit product scheme that though only a small portion of the deposit of the client will be invested in mutual funds, this activity is akin to the activity of portfolio manager under the SEBI (Portfolio Managers) Rules, 1993 and falling under the above definition.
2.3 It is also observed from the Power of Attorney proposed to be executed that the services sought to be provided by UBI to its clients is similar to that of managing and administering the funds of a client.
In view of the above, you will have to obtain registration as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993, upon complying with all eligibility criteria, if you want to have this kind of arrangement of investing a portion of the deposit in the units of mutual funds.
3.0 This guidance 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 on the Board on the questions referred.
4.0 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.
Asst General Manager