SEBI Regulations

1. Portfolio Managers are registered and regulated under the SEBI (Portfolio Managers) Regulations, 1993.

2. SEBI has come across lack of uniformity in practice relating to following issues pertaining to portfolio managers :

a) There have been instances of portfolio managers accepting funds or securities less than ` 5 lakh from clients and opening client accounts on the basis of the client’s commitment that ` 5 lakh would be brought in soon. Also there have been instances of committed amounts being higher than the prescribed minimum of ` 5 lakh while the initial amount collected from the client could be below ` 5 lakh.

b) It is seen that many portfolio managers are not making adequate disclosure regarding portfolio performance in the disclosure document.

c) SEBI vide notification dated August 11, 2008 deleted the word ‘Scheme’ from PMS Regulations. However, it is seen that in some cases, portfolio managers still group portfolios in separate investment categories and term them as ‘schemes’.

3. In order to bring about greater uniformity, clarity and transparency with regard to above issues, portfolio managers are advised to ensure the following :

a) To ensure compliance with regulation 15(1A) of SEBI (Portfolio Managers) Regulations, 1993, it is clarified that the first single lumpsum investment amount received as funds or securities from clients should not be less than ` 5 lakh.

b) To ensure compliance with regulation 14(2)(b)(iv) of SEBI (Portfolio Managers) Regulations, 1993, Portfolio Managers shall disclose the performance of portfolios grouped by investment category for the past three years as per the enclosed prescribed tabular format. Portfolio Managers shall also ensure that the disclosure document is given to all clients along with the account opening form at least two days in advance of signing of the agreement. In order to ensure that the clients have access to updated information about the portfolio manager, portfolio managers shall place the latest disclosure document on their website, wherever possible.

c) Portfolio Managers shall not organize investment portfolios as ‘Schemes’ akin to Mutual Fund Schemes while marketing their services to clients.

4. This circular is issued in exercise of powers conferred under section 11(1) of the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 39 of the SEBI (Portfolio Managers) Regulations, 1993, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

5. This circular is available on SEBI website at www.sebi.gov.in under the category “Legal Framework” and under the drop down “Portfolio Managers”.