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SECURITIES AND EXCHANGE BOARD OF INDIA
SEBI INVESTOR EDUCATION PROGRAMME
(PORTFOLIO MANAGERS)
1. Who is a Portfolio Manager?
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 is a portfolio manager.
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 in a manner which does not partake character of a Mutual Fund, whereas 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?
An applicant for registration or renewal of
registration as a portfolio manager is required to pay a non-refundable
application fee of Rs.1,00,000/- (Rupees one lac only) by way of demand draft drawn in favour of ‘Securities and
Exchange Board of India’, payable at Mumbai. The fee has to be forwarded
to the Treasury & Accounts Division at the below mentioned address.
The application in Form A along with additional information
(Form A and additional information available on SEBI Website : www.sebi.gov.in.)
and copy of the receipt of the application fee is to be submitted to the
Investment Management Department, Division of Funds at the below
mentioned address
SEBI
SEBI Bhavan, 3rd
Floor A Wing,
Plot No. C4-A, ‘G’ Block,
Bandra-Kurla Complex,
Bandra (E), Mumbai - 400 051.
4. What does SEBI consider while
granting the certificate of registration to the applicant?
SEBI takes into account all matters which it deems
relevant to the activities relating to portfolio management. The
applicant has to be a body corporate and must have necessary
infrastructure like adequate office space, equipments and the manpower to effectively discharge the activities of a
portfolio manager. The principal officer of the applicant should have either –a professional qualification in finance, law, accountancy
or business management from a university or an institution recognised by
the Central Government or any State Government or a foreign university;
or an experience
of at least ten years in related activities in the securities market
including in a portfolio manager, stock broker or as a fund manager.
The applicant should have in its employment minimum of
two persons who, between them, have atleast five years experience as portfolio
manager or stock broker or investment manager or in the areas related to
fund management. The applicant also has to fulfill the capital adequacy
requirements, etc.
5. Who is the principal officer
of a portfolio manager?
The principal officer of the applicant
has either –
(i)
a professional qualification in finance, law, accountancy or business
management from a university or an institution recognised by the Central Government or any State
Government or a foreign university;
or
(ii) an
experience of at least ten years in related activities in the securities
market including in a portfolio manager, stock broker or as a fund
manager
6. What is the capital adequacy
requirement of a portfolio manager?
The portfolio manager is required to have a minimum networth of fifty lac rupees.
7. Is it mandatory that a portfolio
manager should appoint a custodian?
Every portfolio manager who has total assets under
management of value more than five hundred crore
rupees shall appoint a custodian. This condition will not be applicable
to portfolio managers offering purely advisory services.
8. Is there any registration fee to be
paid by the portfolio managers?
Yes. Every portfolio manager is required to pay a sum
of ten lac rupees as
registration fees at the time of grant of certificate of registration by
SEBI.
9. How long does the certificate
of registration remain valid?
The certificate of registration remains valid for
three years.
10. Are the portfolio managers
required to pay annual fee to SEBI?
No, the portfolio managers are not required to pay any
annual fee to SEBI.
11. What is the procedure of
renewing the certificate of registration?
The portfolio manager who wants to renew its
certificate of registration has to make an application for renewal in
Form A and Additional Information and pay a non-refundable fee of one lakh
rupees along with the application three months before the expiry of the validity of the
certificate.
12. How much is the renewal fee to
be paid by the portfolio manager?
The portfolio manager is required to pay five lacs as renewal fees to
SEBI.
13. Whether any contract should be
made 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.
14. What fees can a portfolio manager charge from its
clients for the services rendered by him
?
The SEBI (Portfolio Managers)
Regulations, 1993, 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),
15. 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 funds or
securities having a minimum worth of five lac rupees from the client while opening the
account for the purpose of rendering portfolio management service to the
client.
16. Is a portfolio manager
permitted to invest the fund of its clients in derivatives?
A portfolio manager is permitted to invest in
derivatives, including transactions for the purpose of hedging and
portfolio rebalancing, through a recognized stock exchange. However,
leveraging of portfolio is not permitted in respect of investment in
derivatives. The total exposure of the portfolio client in derivatives
should not exceed his portfolio funds placed with the portfolio manager
and the portfolio manager should basically invest and not borrow on
behalf of his clients.
17. 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 , inter alia, contains the quantum and manner of
payment of fees payable by the client for each activity for which service
is rendered by the portfolio manager directly or indirectly ( where such
service is out sourced), portfolio risks, complete disclosures in respect
of transactions with related parties as per the accounting standards
specified by the Institute of Chartered Accountants of India in this
regard, the performance of the portfolio manager and the audited
financial statements of the portfolio manager for the immediately
preceding three years.
18. 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 indicators is also disclosed.
19. 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 rules, regulations and
guidelines pertaining to portfolio managers. Addresses of the
registered portfolio managers are also available on the website.
20. 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. To
help out the investors the grievance redressal and dispute mechanism is also
provided by the portfolio manager 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 India,
SEBI Bhavan
Plot No. C4-A, ‘G’ Block,
Bandra-Kurla Complex, Bandra
(E),
Mumbai - 400 051
Note: The answers given here are
general in nature. The questions and the answers have been structured to
enable the readers to gain a broad understanding of SEBI (Portfolio
Managers) Regulations, 1993. For exact details the reader is advised to
refer to the SEBI (Portfolio Managers) Regulations, 1993 which are
available on our website. Readers may also note that these answers do not
aim to explain the Regulations in force, since answers to questions
involving particular case / fact pattern may depend upon administrative
decisions and Court orders, if any, in respect of the same.
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