SECURITIES
SEBI INVESTOR EDUCATION PROGRAMME
(PORTFOLIO MANAGERS)
1. Who is a Portfolio Manager?
A portfolio manager is a body
corporate 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.
2. What is the difference between a
discretionary portfolio manager and a non- discretionary portfolio manager?
The discretionary portfolio manager
individually and independently manages
the funds of each client in accordance with the needs of the client.
The non-discretionary portfolio
manager manages the funds in
accordance with the directions of the client.
3. What is the procedure of obtaining
registration as a portfolio manager from SEBI?
For registration as a portfolio
manager, an applicant is required to pay a non-refundable application fee of
Rs.1,00,000/- by way of demand draft drawn in favour
of ‘Securities and Exchange Board of India’, payable at Mumbai.
The application in Form A along with
additional information (Form A and additional information available on SEBI Website : www.sebi.gov.in.) submitted to the at the below mentioned
address
Investment Management Department -
Division of Funds- 1
Securities and Exchange Board of
SEBI Bhavan, 3rd Floor A
Wing,
Plot No. C4-A, ‘G’
Block,
Bandra-Kurla
Complex,
Bandra (E),
Mumbai - 400 051.
4.
What is the capital adequacy
requirement of a portfolio manager?
The portfolio manager is required to
have a minimum networth of Rs.
2 crore.
5. Is there any registration fee to be
paid by the portfolio managers?
Yes. Every portfolio manager is
required to pay Rs. 10 lakhs
as registration fees at the time of grant of certificate of registration by
SEBI.
6. How long does the certificate of
registration remain valid?
The certificate of registration remains valid for three
years. The portfolio manager has to apply for renewal of its registration
certificate to SEBI, 3 months before the expiry of the validity of the
certificate, if it wishes to continue as a registered portfolio manager.
7. How much is the renewal fee to be
paid by the portfolio manager?
The portfolio manager is required to
pay Rs. 5 lakh as renewal
fees to SEBI.
8. Is there any contract between the
portfolio manager and its client?
Yes. The portfolio manager, before
taking up an assignment of management of funds or portfolio of securities on
behalf of the client, enters into an agreement in writing with the client,
clearly defining the inter se relationship and setting out their mutual rights,
liabilities and obligations relating to the management of funds or portfolio of
securities, containing the details as specified in Schedule IV of the SEBI
(Portfolio Managers) Regulations, 1993.
9.
What fees can a portfolio manager charge from its clients for the
services rendered by him?
SEBI Portfolio Manager Regulations
have not prescribed any scale of fee to be charged by the portfolio manager to
its clients.
However, the regulations provide
that the portfolio manager shall charge a fee as per the agreement with the
client for rendering portfolio management services. The fee so charged may be a
fixed amount or a return based fee or a combination of both. The portfolio
manager shall take specific prior permission from the client for charging such
fees for each activity for which service is rendered by the portfolio manager
directly or indirectly (where such service is outsourced).
10. Is there any specified value of
funds or securities below which a portfolio manager can’t accept from the
client while opening the account for the purpose of rendering portfolio
management service to the client?
The portfolio manager is required to accept minimum Rs. 5 lakhs
or securities having a minimum worth of Rs. 5 lakhs from the client while opening the account for the
purpose of rendering portfolio management service to the client.
Portfolio manager can only invest
and not borrow on behalf of his clients.
11. Are investors required to open demat accounts for PMS services?
Yes. For investment in listed
securities, an investor is required to open a demat account in his/her own
name.
12. What kind of reports can the client expect from the portfolio manager?
The portfolio manager shall furnish
periodically a report to the client, as agreed in the contract, but not
exceeding a period of six months and as and when required by the client and
such report shall contain the following details, namely:-
(a) the composition and the value of
the portfolio, description of security, number of securities, value of each
security held in the portfolio, cash balance and aggregate value of the
portfolio as on the date of report;
(b) transactions
undertaken during the period of report including date of transaction and
details of purchases and sales;
(c) beneficial
interest received during that period in respect of interest, dividend, bonus
shares, rights shares and debentures;
(d) expenses
incurred in managing the portfolio of the client;
(e) details
of risk foreseen by the portfolio manager and the risk relating to the
securities recommended by the portfolio manager for investment or
disinvestment.
This report may also be available on
the website with restricted access to each client. The portfolio manager shall,
in terms of the agreement with the client, also furnish to the client documents
and information relating only to the management of a portfolio. The client has
right to obtain details of his portfolio from the portfolio managers.
13. What is the disclosure mechanism of
the portfolio managers to their clients?
The portfolio manager provides to
the client the Disclosure Document at least two days prior to entering into an
agreement with the client.
The Disclosure Document contains the
quantum and manner of payment of fees payable by the client for each activity,
portfolio risks, complete disclosures in respect of transactions with related
parties, the performance of the portfolio manager and the audited financial
statements of the portfolio manager for the immediately preceding three years.
Please note that the disclosure
document is neither approved nor disapproved by SEBI nor does SEBI certify the
accuracy or adequacy of the contents of the Documents.
14. Does SEBI approve any of the
services offered by portfolio managers?
No. SEBI does not approve any of the
services offered by the Portfolio Manager. An investor has to invest in the
services based on the terms and conditions laid out in the disclosure document
and the agreement between the portfolio manager and the investor.
15. Does SEBI approve the disclosure
document of the portfolio manager?
The Disclosure Document is neither
approved nor disapproved by SEBI. SEBI does not certify the accuracy or
adequacy of the contents of the Disclosure Document.
16. What are the rules governing
services of a Portfolio Manager?
The services of a Portfolio Manager
are governed by the agreement between the portfolio manager and the investor.
The agreement should cover the minimum details as specified in the SEBI
Portfolio Manager Regulations. However, additional requirements can be
specified by the Portfolio Manager in the agreement with the client. Hence, an
investor is advised to read the agreement carefully before signing it.
17. Is premature withdrawal of
Funds/securities by an investor allowed?
The funds
or securities can be withdrawn or taken back by the client before the maturity
of the contract. However, the terms of the premature withdrawal would be as per
the agreement between the client and the portfolio manager.
18. Can a Portfolio Manager impose a
lock-in on the investor?
Portfolio
managers cannot impose a lock-in on the investment of their clients.
However, a portfolio manager can charge exit fees from the client for early
exit, as laid down in the agreement.
19. Can a Portfolio Manager offer
indicative or guaranteed returns?
Portfolio
manager cannot offer/ promise indicative or guaranteed returns to
clients.
20. On what basis is the performance of
the portfolio manager calculated?
The performance of a discretionary
portfolio manager is calculated using weighted average method taking each
individual category of investments for the immediately preceding three years
and in such cases performance indicator is also disclosed.
21. Where can an investor look out for
information on portfolio managers?
Investors can log on to the website
of SEBI www.sebi.gov.in for information on SEBI regulations and circulars
pertaining to portfolio managers. Addresses of the registered
portfolio managers are also available on the website.
22. How can the investors redress their
complaints?
Investors would find in the
Disclosure Document the name, address and telephone number of the investor
relation officer of the portfolio manager who attends to the investor queries
and complaints. The grievance redressal and dispute mechanism is also mentioned
in the Disclosure Document. Investors can approach SEBI for redressal of their
complaints. On receipt of complaints, SEBI takes up the matter with the
concerned portfolio manager and follows up with them.
Investors may send
their complaints to:
Office of Investor Assistance and
Education,
Securities and Exchange Board of
SEBI Bhavan
Plot No. C4-A, ‘G’ Block,
Bandra-Kurla
Complex, Bandra (E),
Mumbai - 400 051