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SECURITIES
AND EXCHANGE BOARD OF CONTENTS 1. Short title and
commencement CHAPTER II: REGISTRATION
OF PORTFOLIO MANAGERS 3. Application for grant
of certificate 7. Capital
Adequacy Requirement CHAPTER III: GENERAL
OBLIGATIONS AND RESPONSIBILITIES 13. Code of Conduct CHAPTER IV: INSPECTION AND
DISCIPLINARY PROCEEDINGS 24. Right of inspection
by the Board CHAPTER V: PROCEDURE FOR
ACTION IN CASE OF DEFAULT 30. Liability for action
in case of default 31. [Deleted] 32. [Deleted] 33. [Deleted] 34. [Deleted] 35. [Deleted] 36. [Deleted] 38. [Deleted] CHAPTER VI: MISCELLANEOUS 39. Power of the Board to issue
clarification SCHEDULE I: FORMS FORM A: APPLICATION
FOR
GRANT OF CERTIFICATE RENEWAL OF CERTIFICATE FORM B: CERTIFICATE OF
REGISTRATION FORM C: DETAILS OF PORTFOLIO MANAGER SCHEDULE II: FEES SCHEDULE IV:
CONTENTS OF AGREEMENT BETWEEN THE PORTFOLIO MANAGER AND HIS CLIENTS SCHEDULE V:
DISCLOSURE DOCUMENT THE
GAZETTE OF EXTRAORDINARY PART
III - SECTION 4 PUBLISHED
BY AUTHORITY THE
7TH DAY OF JANUARY 1993 NOTIFICATION SECURITIES
AND EXCHANGE BOARD OF (PORTFOLIO
MANAGERS) REGULATIONS, 1993 SEBI/LE/92/III. In exercise of the powers
conferred by section 30 of the Securities and Exchange Board of India Act,
1992 (15 of 1992), the Securities and Exchange Board of India hereby makes
the following regulations, namely: - PRELIMINARY 1. (1) These regulations may be called the
Securities and Exchange Board of India (Portfolio Managers) Regulations,
1993. (2) They shall come into force on the date
of their publication in the Official Gazette. 2. In these regulations, unless the
context otherwise requires, - 1[ (a) [chartered
accountant" means a chartered accountant as defined in clause (b) of
sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of
1949) and who has obtained a certificate of practice under sub-section (1) of
section 6 of that Act;] 1a[ (aa) 2 [***] (b)
"form" means a form specified in Schedule I; (c)
"inspecting authority" means one or more persons appointed by the
Board to exercise powers conferred under Chapter IV; 3 [(d)
"principal officer" means a director of the portfolio Manager, who
is responsible for the activities of portfolio management and has been
designated as principal officer by the portfolio manager;] (e)
"rules" means Securities and Exchange Board of India (Portfolio
Managers) Rules 1993; 4 [(ea) �Securities
lending� means the securities lending as per the Securities Lending Scheme,
1997 specified by the Board;] (f) Words and expressions used and not defined in these regulations
but defined in the Act and the rules shall have the meanings respectively
assigned to them in the Act or the rules, as the case may be. Foot
notes 1.��
"Clause a" in regulation 2 was Inserted by the SEBI
(Portfolio Managers) (Amendment) Regulations, 2002, w.e.f. 11.10.2002.
1a.� �Clause (a) in regulation 2 renumbered as
clause (aa) by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002,
w.e.f. 11.10.2002. 2.� Omitted by the SEBI
(Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty)
Regulations, 2002, w.e.f. 27.9.2002.
The omitted provisions are as follows : �Enquiry
Officer" means any officer of the Board, or any other person, having
experience in dealing with the problems relating to the securities market,
who is authorised by the Board under Chapter V;�. 3.
Following
"Clause (d)" in regulation 4 was substituted for the following by
the SEBI (Portfolio Managers) (Amendment) Regulations, 2002, w.e.f.
11.10.2002. "principal officer" means
4. �"Clause (ea)" in
regulation 2 was Inserted by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. CHAPTER
II REGISTRATION
OF PORTFOLIO MANAGERS Application for grant
of certificate 5 [3. (1) An application by a Portfolio Manager for the
grant of a certificate shall be made to the Board in Form A and
shall be accompanied by a non�refundable application fee, as specified in
clause (1) of Schedule
II, to be paid in the manner specified in Part B
thereof ] �(2) Notwithstanding anything
contained in sub-regulation (1), any application made by a portfolio manager
prior to coming into force of these regulations containing such particulars
or as near thereto as mentioned in Form A shall be treated as an application
made in pursuance of sub-regulation (1) and dealt with accordingly. Application to conform to the requirements 4. Subject to the provisions of sub-regulation (2) of Regulation 3,
any application, which is not complete in all respects and does not conform
to the instructions specified in the form, shall be rejected: Provided that, before rejecting any such application, the applicant
shall be given an opportunity to remove within the time specified such
objections as may be indicated by the Board. Furnishing of further information, clarification,
and personal representation 5.
(1) The Board may require the applicant to furnish further information or
clarification regarding matters relevant to his activity of a portfolio
manager for the purposes of disposal of the application. (2) The applicant
or, its principal officer shall, if so required, appear before the Board for
personal representation. 6 [Consideration of application
6.
(1) For considering the grant of certificate of registration to the
applicant, the Board shall take into account all matters which it deems
relevant to the activities relating to portfolio management. (2) Without
prejudice to the generality of the foregoing provisions, the Board shall
consider whether - a)
the applicant is a body corporate; (b) the applicant
has the necessary infrastructure like adequate office space, equipments and
the manpower to effectively discharge the activities of a portfolio manager; (c) the principal
officer of the applicant has the professional qualifications in finance, law,
accountancy or business management from an institution recognised by the
Government; (d) the applicant
has 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; (e) any previous
application for grant of certificate made by any person directly or
indirectly connected with the applicant has been rejected by the Board; (f) any disciplinary
action has been taken by the Board against a person directly or indirectly
connected with the applicant under the Act or the Rules or the Regulations made
thereunder; Explanation - For
the purposes of sub-clauses (e) and (f), the expression " person
directly or indirectly connected" means any person being an associate,
subsidiary, inter connected company or a company under the same management
within the meaning of section 370(1B) of the Companies Act,1956 or in the
same group; (g) the applicant fulfills the capital
adequacy requirements specified in regulation 7; (h) the applicant,
its director, principal officer or the employee as specified in clause (d) is
involved in any litigation connected with the securities market which has an
adverse bearing on the business of the applicant; (i) the applicant,
its director, principal officer or the employee as specified in clause (d)
has at any time been convicted for any offence involving moral turpitude or
has been found guilty of any economic offence; (j) the applicant is a fit and proper
person; (k)
grant of certificate to the applicant is in the interests of investors. ] 7 [ Applicability of Securities and Exchange Board of
6A.The provisions of the
Securities and Exchange Board of India (Criteria for fit and proper person)
Regulations, 2004 shall, as for as may be, apply to all applicants or the portfolio
managers under these regulations. ] Capital Adequacy Requirement 8 [7. The capital
adequacy requirement referred to in clause (g) of regulation 6 shall not be
less than the networth of fifty lacs rupees; Explanation: For the purposes of this regulation, "networth"
means the aggregate value of paid up equity capital plus free reserves
(excluding reserves created out of revaluation) reduced by the aggregate
value of accumulated losses and deferred expenditure not written off,
including miscellaneous expenses not written off."] Procedure for registration 8. The Board on being satisfied that the applicant fulfils the
requirements specified in Regulation 6 shall send an intimation to the
applicant and on receipt of the payment of 9 �[ registration ] fees as specified in
10 [ clause (1A) of ] Schedule II grant
a certificate in Form B. 9. (1) A portfolio manager may, three months before the expiry of the
validity of the certificate, make an application for renewal in Form A. (2) The application
for renewal, under sub-Regulation (1) shall be dealt with in the same manner
as if it were an application for grant of a certificate made under Regulation
3. (3) The Board on
being satisfied that the applicant fulfils the requirements specified in
Regulation 6 for renewal of certificate shall grant a certificate in Form B
and send an intimation to the applicant. Procedure where registration is not granted 10. (1) Where an application for grant of a certificate under
Regulation 3 or of renewal under Regulation 9 does not satisfy the
requirements set out in Regulation 6, the Board may reject the application,
after giving an opportunity of being heard. (2) The refusal to
grant registration shall be communicated by the Board within thirty days of
such refusal to the applicant stating therein the grounds on which the
application has been rejected. (3) Any applicant
may, being aggrieved by the decision of the Board under sub-regulation (1),
apply within a period of thirty days from the date of receipt of such
intimation, to the Board for reconsideration of its decision. (4) The Board
shall reconsider an application made under sub- Regulation (3) and
communicate its decision as soon as possible in writing to the applicant. Effect of refusal to
grant certificate 11. Any
portfolio manager whose application for a certificate has been refused by the
Board shall on and from the date of the receipt of the communication under
sub-Regulation (2) of Regulation 10 cease to carry on any activity as
portfolio manager. Payment of fees, and the Consequences of failure to pay fees 12. (1) Every applicant eligible for grant of a
certificate shall pay fees in such manner and within the period specified in
Schedule II. (2) Where a portfolio manager fails to pay the fees as provided
Schedule II, the Board may suspend the certificate, whereupon the Portfolio
Manager shall forthwith cease to carry on the activity as a portfolio manager
for the period during which the suspension subsists. Foot
notes 5.� Sub-Regulation
(1) in Regulation 3 substituted for the following by SEBI (Portfolio
Managers) (Amendment) Regulations, 2004, w.e.f. 27.5.2004: �3. (1) An
application by a portfolio manager for grant of a certificate shall be made
to the Board in Form A.� 6.� �Regulation 6 substituted for the following
by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002, w.e.f.
11.10.2002 � �Consideration
of application 6. The Board shall take into account for considering the grant of a
certificate, all matters, which are relevant to the activities relating to
portfolio manager and in particular whether the applicant complies with the
following requirements namely - (a) the applicant has the necessary infrastructure like adequate
office space, equipments, and manpower to effectively discharge his
activities; (b) the applicant has in his employment minimum of two persons who
have the experience to conduct the business of portfolio manager; (c) a person, directly or indirectly connected with the applicant has
not been granted registration by the Board in case of the applicant being a
body corporate; Explanation: For the purposes of this clause the expression
"directly or indirectly connected" means any person being an
associate, subsidiary, inter-connected or group company of the applicant in
case of the applicant being a body corporate; (d) the applicant fulfils the capital adequacy
requirements specified in Regulation 7; (e) the applicant, his partner, director or principal officer is not
involved in any litigation connected with the securities market and which has
an adverse bearing on the business of the applicant; (f) the applicant, his director, partner or principal officer has not
at any time been convicted for any offence involving moral turpitude or has
been found guilty of any economic offence; (g) the applicant has the professional qualification from an
institution recognised by the Government in finance, law, accountancy or
business management; 1aa*[(gg) the applicant is a fit and proper person] (h) grant of certificate to the applicant is in the interest of
investors. 1aa. Clause (gg) inserted by the SEBI (Portfolio Mangers) (Amendment)
Regulations, 1998 published in the Official Gazette of 7. ��Regulation �6A inserted by the SEBI (Criteria for fit
and proper person) Regulations, 2004, w.e.f 10.3.2004 8.� ��Regulation 7 substituted for the following
by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002, w.e.f.
11.10.2002 for � "The
capital adequacy requirement referred to in sub - regulation (d) of
Regulation 6 shall not be less than networth of Rupees fifty lacs of the
person making the application; Explanation:
For the purposes of this Regulation, "networth" means in the case
of an applicant which is a partnership firm or a body corporate, the value of
the capital contributed to the business of such firm or the paid up capital
of such body corporate and plus free reserves as the case may be at the time
of making application under sub- Regulation (1) of Regulation 3." 9.�� In Regulation 8 after the words "on
receipt of the payment of" and before the word "fees", the
word, "registration", shall be inserted by SEBI (Portfolio
Managers) (Amendment) Regulations, 2004, w.e.f. 27.5.2004. 10 ��In
Regulation 8 after the words "as specified in", and before the
words "Schedule II", the words "clause (1A) of", shall be
inserted by SEBI (Portfolio Managers) (Amendment) Regulations, 2004, w.e.f. 27.5.2004.
CHAPTER III GENERAL
OBLIGATIONS AND RESPONSIBILITIES 13. Every
Portfolio Manager shall abide by the Code of Conduct as specified in Schedule
III. 11 [Contract with clients and disclosures 14. (1) (a) The portfolio manager shall before
taking up an assignment of management of funds or portfolio of securities in
writing on behalf of a client, enter into an agreement in writing with such
client clearly defining the interse relationship, and setting out their
mutual rights, liabilities and obligations relating to management of funds or
portfolio of securities containing the details as specified in Schedule IV. (b) The agreement between the portfolio manager and the client shall,
inter alia, contain: (i) the investment objectives and the services to be provided; (ii) areas of investment and restrictions, if any, imposed by the client
with regard to the investment in a particular company or industry ; (iii) type of instruments and proportion of exposure; (iv) tenure of portfolio investments; (v) terms for early withdrawal of funds or securities by the clients; (vi)attendant risks involved in the management of the portfolio; (vii) period of the contract and provision of early termination, if
any; (viii)amount to be invested subject to the restrictions provided under
these regulations; (ix)procedure of settling client's account including form of repayment
on maturity or early termination of contract; (x)fees payable to the portfolio manager; (xi)the quantum and manner 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) ; (xii)custody of securities; (xiii)in case of a discretionary portfolio manager a condition
that the liability of a client shall not exceed his investment with the
portfolio manager; (xiv) the terms of accounts and audit and furnishing of the
reports to the clients as per the provisions of these regulations; and (xv) other terms of portfolio investment subject to
these regulations. (2)(a)The portfolio manager shall provide to the
client, the Disclosure Document as specified in Schedule V, alongwith a
certificate in Form C as specified in Schedule I , at least two days prior to
entering into an agreement with the client as referred to in sub- regulation
(1). (b)The Disclosure Document, shall inter alia contain
the following - (i)
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); (ii)
portfolio risks; (iii)
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; (iv)
the performance of the portfolio manager; Provided
that the performance of a discretionary portfolio manager shall be calculated
using weighted average method taking each individual category of investments
for the immediately preceding three years and in such cases performance
indicators shall also be disclosed. (v)
the audited financial statements of the portfolio manager for the immediately
preceding three years. (c) The contents of the Disclosure Document shall be certified by an
independent chartered accountant. (d) The portfolio manager shall file with the Board, a copy of the
Disclosure Document before it is circulated or issued to any person and every
six months thereafter or whenever any material change is effected therein
whichever is earlier, along with the certificate in Form C as specified in
Schedule I. (3) (a) The portfolio manager shall charge an
agreed fee from the clients for rendering portfolio management services
without guaranteeing or assuring, either directly or indirectly, any return
and the fee so charged may be a fixed fee or a return based fee or a combination
of both. (b) The portfolio manager may, subject to the disclosure in terms of
the Disclosure Document and specific permission from the client, charge such
fees from the client for each activity for which service is rendered by the
portfolio manager directly or indirectly (where such service is out
sourced).] General responsibilities of a Portfolio Manager 15. (1) The discretionary portfolio manager shall
individually and independently manage 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 shall manage
the funds in accordance with the directions of the client. 12[(1A) The portfolio
manager shall not accept from the client, funds or securities worth less than
five lacs rupees.] (2) The portfolio manager shall act in a fiduciary
capacity with regard to the client's funds. 13 [(2A) The portfolio manager shall keep the funds of
all clients in a separate account to be maintained by it in a Scheduled
Commercial Bank. Explanation : -
For the purposes of this sub-regulation, the expression " Scheduled
Commercial Bank" means any bank included in the Second Schedule to the
Reserve Bank of India Act, 1934 (2 of 1934).] (3) The portfolio
manager shall transact in securities within the limitation placed by the
client himself with regard to dealing in securities under the provisions of
the Reserve Bank of India Act, 1934 (2 of 1934); (4) The
portfolio manager shall not derive any direct or indirect benefit out of the
client's funds or securities. 14 [(4A) The portfolio manager shall not borrow funds
or securities on behalf of the client.] 15 [(5) The portfolio manager shall not lend
securities held on behalf of clients to a third person except as provided
under these regulations] (6) The
portfolio manager shall ensure proper and timely handling of complaints from
his clients and take appropriate action immediately. 16 [Investment of clients' moneys and management of clients' portfolio of
securities.] 16. (1) 17
[(a) The money or securities accepted by the portfolio manager shall not be
invested or managed by the portfolio manager except in terms of the agreement
between the portfolio manager and the client.] (b) Any renewal of portfolio fund on maturity of the initial period
shall be deemed as a fresh placement 18[***]. 19
[(2) Notwithstanding anything contained in the agreement referred to in
regulation 14, the funds or securities can be withdrawn or taken back by the
client before the maturity of the contract under the following circumstances,
namely - (a) voluntary or compulsory termination of portfolio management
services by the portfolio manager or the client. (b) suspension or cancellation of the certificate of registration of
the portfolio manager by the Board. (c) bankruptcy or liquidation of the portfolio manager.] (3) The portfolio manager shall invest funds of his clients in money
market instruments 20 [or derivatives ] or as specified in the
contract: 21 [Provided that leveraging
of portfolio shall not be permitted in respect of investment in derivatives:]
Provided 22 [further] that the portfolio manager shall not
deploy the clients' funds in bill discounting, badla financing or for the
purpose of lending or placement with corporate or non- corporate bodies. Explanation: For the purposes of this sub- regulation: "money
market instruments" includes commercial paper, trade bill, treasury
bills, certificate of deposit and usance bills; 23 [ (4) The portfolio
manager shall not while dealing with clients� funds indulge in speculative
transactions that is, he shall not enter into any transaction for purchase or
sale of any security which is periodically or ultimately settled otherwise
than by actual delivery or transfer of security except the transactions in
derivatives.] (5) The portfolio manager shall, ordinarily purchase or sell
securities separately for each client. However, in the event of aggregation
of purchases or sales for economy of scale, interse allocation shall be done
on a prorata basis and at weighted average price of the day's transactions.
The portfolio manager shall not keep any open position in respect of
allocation of sales or purchases effected in a day. (6) Any transaction of purchase or sale including that between the
portfolio manager's own accounts and client's accounts or between two
clients' accounts shall be at the prevailing market price. (7) The portfolio manager shall segregate each clients' funds and
portfolio of securities and keep them separately from his own funds and
securities and be responsible for safekeeping of clients' funds and
securities. (8) The portfolio manager may hold the securities belonging to the
portfolio account in 24 [its] own name on behalf of 24 [its]
clients only if the contract so provides and in such an event the records of
the portfolio manager and 24 [its] report to the client should
clearly indicate that the securities are held by 24 [it] on behalf
of the portfolio account. 25 [ (9) The portfolio
manager may, subject to authorisation by the client in writing, participate
in securities lending. 26[16 A That the
portfolio manager may manage funds raised or collected or brought from
outside India in accordance with the Securities and Exchange Board of India
(Foreign Institutional Investors) Regulations, 1995] Maintenance of books
of accounts, records, etc. 17. (1) Every
Portfolio Manager shall keep and maintain the following books of accounts,
records and documents namely:- (a) a copy of
balance sheet at the end of each accounting period; (b) a copy of the
profit and loss account for each accounting period; (c) a copy of the
auditors report on the accounts for each accounting period; (d) a statement
of financial position and; (e)
records in support of every investment transaction or recommendation which
will indicate the data, facts and opinion leading to that investment
decision. (2) Every
portfolio manager shall intimate to the Board the place where the books of
accounts, records and documents are maintained. (3) Without
prejudice to sub- regulation (1), every Portfolio Manager shall, after the
end of each accounting period, furnish to the Board copies of the balance
sheet, profit and loss account and such other documents as are mentioned in
any of the regulations under this chapter for any other preceding five
accounting years when required by the Board. Submission of
half-yearly results 18. Every
portfolio manager shall furnish to the Board half- yearly-unaudited financial
results when required by the Board with a view to monitor the capital
adequacy of the portfolio manager. Maintenance of books
of accounts, records and other documents 19. The
portfolio manager shall preserve the books of account and other records and
documents mentioned in any of the regulations mentioned under this chapter
for a minimum period of five years. 20. (1) (a) The portfolio manager shall
maintain separate client-wise accounts. (b)
The funds received from the clients, investments or disinvestments and all
the credits to the account of the client like interest, dividend, bonus, or
any other beneficial interest received on the investment and debits, for
expenses, if any, shall be properly accounted for and details thereof shall
be properly reflected in the client's account. (c) The tax
deducted at source as required under the provisions of the Income-Tax Act,
1961, (43 of 1961) shall be recorded in the portfolio account. (2) The books
of account will be audited yearly by qualified auditor to ensure that the
portfolio manager has followed proper accounting methods and procedures and
that the portfolio manager has performed his duties in accordance with the
law. A certificate to this effect shall, if so specified, be submitted to the
Board within six months of close of portfolio manager's accounting period. 27 [(3) The portfolio accounts of the portfolio
manager shall be audited annually by an independent chartered accountant and
a copy of the certificate issued by the chartered accountant shall be given
to the client. (4) The client
may appoint a chartered accountant to audit the books and accounts of the
portfolio manager relating to his transactions and the portfolio manager
shall co-operate with such chartered accountant in course of the audit.] Reports to be furnished
to the client 21. (1) The
portfolio manager shall furnish periodically a report to the client, as
agreed in the contract, but not exceeding a period of six months 28
[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. 29 [ (1A) The report referred to in sub-regulation
(1) may be made available on the website of the portfolio manager with
restricted access to each client.] (2) The
portfolio manager shall 30 [ in terms of the agreement with the
client ] also furnish to the client documents and information relating only
to the management of a portfolio. (3) On termination of the contract, the
portfolio manager shall give a detailed statement of accounts to the client
and settle the account with the client as agreed in the contract. 31 [ (4) The client shall have the right to obtain
details of his portfolio from the portfolio managers.] Report on steps taken on
Auditor's report 22. Every
Portfolio Manager shall within two months from the date of the auditors
report take steps to rectify the deficiencies, made out in the auditors
report. 23. A portfolio
manager shall disclose to the Board as and when required the following
information namely; (i) particulars regarding the management of a portfolio; (ii) any change in the information or particulars previously
furnished, which have a bearing on the certificate granted to him; (iii) the names of the clients whose portfolio he has managed; (iv) particulars relating to the capital adequacy requirement as
specified in regulation 7 32 [Appointment of
compliance officer. 23A. (1) Every
portfolio manager shall appoint a compliance officer who shall be responsible
for monitoring the compliance of the Act, rules and regulations,
notifications, guidelines, instructions etc., issued by the Board or the
Central Government and for redressal of investors' grievances. (2) The compliance officer shall immediately and independently report
to the Board any non-compliance observed by him.] Foot
notes 11. ��Regulation
14 substituted by the SEBI (Portfolio Managers ) (Amendment) Regulations,
2002, w.e.f. 11.10.2002 for "Contract
with clients 14. (1) (a)
Every portfolio manager shall before taking up an assignment of management of
portfolio on behalf of a client, enter into an agreement with such client
clearly defining the interse relationship, and setting out their mutual
rights, liabilities and obligations relating to management of the portfolio
of the client. (b) The
contract shall, inter alia, contain; - (i) the investment objectives and the services to be provided; (ii) areas of investment and restrictions, if any, imposed by the
client with regard to investment in a particular company or industry; (iii) attendant risks involved in the management of the portfolio; (iv) period of the contract and provision of early termination, if
any; (v) amount to be invested; (vi) procedure of settling client's account including form of
repayment on maturity or early termination of contract; (vii) fees payable to the portfolio manager; (viii) custody of securities. (2) The
funds of all clients shall be placed by the portfolio manager in a separate
account to be maintained by him in a scheduled commercial bank. Explanation
- For the purposes of this sub-regulation "scheduled bank" means
any bank included in the Second Schedule to the Reserve Bank of India Act,
1934 (2 of 1934); (3) The
portfolio manager shall charge an agreed fee from the client for rendering
portfolio management services without guaranteeing or assuring, either
directly or indirectly any return and such fee shall be independent of the
return to the client and shall not be on a return sharing basis." 12.�� �Sub-regulation (1A), in regulation 15 of the
regulations was inserted by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. 13.� �Sub-regulation (2A), in regulation 15 of the
regulations was inserted by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. 14.� �Sub-regulation (4A), in regulation 15 of the
regulations was inserted by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. 15.� �Sub-regulation (5), substituted for the
following by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002,
w.e.f. 11.10.2002: �(5) The
portfolio manager shall not pledge or give on loan securities held on behalf
of clients to a third person without obtaining a written permission from his
client�. 16.� �In
"regulation 16", the heading "investment of clients
moneys" was substituted by "investment of clients moneys and management
of clients� portfolio of securities" by the SEBI (Portfolio Managers)
(Amendment) Regulations, 2002, w.e.f. 11.10.2002. 17.� �In
Regulation 16, sub-regulation (1), clause (a) and its proviso were
substituted for the following by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002: "(a)
The portfolio manager shall not accept money or securities from his client
for a period of less than one year: Provided
that in the case of placement of funds for portfolio management by the same
client on more than one occasion or on a continual basis, each placement
shall be for a minimum period of one year" 18.� �In
Regulation 16, sub-regulation (1), clause (b) the words "and shall be
for a minimum period of one year" were omitted by the SEBI (Portfolio
Managers) (Amendment) Regulations, 2002, w.e.f. 11.10.2002. 19.�� In Regulation 16, sub-regulation (2) was
substituted for by the SEBI (Portfolio Managers) (Amendment) Regulations,
2002, w.e.f. 11.10.2002. "(2) Notwithstanding anything contained in the agreement between
a portfolio manager and his client, referred to in regulation 14 hereof the,
portfolio funds can be withdrawn or taken back by Portfolio client at his
risk before the maturity date of the contract under the following circumstances,
namely: - (a) Voluntary or
compulsory, termination of Portfolio management services by the Portfolio
manager; (b) suspension or termination of registration of Portfolio manager by
the Board; (c) bankruptcy or liquidation in case the portfolio manager is a body
corporate; (d) permanent
disability, lunacy or insolvency in case the portfolio manager is an
individual;" 20.� �In Regulation 16, sub-regulation (3), the
words "or derivatives" were inserted by the SEBI (Portfolio
Managers) (Amendment) Regulations, 2002, w.e.f. 11.10.2002. 21. ��In Regulation 16, after
sub-regulation (3), proviso was inserted by the SEBI (Portfolio Managers)
(Amendment) Regulations, 2002, w.e.f. 11.10.2002. 22.� �In
Regulation 16, after sub-regulation (3), in the existing proviso
"further" was inserted by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. 23.� �In Regulation 16, sub-regulation (4), was
substituted by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002,
w.e.f. 11.10.2002. "(4) The portfolio manager shall not while dealing with clients
funds indulge in speculative transactions that, is, he shall not enter into
any transaction for purchase or sale of any security in which transaction is
periodically or ultimately settled otherwise than by actual delivery or
transfer of security. The portfolio manager may enter into transactions on behalf of client
for the specific purpose of meeting margin requirements only if the contract
so provides and the client is made aware of the attendant risks of such
transactions. " 24.� �In regulation 16, in sub-regulation (8), the
words "his and "him" were substituted by "its" and
"it" respectively, by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. 25.� �In
regulation 16, sub-regulation (9) was inserted by the SEBI (Portfolio
Managers) (Amendment) Regulations, 2002, w.e.f. 11.10.2002. 26.� �In
regulation 16, clause (16A) was inserted by the SEBI (Portfolio Managers)
(Amendment) Regulations, 2000, w.e.f. 22.2.2000. 27. In regulation 20, sub-regulations (3) and (4) were inserted by the
SEBI (Portfolio Managers) (Amendment) Regulations, 2000, w.e.f. 22.2.2000. 28.� In regulation 21, in sub-regulation (1),
the words "as and when required by the client" inserted by the SEBI
(Portfolio Managers) (Amendment) Regulations, 2002, w.e.f. 11.10.2002. 29.� �In regulation 21, sub-regulation (1A) was
inserted by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002,
w.e.f. 11.10.2002. 30.� In regulation 21, in
sub-regulation (2), the comma and words ", in terms of agreement with
the client" were inserted by the SEBI (Portfolio Managers) (Amendment)
Regulations, 2002, w.e.f. 11.10.2002. 31.�
�In regulation 21,
sub-regulation (4) was substituted for by the SEBI (Portfolio Managers)
(Amendment) Regulations, 2002, w.e.f. 11.10.2002. �In the event of any dispute between the portfolio manager and his
clients, the client shall have the right to obtain details of his portfolio
from the portfolio manager.� 32.� .
Regulation 23A was inserted by the SEBI (Investment Advice by Intermediaries)
(Amendment) Regulation 2001 published in the Official Gazette of CHAPTER
IV INSPECTION
AND DISCIPLINARY PROCEEDINGS Right of inspection by the Board 24. (1) The Board may appoint one or more
persons as inspecting authority to undertake the inspection of the books of
account, records and documents of the Portfolio Manager for any of the
purposes specified in sub-regulation (2). (2) The purposes referred to in sub-regulation
(1) may be as follows, namely:- (a) to ensure that the books of account
are being maintained in the manner required; (b) that the provisions of the Act, rules
and regulations are being complied with; (c) to investigate into the complaints
received from investors, other portfolio managers or any other person on any
matter having a bearing on the activities of the Portfolio Manager; and �(d)
to investigate suo-moto in the interest of securities business or investors'
interest into the affairs of the Portfolio Manager. 25. (1) Before
undertaking an inspection under regulation 24, the Board shall give a
reasonable notice to the Portfolio Manager, for that purpose. (2) Notwithstanding anything contained in sub-regulation (1), where
the Board is satisfied that in the interest of the investors no such notice
should be given, it may by an order in writing direct that the inspection of
the affairs of the Portfolio Manager be taken up without such notice. (3) During the course of inspection the Portfolio Manager against whom
an inspection is being carried out shall be bound to discharge his
obligations as provided under regulation 26. Obligations of
Portfolio Manager on inspection 26. (1) It
shall be the duty of every director, proprietor, partner, officer and
employee of the Portfolio Manager who is being inspected to produce to the
inspecting authority such books, accounts and other documents in his custody
or control and furnish him with the statements and information relating to
his activities as a portfolio manager within such time as the inspecting
authority may require. (2) The Portfolio Manager shall allow the inspecting authority to have
a reasonable access to the premises occupied by such Portfolio Manager or by
any other person, on his behalf and also extend reasonable facility for
examining any books, records, documents and computer data in the possession
of the Portfolio Manager or any such other person and also provide copies of
documents or other material which in the opinion of the inspecting authority
are relevant for the purposes of the inspection. (3) The inspecting authority shall in the course of inspection, be
entitled to examine or record statements of any principal officer, director,
partner, proprietor and employee of the Portfolio Manager. (4) It shall be the duty of every director, proprietor, partner,
officer or employee of the Portfolio Manager to give to the inspecting
authority all assistance in connection with the inspection which the
Portfolio Manager may reasonably be expected to give. Submission of report
to the Board 27. The
inspecting authority shall, as soon as may be possible, submit an inspection
report to the Board. 33[Action
on inspection or investigation report 28. The Board
or the Chairman shall after consideration of the inspection or investigation
report take such action as the Board or Chairman may deem fit and appropriate
including action under the Securities and Exchange Board of India (Procedure
for Holding Enquiry by Enquiry Officer and imposing penalty) Regulations,
2002.] 29. The Board
may appoint a qualified auditor to investigate into the books of account or
the affairs of the portfolio manager: Provided that
the auditor so appointed shall have the same powers of the inspecting
authority as are mentioned in regulation 24 and the obligation of the
portfolio manager and his employees in regulation 26 shall be applicable to
the investigation under this regulation. Explanation:
For the purposes of sub- regulation (2) of regulation 20 and under this
regulation, the expression "qualified auditor" shall have the same
meaning as given to it in section 226 of the Companies Act, 1956 (1 of 1956). Foot notes 33.� �Following regulation 28 was substituted by
the Securities and Exchange Board of India (Procedure for Holding Enquiry by
Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the
Official Gazette of India dated 27.09.2002 �28. (1) The Board shall after consideration of the inspection report
communicate the findings to the Portfolio Manager to give him an opportunity
of being heard before any action is taken by the Board on the findings of the
inspecting authority. (2) On receipt of the explanation, if any, from the Portfolio Manager
the Board may call upon the Portfolio Manager to take such measures as the
Board may deem fit in the interest of the securities market and for due
compliance with the provisions of the Act, rules and regulations.� CHAPTER
V PROCEDURE
FOR ACTION IN CASE OF DEFAULT 34
[Liability for action in case of default 30. A portfolio
manager who
shall be dealt
with in the manner provided under the Securities and Exchange Board of India
(Procedure for Holding Enquiry by Enquiry Officer) Regulations, 2002.] Foot notes 34.� ��Following
regulation 30 was substituted by the Securities and Exchange Board of India
(Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty)
Regulations, 2002 published in the Official Gazette of India dated
27.09.2002: "30. (1) A portfolio manager who (a) fails to comply with any conditions subject to which certificate
has been granted; (b) contravenes any of the provisions of the Act, rules or
regulations; shall be liable to any of the penalties specified in sub -
regulation (2). (2) The penalties referred to in sub-regulation (1)
may be either: - (a) suspension of registration; or (b) cancellation of registration." 35.�� Regulation 31 to 38 deleted by the
Securities (Procedure for Holding Enquiry by Enquiry Officer and Imposing
Penalty) Regulations, 2002 published in the Official Gazette of "Suspension of registration 31. (1) A penalty of suspension of registration of a portfolio manager
may be imposed where - (i) the portfolio manager violates the provisions of the Act, rules or
regulations; (ii) the portfolio manager - (a) fails to furnish any information relating to his activity as
portfolio manager as required by the Board; (b) furnishes wrong or false information; (c) does not submit periodical returns as required by the Board; (d) does not co-operate in any enquiry conducted by
the Board; � (iv) the portfolio manager indulges in manipulating or price rigging
or cornering activities; (v) the portfolio manager is guilty of misconduct or improper or
unbusinesslike or unprofessional conduct which is not in accordance with the
Code of Conduct specified in Schedule III; (vi) the portfolio manager fails to maintain the capital adequacy
requirement in accordance with the provisions of regulation 7; (vii) the portfolio manager fails to pay the fees; (viii) the portfolio manager violates the conditions of registration; (ix) the portfolio manager does not carry out his obligations as
specified in the regulation. Cancellation of registration 32. A penalty of cancellation of registration of a portfolio manager
may be imposed where (i) the portfolio manager indulges in deliberate manipulation or price
rigging or cornering activities affecting the securities market and the
investors interest; (ii) the financial position of the portfolio manager deteriorates to
such an extent that the Board is of the opinion that his continuance as
portfolio manager is not in the interest of investors; (iii) the portfolio manager is guilty of fraud, or is convicted of a
criminal offence; (iv) the portfolio manager is guilty of repeated defaults of the
nature mentioned in regulation 31 provided that the Board furnishes the
reasons for cancellation in writing. Manner of making order of suspension and
cancellation 33. No order of penalty of suspension or cancellation, as the case may
be, shall be imposed except after holding an enquiry in accordance with the
procedure specified in regulation 34. Manner of holding enquiry before suspension or
cancellation 34. (1) For the purpose of holding an enquiry under regulation 33, the
Board may appoint an enquiry officer. (2) The enquiry officer shall issue to the portfolio manager a notice
at the registered office or the principal place of business of the portfolio
manager. (3) The portfolio manager may, within thirty days
from the date of receipt of such notice, furnish to the enquiry officer a
reply together with copies of documentary or other evidence relied on by him
or sought by the Board from the portfolio manager. (4) The enquiry officer shall, give a reasonable opportunity of
hearing to the portfolio manager to enable him to make submissions in support
of his reply made under sub-regulation (3). (5) Before the enquiry officer, the portfolio manager may either
appear in person or through any person duly authorised by the portfolio
manager: Provided that no lawyer or advocate shall be permitted to represent
the portfolio manager at the enquiry: Provided further that where a lawyer or an advocate has been appointed
by the Board as a presenting officer under sub- regulation (6), it shall be
lawful for the portfolio manager to present its case through a lawyer or
advocate. (6) If it is considered necessary, the enquiry
officer may ask the Board to appoint a presenting officer to present its
case. (7) The enquiry officer shall, after taking into account all relevant facts
and submissions made by the portfolio manager, submit a report to the Board
and recommend the penalty to be imposed as also the grounds on the basis of
which the proposed penalty is justified. 35. (1) On receipt of the report from the enquiry officer, the Board
shall consider the same and issue a show-cause notice as to why the penalty
as proposed by the enquiry officer should not be imposed. (2) The portfolio manager shall within twenty-one days of the date of
the receipt of the show- cause notice send a reply to the Board. (3) The Board after considering the reply to the
show-cause notice, if received, shall as soon as possible but not later than
thirty days from the receipt of the reply, if any, pass such order as it deems
fit. (4) Every order passed under sub- regulation (3) shall be self-
contained and give reasons for the conclusions stated therein including
justification of the penalty imposed by that order. (5) The Board shall send a copy of the order under sub- regulation (3)
to the portfolio manager. Effect of suspension and cancellation of
registration of portfolio manager 36. (1) On and from the date of the suspension of the portfolio
manager he shall cease to carry on any activity as a portfolio manager during
the period of suspension. (2) On and from the date of cancellation, the portfolio manager shall
with immediate effect cease to carry on any activity as a portfolio manager. Publication of order of suspension 37. The order of suspension or cancellation of certificate passed
under sub-regulation (3) of regulation 35 shall be published in at least two
daily newspapers by the Board. 2aa[Appeal to the Securities Appellate Tribunal 38. Any person aggrieved by an order of the Board made, on and after
the commencement of the Securities Laws (Second Amendment) Act, 1999, (i.e.,
after 16th December 1999), under these regulations may prefer an appeal to a
Securities Appellate Tribunal having jurisdiction in the matter]" 2aa- Regulation 38 substituted for the following by the SEBI (Appeal to
Securities Appellate Tribunal)(Amendment) Regulations, 2000, w.e.f.
28.3.2000. "Any person aggrieved by an order of the Board may prefer an
appeal to the Government." 36[ CHAPTER VI Power of the Board to issue
clarifications. 39. In order to
remove any difficulties in respect of the application or interpretation of
these regulations, the Board may issue clarifications or guidelines in the
form of circulars.] Footnotes 36.
��Inserted
by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002, w.e.f.
11.10.2002. F.No.SEBI/LE/92/II FIRST
SCHEDULE FORM
A SECURITIES
AND EXCHANGE BOARD OF (PORTFOLIO
MANAGERS) REGULATIONS 1993 Name of Applicant:
__________________________________________ Name of Person to Contact:
______________________ Designation: _____________________ Telephone No: _____________________ INSTRUCTIONS: - 1. Applicants
must submit a completed application form together with appropriate supporting
documents to the board. 2. It is
important that this application form should be filled in accordance with the
regulations. 3. Application
for registration will be considered provided it is complete in all respects. 4. Answers must
be typed/ printed. 5. Information
which needs to be supplied in more details may be given on separate sheets
which should be attached to the application form. 6. All signatures must be original. 1. PARTICULARS OF THE APPLICANT 1.1 Name of the Applicant: 1.2 Address - Principal place of
business/registered office: Pin code: ______________________ Telephone
No: ________________ Telex No: ______________________ Fax No:
______________________ 1.3 Address for Correspondence: Pin code: ______________________ Telephone
No: ________________ Telex No: ______________________ Fax No:
______________________ Address of Branch Offices (in 1.4 Application to Board for any other
intermediary activity: ____________ 2. ORGANISATION STRUCTURE: (Organisation
chart separately showing functional responsibilities of Portfolio Management
activities to be enclosed) 2.1 Objectives: - In brief. 2.2 Date and Place of
Incorporation/Establishment: Day Month Year Place 2.3 Status of
the Applicant: (e.g. limited company -private/public, unlimited company,
partnership, proprietary, others. If listed, names of the stock exchanges and
latest share price: to be given.) 2.4
Organisation Chart: General Organisation & specific Activity. 2.5 Particulars
of all Directors/ Partners/ Proprietor and key management personnel: - Ownership
details; (Date of Appointment) Other directorship; (Name & Date of
Appointment); Previous positions held.] 2.6 Number of employees 2.7 Name and
activities of associate companies/ concerns Name of company /firm Address/
phone numbers Type of activity handled Ownership details Nature/Quantum of
financial dealing Nature of interest of promoter /director Nature of interest
of applicant company 2.8 List of major shareholders (holding 5%
or more voting shares) Name; Share holding pattern i.e., no of
share to its % to total capital) 3.0 DETAILS OF INFRASTRUCTURAL
FACILITIES 3.1 Office Space 3.2 Office Equipment 3.3 Furniture & Fixtures 3.4 Communication Facilities 3.5 Data Processing Capacity (a) In-house: (b) Others: 3.6 COMPUTER FACILITY: (a) Hardware configuration (b) Software Environment 4.0 BUSINESS PLAN (FOR THREE YEARS) (a) History, Major events and present
activities (b) Proposed business plan & means of
achieving the same. (c) Projected Profitability (Next three
years) 5.0 FINANCIAL INFORMATION 5.1 Capital Structure (Rs. in lakhs)
Note: - 1. In case of partnership or proprietary
concerns, please indicate capital minus drawings. 2. In case of
partnership or proprietary concerns, please indicate the financial position,
means and networth of the partners. 5.2 Deployment of Resources (Rs. in lakhs)
5.3 Major Sources of Income: (Rs. in
lakhs)
* Fees charged as % of issue 5.4 Net Profit
5.5 Name and Address of the Principal
Bankers 5.6 Name and Address of the Auditors 6. OTHER INFORMATION 6.1 Details of all settled and pending
disputes: Nature of dispute Name of the party
Pending/settled. 6.2 Indictment of involvement in any
economic offences in the last three years. 6.3 Indicate
Dealing/ trading with any Intermediary who has defaulted with or suspended by
any stock exchange authorities or any other authorities. 6.4 Any other
information considered relevant to the nature of services rendered by the
company. 6.5 Names of
two references from bankers (For applicants other than financial institutions
& banking companies) 7.0 BUSINESS INFORMATION 7.1 Indicate Type of Activity carried on/
proposed to be carried on. 7.2 Indicate the facilities for making
decision on portfolio Investment. 7.3 Describe
portfolio management schemes floated during last years /proposed to float
during next one year. (Enclose a copy of typical contract entered with the
client for Portfolio Management Services) 7.4 Enclose a copy of list of approved
share brokers, involved for Portfolio Management
Scheme activities and state whether any of them were suspended/had defaulted
with any Stock Exchange authority. 7.5 Describe
Accounting system followed/to be followed for Portfolio Management Services. (Client
wise & scheme wise) 7.6 Indicate various research &
database facilities provided. 8.0 EXPERIENCE 8.1 Experience in Portfolio management
activities. Indicate period also. 8.2 Experience
in other financial services rendered:- (Period, Area and Date of Commencement
of Activity). (a) PORTFOLIO MANAGEMENT
(b) Only Portfolio Advisory Services (c) List of Clients (Corporate clients
only)
DECLARATION THIS
DECLARATION MUST BE SIGNED BY TWO DIRECTORS, TWO PARTNERS OR THE SOLE
PROPRIETOR,AS THE CASE MAY BE. __________________________________________________________________
I/We hereby
apply for REGISTRATION. I/We warrant that I/We have truthfully and fully
answered the questions above and provided all the information which might
reasonably be considered relevant for the purposes of my/our registration. For and On behalf of
--------------------------------------------------------------------------------
------------------------------------------------
----------------------------------------------- ------------------------------------------------
------------------------------------------------ PLACE
PLACE FORM B I. In exercise
of the powers conferred by sub-section (1) of section 12 of the II. Registration Code for the portfolio
manager is PM / / / III. Unless renewed, the certificate of
registration is valid from ________ to _________. Place: By
Order
37 [FORM C SECURITIES
AND EXCHANGE BOARD OF (PORTFOLIO
MANAGERS) REGULATIONS,1993 (Regulation 14) (Name of the Portfolio Manager) (Address of the
Portfolio Manager( including phone numbers, fax, email etc) We confirm that: i) the
Disclosure Document forwarded to the Board is in accordance with the SEBI
(Portfolio Managers) Regulations, 1993 and the guidelines and directives
issued by the Board from time to time; ii) the
disclosures made in the document are true, fair and adequate to enable the
investors to make a well informed decision regarding entrusting the
management of the portfolio to us / investment in the Portfolio
Management Scheme; iii) the
Disclosure Document has been duly certified by an independent chartered
accountant (Indicate name, address, phone number and registration number of
the chartered accountant) on
���. (date). (enclose a copy of the chartered accountants' certificate to the
effect that the disclosures made in the document are true, fair and adequate to
enable the investors to make a well informed decision) Date : Signature of the Principal Officer Place: Name and address of the Principal
Officer] Foot notes 37.� Inserted by the SEBI (Portfolio
Managers) (Amendment) Regulations, 2002 w.e.f 11.10.2002. SECOND
SCHEDULE 38[1. Every portfolio manager shall pay a sum of Rs. 25,000/-
as application fees along with the application for grant of certificate of
registration. (1A) Every portfolio
manager shall pay a sum of Rs. 5 lakhs as registration fees at the time of
the grant of certificate by the Board. ] 2.
Every portfolio manager to keep his registration in force shall pay renewal
fee of Rs. 2.5 lakhs every three years from the fourth year from the date of
initial registration. 3.
(a) The fee referred to in paragraph (1) shall be paid by the Portfolio
Manger within fifteen days from the date of receipt of intimation from the
Board under regulation 8. (b) The fee
referred to in paragraph (2), shall be paid by the Portfolio Manager within
fifteen days from the date of receipt of intimation from the Board disposing
of the application for renewal made under sub - regulation (1) of regulation
9. 4. The fees
specified in paragraphs (1) and (2) above, shall be payable by the Portfolio
Manager by a demand draft in favour of "Securities and Exchange Board of
India" payable at Mumbai or at the respective regional office.] 38. Substituted for the following by the SEBI
(Portfolio Managers) (Amendment) (Regulations) 2004 published in the Official
Gazette of �Clause (1)
of Schedule II� has been substituted
for the following : �1. Every
Portfolio Manager shall pay a sum of Rs. 5 lakhs as registration fees at the
time of the grant of certificate by the Board.� Prior to
such submission, clause 1 was substituted for existing paragraphs 1, 2, 3 and
4 by the SEBI (Portfolio Managers) (Amendment) Regulations, 1999 w.e.f 30.09.1999
which read as under: . "1. Every Portfolio Manager shall subject to paragraphs 3 and 4
of this Schedule, pay a sum of Rs 2.50 lakhs every year for the first two
years and thereafter a sum of Rs 1 lakh for the third year. 2. Every Portfolio Manager shall to keep his registration in force,
pay renewal fee of Rs 75, 000 per annum from the fourth year from the date of
initial registration. 3. Fee specified in paragraphs (1) and (2) above shall be paid in the
following manner � a) First installment is to be paid within 15 days from the date of
intimation from the Board under regulation 8. b) Subsequent installments including the renewal fee to be paid on or
before expiry of 12 months of each year of registration beginning from date
of grant of such registration. 4. The fees specified in paragraphs (1) and (2) above, shall be
payable by 3aa [***]draft in
favour of "Securities and Exchange Board of India" at
Bombay 4aa[or at the
respective regional office.] 3aa.
The words �a cheque or� deleted by the Securities and Exchange Board of 4aa.
"or at the respective regional office" inserted by the Securities
and Exchange Board of THIRD SCHEDULE 1.
A Portfolio Manager shall, in the conduct of his business, observe high
standards of integrity and fairness in all his dealings with his clients and
other Portfolio Managers. 2.
The money received by a portfolio manager from a client for an investment
purpose should be deployed by the portfolio manager as soon as possible for
that purpose and money due and payable to a client should be paid forthwith. 3.
A Portfolio Manager shall render at all times high standards of service,
exercise due diligence, ensure proper care and exercise independent
professional judgement. The portfolio manager shall either avoid any conflict
of interest in his investment or disinvestment decision, or where any
conflict of interest arises, ensure fair treatment to all his customers. He
shall disclose to the clients, possible sources of conflict of duties and interests,
while providing unbiased services. A portfolio manager shall not place his
interest above those of his clients. 4.
A Portfolio Manager shall not make any statement or become privy to any act,
practice or unfair competition, which is likely to be harmful to the
interests of other Portfolio Managers or is likely to place such other
Portfolio Managers in a disadvantageous position in relation to the Portfolio
Manager himself, while competing for or executing any assignment. 5.
A Portfolio Manager shall not make any exaggerated statement, whether oral or
written, to the client either about the qualification or the capability to
render certain services or his achievements in regard to services rendered to
other clients. 6.
At the time of entering into a contract, the portfolio manager shall obtain
in writing from the client, his interest in various corporate bodies which
enables him to obtain unpublished price-sensitive information of the body
corporate. 7.
A Portfolio Manager shall not disclose to any clients, or press any
confidential information about his client, which has come to his knowledge. 8.
The portfolio manager shall where necessary and in the interest of the client
take adequate steps for registration of the transfer of the clients'
securities and for claiming and receiving dividends, interest payments and
other rights accruing to the client. He shall also take necessary action for
conversion of securities and subscription/renunciation of/or rights in
accordance with the clients' instruction. 9. A Portfolio Manager
shall endeavour to - (a) ensure that
the investors are provided with true and adequate information without making
any misguiding or exaggerated claims and are made aware of attendant risks
before any investment decision is taken by them; (b) Render the
best possible advice to the client having regard to the client's needs and
the environment, and his own professional skills. (c) ensure that
all professional dealings are effected in a prompt, efficient and cost effective
manner. 10. (1) A Portfolio Manager shall not be a
party to - (a) creation of
false market in securities (b) price rigging
or manipulation of securities (c)
passing of price sensitive information to brokers, members of the stock
exchanges and any other intermediaries in the capital market or take any
other action which is prejudicial to the interest of the investors. (2) No
Portfolio manager or any of its directors, partners or manager shall either
on their respective accounts or through their associates or family members,
relatives enter into any transaction in securities of companies on the basis
of unpublished price sensitive information obtained by them during the course
of any professional assignment. 40 [11.(a) A Portfolio Manager or any his employees shall not render,
directly or indirectly any investment advice about any security in the
publicly accessible media, whether rea-time or non-real-time, unless a
disclosure of his long or short position in the said security has been made,
while rendering such advice. (b) In case an
employee of the Portfolio Manager is rendering such advice, he shall also
disclose the interest of his dependent family members and the employer
including their long or short position in the said security, while rendering
such advice.] 41[12. (a) The portfolio
manager shall abide by the Act, and the Rules, Regulations made thereunder
and the Guidelines / Schemes issued by the Board. (b) The
portfolio manager shall comply with the model code of conduct specified in
the SEBI (Prohibition of Insider Trading) Regulations, 1992. (c) The
portfolio manager shall not use his status as any other registered
intermediary to unduly influence the investment decision of the clients while
rendering portfolio management services.]
40. 40.��� Inserted
by the SEBI (Investment Advice by Intermediaries) (Amendment) Regulations,
2001, w.e.f 41.�� Inserted by the SEBI (Portfolio
Managers)(Amendment) Regulations, 2002, w.e.f. 11.10.2002 42 [FOURTH SCHEDULE Contents
of Agreement between the Portfolio Manager and his clients (Regulation
14) The following shall be mentioned in
the agreement - 1. Appointment of
Portfolio Manager 2. Scope
of services to be provided by the Portfolio Manager subject to the activities
permitted under SEBI (Portfolio Managers) Regulations, 1993, viz, advisory,
investment management, custody of securities, keeping track of corporate
benefits associated with the securities. The Portfolio Manager shall act
in a fiduciary capacity and as a trustee and agent of the clients' account. 3. Functions,
obligations, duties and responsibilities (as discretionary and non
discretionary to be given separately) with specific provisions regarding
instructions for non discretionary portfolio manager, inter alia - (i) terms in compliance with the Act, SEBI (Portfolio
Managers)Regulations,1993, rules, regulations, guidelines made under the Act
and any other laws/rules/regulations / guidelines etc.; (ii) providing
reports to clients; (iii)
maintenance of client wise transaction and related books of accounts; (iv) provisions
regarding audit of accounts as required under the SEBI (Portfolio Managers)
Regulations, 1993; (v) settlement
of accounts and procedure therefor including the provisions for
payment on maturity or early termination of the contract; 4. Investment
objectives and guidelines - (i) Types of securities in which investment would be made specifying
restrictions, if any. (ii)Particulars regarding amount, period of management, repayment or
withdrawal. (iii)Taxation aspects such as Tax Deducted at Source etc., if any. (iv)Condition
that the portfolio manager shall not lend the securities of the client unless
authorised by him in writing. 5. Risk factors (i) A detailed statement of risks associated with each type of
investment including the standard risks associated with each type of
investment. (ii) Risk factors specific to the scheme as well as those attendant to
specific investment policies and objectives of the scheme. 6.
Period of agreement - minimum period if any, and provision for renewal, if
any. 7.
Conditions, under which agreement may be altered, terminated and implications
thereof, such as settlement of amounts invested, repayment obligations etc. (i)
Voluntary/mandatory termination by the Portfolio Manager ����������� (ii)
Voluntary/mandatory termination by the client (iii)
Suspension by the Board or other regulatory authority 8.
Maintenance of Accounts: maintenance of accounts separately in the name of
the client as are necessary to account for the assets and any additions,
income, receipts and disbursements in connection therewith, as provided under
SEBI (Portfolio Managers) Regulations, 1993. 9.
Change in the quantum of funds to be managed: The conditions under which the
client may withdraw cash or securities from the portfolio account or bring in
additional cash to be managed as per the terms and conditions that apply. The
portfolio manager shall not change any terms of the agreement without prior
consent of the client. 10.
Access to information: (Subject to the provisions of SEBI (Portfolio
Managers)Regulations,1993) - Provisions enabling client to get
the books of accounts of the portfolio manager relating to his transactions
audited by a chartered accountant appointed by him and permitting the client
an access to relevant and material documents of portfolio manager, provisions
listing the documents for inspection along with timings for such inspection,
furnishing of reports to the client subject to furnishing atleast once in six
months and the reports to be made available on the web site of the portfolio
manager with restricted access to each client and other rights of clients
etc. The provision that the statements / documents / report furnished by the
portfolio manager to the client present a true and fair picture of the actual
transactions. 11. Terms
of Fees: The quantum and manner of payment of
fees and charges for each activity for which services are rendered
by the portfolio manager directly or indirectly ( where such service is
outsourced) such as investment management, advisory, transfer, registration
and transaction costs with specific references to brokerage costs, custody
charges, cost related to furnishing regular communication, account statement,
miscellaneous expenses (individual expenses in excess of 5% to be indicated
separately) etc. The provision that the portfolio manager shall take
prior permission from the client in this respect. 12. Billing: Periodicity of billing,
whether payment to be made in advance, manner of payment of fees, whether
setting off against the account etc., type of documents evidencing receipt of
payment of fees. 13. Liability of Portfolio Manager:
Liability of Portfolio Manager in connection with recommendations made, to cover
errors of judgement, negligence, willful misfeasance in connection with
discharge of duties, acts of other intermediaries, brokers, custodians etc. 14.
Liability of client: restricting the liability of the client to the extent of
his investment. 15. Death
or Disability: providing for continuation /termination of the agreement in
event of client's death/disability. succession, nomination , representation
etc to be incorporated. 16. Assignment: Conditions for
assignment of the agreement by client. 17.
Governing Law: The law/jurisdiction of country/state which governs the
agreement to be stated. 18. Settlement of
grievances/disputes and provision for arbitration - (Provisions to
cover protection of act done in good faith, Risks and losses, redressal of
grievances, dispute resolution mechanism, reference for arbitration and the
situations under which such rights may arise, may be made). 42. ��Inserted
by the SEBI (Portfolio Managers) (Amendment) Regulations, 2002, w.e.f.
11.10.2002. Fifth Schedule DISCLOSURE DOCUMENT (Regulation
14) General instructions 1. This Disclosure Document is to
be given to the prospective client along with the account opening form ( as
per Format I) atleast two days in advance of signing of the agreement. 2. This
Disclosure Document is to be filed with the Board before it is circulated or
issued to any person and every six month thereafter or whenever any material
changes are effected therein. 3. This
model Disclosure Document enumerates the minimum disclosure requirements to
be contained in the disclosure document. The portfolio manager may make any
other disclosures, which in its opinion are material for the investor,
provided that such information is a statement of fact and is not presented in
an incomplete, inaccurate or misleading manner. It should also be ensured
that inclusion of such information does not, by virtue of its nature or
manner of presentation, hamper understanding of any information that is
required to be included under the model disclosure document The model
Disclosure Document specifies only the nature of the disclosures that should
be contained under various heads in the disclosure document, and is not
intended to describe the layout or language to be contained therein. MODEL DISCLOSURE DOCUMENT FOR PORTFOLIO
MANAGEMENT The minimum
disclosures to be given in the Disclosure Document shall be as under and due
care shall be taken to present the information in simple language and
in a clear, concise and easily understandable manner - I. Front page (i)The Document has been filed with the Board alongwith the
certificate in the prescribed format in terms of Regulation 14 of the
SEBI (Portfolio Managers ) Regulations,1993. (ii)The purpose of the Document is to provide essential information about
the portfolio services in a manner to assist and enable the investors in
making informed decision for engaging a Portfolio Manager. (iii)The necessary information about the Portfolio Manager required by
an investor before investing, and the investor may also be advised to retain
the document for future reference. (iv)All the intermediaries involved in the scheme are registered with
SEBI as on the date of the document. (v) The name, phone number, e-mail address of the principal officer so
designated by the portfolio manager is����.(Give details). II. Index page giving item number,
contents and page number III. Contents of the Document 1) Disclaimer clause A statement to
the effect that the particulars have been prepared in accordance with the
SEBI (Portfolio Managers)Regulations,1993 and filed with SEBI. This Document
has neither been approved or disapproved by SEBI nor has SEBI certified the
accuracy or adequacy of the contents of the Document. 2)
Definitions All terms used
in the Disclosure Document be defined. The language and terminology used in
the Disclosure Document shall be as provided in the Regulations. Any new term
if used shall be clearly defined. All terms shall be used uniformly
throughout the text of the Disclosure Document. 3) Description (i) History,
Present Business and Background of the Portfolio Manager (ii)Promoters of
the Portfolio Manager, directors and their background (iii)Top 10 Group companies/firms of the Portfolio Manager on turnover
basis (latest audited financial statements may be used for this purpose) (iv)Details of
the services being offered : Discretionary/ Non discretionary / Advisory. 4) Penalties, pending litigation or proceedings,
findings of inspection or investigations for which action may have been taken
or initiated by any regulatory authority.
(i)
All cases of
penalties imposed by the Board or the directions issued by the Board under
the Act or Rules or Regulations made thereunder.
(ii)
The nature of
the penalty/direction.
(iii)
Penalties
imposed for any economic offence and/ or for violation of any securities
laws.
(iv)
Any pending
material litigation/legal proceedings against the portfolio manager / key
personnel with separate disclosure regarding pending criminal cases, if any.
(v)
Any deficiency
in the systems and operations of the portfolio manager observed by the Board
or any regulatory agency.
(vi)
Any enquiry/
adjudication proceedings initiated by the Board against the portfolio manager
or its directors, principal officer or employee or any person directly or
indirectly connected with the portfolio manager or its directors, principal
officer or employee, under the Act or Rules or Regulations made
thereunder.. 5) Services Offered (i) The present investment objectives and policies including the types
of securities in which it generally invests shall be clearly and concisely
stated in the document for easy understanding of the potential investor. (ii) The policies for investments in associates/ group companies of
the portfolio manager and the maximum percentage of such investments therein
subject to the applicable laws / regulations/ guidelines. 6) Risk factors (i) Statement to the effect that securities investments are subject to
market risk and there is no assurance or guarantee that the objectives of the
scheme will be achieved. (ii) Statement to the effect that past performance of the portfolio
manager does not indicate the future performance of the same scheme in future
or any other future schemes of the portfolio manager. (iii) Risk arising from the investment objective, investment strategy
and asset allocation. (iv) Risk
arising out of non diversification, if any. (v) If the portfolio manager has no previous experience/ track record,
a disclosure to the effect that this is the first scheme being launched by
the portfolio manager. 7) Client Representation (i)
(ii)Complete
disclosure in respect of transactions with related parties as per the
standards specified by the Institute of Chartered Accountants of India.
8) The
Financial Performance of the portfolio manager (based on audited financial
statements) 9) Portfolio
Management performance of the portfolio manager for the last three years ,
and in case of discretionary Portfolio Manger disclosure of performance
indicators calculated using weighted average method in terms of Regulation 14
of the SEBI (Portfolio Managers) Regulations, 1993. 10) Nature of expenses (i)Investment
management and advisory fees (ii)Custodian
fee (iii)Registrar
and transfer agent fee (iv)Brokerage
and transaction cost A brief
explanation shall be given to assist the investor in understanding the
various costs and expenses that an investor may have to bear directly or
indirectly. Additionally, appropriate cross-references may be given to the
relevant sections of the offer document for more complete description in this
regard. 11) Taxation
- Disclose the implications of investments in securities and the tax
provisions on Income/ Loss or Tax Deduction at Source on various investors. 12) Accounting
policies- Disclose the accounting policy followed by the portfolio
manager while accounting for the portfolio investments of the clients. 13) Investors services (i) Name, address and telephone number of the investor relation
officer who shall attend to the investor queries and complaints. (ii) Grievance
redressal and dispute settlement mechanism. Date : ������������������������������������������������������������������������������������������������Name
and Signature Place : �����������������������������������������������������������of
all the Directors of the Portfolio Manager FORMAT
I (Account Opening Form) Information About The Client 1) General
information about the client (a) Name, primary mailing address, secondary (back up)
mailing address, identity information such as photograph, Permanent Account
Number (PAN), driving license etc. (b)
Occupation ���. (c) Introduced
by------------------------------( name and full address) (d) Annual incomes for the last 3 financial years and the
networth as on the last date of the respective years. (optional) 2) Investment
profile of the client (a) Investment
experience regarding securities. (b) Indicative percentage of total investment portfolio proposed
to be invested with the Portfolio Manager (optional). (c) Overall investment goals such as capital appreciation,
capital appreciation & regular income or regular income. (d) Risk
tolerance i.e low, medium or high. (e) Time period for which investments are proposed to be
made with the Portfolio Manager. (f) Provisions for systematic withdrawal on a
monthly, quarterly, annual basis etc. 3) Detailed investment
objectives of the client (a) Equity : Nature of equities in which investments are
desired, may be indicated. (b)
Balanced : Percentage of debt/equity. (c) Debt
: Government Bonds, corporate debt etc. (d)
Mutual funds, venture funds etc. (e) Others. Date : 42.
Place : �������������������������������������������������������������������������������������������Signature
of the client � |