GENERAL
MANAGER
INVESTMENT MANAGEMENT DEPARTMENT
IMD/PMS/CIR/1/21727/03
All Portfolio Managers registered
with SEBI
Dear Sirs,
Sub : Improvement in corporate governanace
1. As you
are aware, all portfolio managers are required to disclose the performance of
their portfolios to their clients, including disclosure of the performance indicators
calculated on the basis of weighted average method taking each individual
category of investments for the immediately preceding three years in case of
discretionary portfolio managers. In order to make the investors fully aware about
how their funds have been deployed and also to give them an
objective analysis of the performance of the portfolios being managed by the
portfolio managers on discretionary basis in comparison with the rise or fall
in the markets, it has been decided to disclose the performance of benchmark indices
in the periodical reports to be furnished to the client in terms of Regulation 21
of SEBI (Portfolio Managers) Regulations, 1993.
The
portfolio managers may select any of the indices available, e.g. BSE
(Sensitive) index, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX 500,
depending on the investment objective and portfolio of the client. These
benchmark indices may be decided by the portfolio managers and any change at a
later date shall be recorded and justified with specific reasons thereof.
As the purpose of introducing benchmarks is to indicate the performance
of the portfolios vis.a.vis. markets to
the investors, the portfolio managers may give performance of more than one
index if they so desire. Also, they have the option to give their management
perception on the performance of their schemes.
The Boards
of portfolio managers may review the performance of the funds managed by them
for each client separately in their meetings and should take corrective action
wherever necessary. They may also compare the performance of the portfolios with
benchmarks.
2.
Boards of the portfolio managers should
review the compliance of regulations in their periodical meetings. They should
develop a system of getting quarterly reports of compliance of SEBI Regulations
and Guidelines and also that due diligence has been exercised by their
officials in their operations and that the interests of investors are
protected. Such reports may be placed before the Boards by the compliance
officers. Boards of the portfolio managers should also review redressal of investors’ grievances. Any deficiency letters
or warning letters issued to the portfolio managers by SEBI should also be
placed before the Boards of the portfolio managers.
3. There shall be internal audit by a practicing
CA or CS so as to judge the quality of internal procedures being followed by
the portfolio manager. The report of the internal audit shall be submitted to the
Board of the portfolio manager.
4. The portfolio manager shall exercise due
diligence in all their operational activities.
5. Compliance of the
above guidelines may please be disclosed to SEBI while submitting the half
yearly report. The report is to be submitted twice a year, as on 31st
of March and 30th of September. The report should reach SEBI within
thirty days of the period to which it relates.
These
guidelines are being issued in accordance with the provisions of Regulation 39
of SEBI (Portfolio Managers) Regulations, 1993.
Yours faithfully,
SURESH GUPTA