| Portfolio_Managers_Apr17_2020 |
| 1 Short title and commencement. (1) These regulations may be called the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993. |
| 1 (2) They shall come into force on the date1 of their publication in the OfficialGazette.1 7th January, 1993, vide S.O. No. SEBI/LE/92/III, dated 7-01-1993, Gazette of India, Extraordinary, |
| 2 Definitions. In these regulations, unless the context otherwise requires, 2[(a) Act means the Securities and Exchange Board of India Act,1992 (15 of 1992);]3[(aa)] 45[(aa) body corporate shall have the meaning assigned to it in or underclause (7) of section 2 of the Companies Act, 1956 (1 of 1956);(ab) certificate means a certificate of registration issued by the Board;(ac) change of status or constitution in relation to a portfolio manager (i) means any change in its status or constitution ofwhatsoever nature; and(ii) without prejudice to generality of sub-clause (i), includes (A) amalgamation, demerger, consolidation or any otherkind of corporate restructuring falling within the scopeof section 391 of the Companies Act, 1956 (1 of 1956)or the corresponding provision of any other law for thetime being in force;(B) change in its managing director or whole-time director;and |
| 3 3. Registration as portfolio manager. No person shall act as portfolio manager unless he holds a certificate granted by the Board under these regulations: Provided that a merchant banker acting as a portfolio manager immediately before commencement of the Securities and Exchange Board of India (Portfolio Managers) (Second Amendment) Regulations, 2006 may continue to do so for a period of six months from such commencement or, if he has made an application for registration under these regulations within |
| 3A 3A. Application for grant of certificate. 21[(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. |
| 3A (2) Notwithstanding anything contained in sub-regulation (1), anyapplication made by a portfolio manager prior to coming into force of theseregulations containing such particulars or as near thereto as mentioned inForm A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.]1907-09-2006.20Regulation 3 renumbered as 3A by the SEBI (Portfolio Managers) (Second Amendment)Regulations, 2006, w.e.f. 07-09-2006.2105-2004. Prior to substitution, sub-regulation (1) read as under: (1) An application by a portfolio manager for a grant of a certificate shall be made to the |
| 4 (1) An application by a person for the grant of a certificate shall be made to the Board in Form A of Schedule I and shall be accompanied by a non-refundable application fee, as specified in para(1) of Schedule II. |
| 4 (2) Notwithstanding anything contained in sub-regulation (1), any application made by a personprior to coming into force of these regulations containing such particulars or as near thereto asmentioned in Form A of Schedule I shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly. |
| 5 Subject to the provisions of sub-regulation (2) of regulation 4, 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 objections indicated by the Board, within the time specified, not later than 3 weeks. |
| 6 (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 theapplication. |
| 6 (2) The applicant or its principal officer shall, if so required, appear before the Board for personalrepresentation. |
| 7 (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 . |
| 7 (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, equipment andthe manpower to effectively discharge the activities of a portfolio manager;(c)the applicant has appointed a compliance officer;(d)the principal officer of the applicant has (i)a professional qualification in finance, law, accountancy or business managementfrom a university or an institution recognized by the Central Government or any StateGovernment or a foreign university or a CFA charter from the CFA institute;(ii)experience of at least five years in related activities in the securities marketincluding in a portfolio manager, stock broker, investment advisor, research analyst or asa fund manager; and(iii)the relevant NISM certification as specified by the Board from time to time.Provided that at least 2 years of relevant experience is in portfolio management orinvestment advisory services or in the areas related to fund management.Provided further that a portfolio manager, who was granted a certificate of registrationprior to the commencement of the Securities and Exchange Board of India (PortfolioManagers) Regulations, 2020, shall comply with sub clauses (i) and (ii) of clause (d) ofsub-regulation (2) of regulation 7 within thirty-six months from such commencement.(e)In addition to the Principal Officer and Compliance Officer, the applicant has in itsemployment at least one person with the following qualifications :-(i)graduation from a university or an institution recognized by the CentralGovernment or any State Government or a foreign university; and(ii)an experience of at least two years in related activities in the securities marketincluding in a portfolio manager, stock broker, investment advisor or as a fund manager:Provided that any employee of the Portfolio Manager who has decision making authorityrelated to fund management shall have the same minimum qualifications and experienceas specified for the Principal Officer in clause (d) of sub-regulation (2) of regulation 7:Provided further that a portfolio manager, who was granted a certificate of registrationprior to the commencement of the Securities and Exchange Board of India (PortfolioManagers) Regulations, 2020, shall comply with sub clauses (i) and (ii) of clause (e) ofsub-regulation (2) of regulation 7 within twelve months from such commencement;(f)any disciplinary action has been taken by the Board against a person directly or indirectlyconnected with the applicant under the Act or the rules or the regulations made thereunder;indirectly connected" means any person being an associate, subsidiary company or anassociate company within the meaning of sub-section (6) of section 2 of the CompaniesAct , 2013;(g)the applicant fulfills the net worth requirement specified in regulation 9;(h)the applicant , its director or partner, principal officer, compliance officer or the employeeas specified in clause (e) is involved in any litigation connected with the securities marketthat has an adverse bearing on the business of the applicant ;(i)the applicant , its director or partner, principal officer, compliance officer or the employeeas specified in clause (e) has at any time been convicted for any offence involving moralturpitude or has been found guilty of any economic offence;(j)the applicant is a fit and proper person;(k) |
| 8 For the purposes of determining whether an applicant or the portfolio manager is a fit and proper person, the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. |
| 9 The net worth referred to in clause (g) of regulation 7 shall not be less than five crore rupees: Provided that a portfolio manager, who was granted a certificate of registration prior to the commencement of the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, shall raise its net worth to not less than five crore rupees within thirty-six months from such commencement: Provided further that the portfolio manager shall fulfill the net worth requirements under these regulations, separately and independently, of the capital adequacy requirements, if any, for each activity undertaken by it under the relevant regulations. 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. |
| 10 (1) The Board on being satisfied that the applicant fulfils the requirements specified in regulation 7 shall send an intimation to the applicant and on receipt of the payment of registration fees as specified in paragraph (2) of Schedule II grant a certificate in Form B of Schedule I. |
| 10 (2) The portfolio manager who has already been granted a certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 shall be deemed to have been granted a certificate of registration, in terms of sub- regulation (1). |
| 11 The certificate of registration granted under regulation 10 shall, inter alia, be subject to the following conditions, namely: -(a)the portfolio manager shall abide by the provisions of the Act and these regulations;(b)the portfolio manager shall forthwith inform the Board in writing, if any informationor particulars previously submitted to the Board are found to be false or misleadingin any material particular or if there is any material change in the information alreadysubmitted;(c)the portfolio manager shall pay the fees for registration in the manner provided inthese regulations;(d)the portfolio manager shall take adequate steps for redressal of grievances of theinvestors within one month of the date of the receipt of the complaint and keep theBoard informed about the number, nature and other particulars of the complaintsreceived; and(e)the portfolio manager shall maintain the net worth specified in regulation 9 at alltimes during the period of the certificate. |
| 12 The certificate of registration granted under regulation 10 shall be valid unless it is suspended or cancelled by the Board. |
| 13 (1) After considering an application made under regulation 4, if the Board is of the opinion that a certificate should not be granted to the applicant , it may reject the application after giving the applicant a reasonable opportunity of being heard. |
| 13 (2) The decision of the Board to reject the application shall be communicated to the applicant within thirty days of such decision. |
| 14 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 13 cease to carry on any activity as portfolio manager. |
| 15 (1) Every applicant eligible for grant of a certificate shall pay such fees within 15 days of receiving intimation from the Board and in such manner as specified in Schedule II: Provided that the Board may on sufficient cause being shown allow the portfolio manager to pay such fees at any time before the expiry of one month from the date on which such fees becomedue. |
| 15 (2) Where a portfolio manager fails to pay the fees as provided in Schedule II, the Board may |
| 16 (1) The provisions of this Chapter shall apply to eligible fund managers exclusively, pertaining to their activities as portfolio managers to eligible investment funds. |
| 16 (2) All other provisions of these regulations and the guidelines and circulars issued thereunder, unless the context otherwise requires or is repugnant to the provisions of this chapter, shall apply to eligible fund managers in relation to their activities as portfolio managers to eligible investmentfunds. |
| 17 An existing portfolio manager may act as a portfolio manager to an eligible investment fund if:(a) it fulfills all the conditions specified in sub section (4) of Section 9A of the Income-taxAct, 1961; and(b) it intimates the Board prior to undertaking such activity and submit declarations asspecified in clause (1) of Schedule VI. |
| 18 An applicant who is a body corporate who intends to act as an eligible fund manager may be granted registration under regulation 10 if:(a) it fulfills all the conditions specified in sub section (4) of Section 9A of the Income-taxAct, 1961;(b) it complies with the requirements specified under Chapter II of these regulations , unlessspecified otherwise in this Chapter;(c) it pays the fees as specified in Schedule II; and(d) it provides a declaration to the Board as specified in paragraph (2) of Schedule VI. |
| 19 An eligible fund manager shall be required to: -(1)comply with the requirements specified under Section 9A of the Income-tax Act,1961 or any amendment, notification, clarification, guideline issued thereunder;(2)offer discretionary or non-discretionary or advisory services or a combinationthereof to eligible investment funds;operate in accordance to its mutually agreed contract with the eligible investment(3)funds;(4) provide all material disclosures to eligible investment funds;(5)(6)segregate funds and securities of each eligible investment fund;segregate the funds and securities of eligible investment funds from those of itsother clients;(7) maintain and segregate its books and accounts pertaining to its activities as aportfolio manager to eligible investment funds and other clients;(8) appoint a custodian:Provided that the requirement of compliance with this sub-regulation would not arise in casean eligible investment fund has already appointed a custodian under the applicable act orregulations;(9) keep the funds of eligible investment funds in scheduled commercial banks;Provided that requirement of compliance with this sub-regulation would not arise in case aneligible investment fund does not intend to invest in Indian securities;(10)maintain any additional records as may be specified by the Board and disclose thesame to the Board as and when required;(11)provide quarterly reports to the Board;(12)ensure compliance with the Prevention of Money Laundering Act, 2002 and rulesand regulations made thereunder;(13)abide by the provisions in these regulations and circulars / guidelines issued by theBoard from time to time. |
c. sebi (portfolio managers)(amendment) regulations, 2002sebi (portfolio managers) amendment regulations 2002 were notified on 11.10.2002 to amend sebi (portfolio managers) regulations, 1993 to provide inter-alia the following:i the portfolio manager to be a bodycorporate.ii multiple registration i.e. registration to associates/group companies/ companies same management of the portfolio manager may be considered. the application may be rejected if any application of a person directly orunder indirectly connected with applicant has been rejected or any disciplinary action has been taken by the board against such person. iii requirement of minimum two keypersonnel.iv before taking up an assignment of management of funds and portfolio of securities, the portfolio manager shall enter 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.v the details to be contained in the agreement are specified in schedule iv. such agreement between the portfolio manager and the client shall, inter alia, contain:the investment objectives and the services to be provided; areas of investment and restrictions, if any, imposed by the client; type of instruments and proportion of exposure; tenure of portfolio investments; terms for early withdrawal of funds or securities by the clients; period of the contract and early provision termination, if anyof attendant risks involved in themanagement of the portfolio; amount to be invested subject to the restrictions provided under the regulations; fees payable to the portfolio manager; the quantum and manner of fees payable by the client for each activity for which service is rendered by thes e c u r i t i e s and exchange board of indiaportfolio manager directly or indirectly (where such service is out sourced) ; in case of a discretionary portfolio manager a condition that the liability of a client shall not exceed his investment with the portfolio manager;vi the portfolio manager shall provide to the client, the disclosure document alongwith a certificate regarding the correctness of the contents, atleast two days prior to entering into an agreement with the client. the contents of the disclosure document have been specified in schedule.in the respect vii the disclosure document, shall inter alia contain the complete disclosures of transactions with related parties as per the accounting standards specified by institute of chartered accountants of india in this regard; the performance of the portfolio manager; audited financial statements of the portfolio manager for the immediately preceding three years.the viii the contents of the disclosure document shall be certified by an independent chartered accountant.ix disclosure document to filed with sebi before its issue and thereafter every six months or effecting material change in document whichever is earlier.x the portfolio manager shall charge an agreed fee from the clients for rendering portfolio management services without guaranteeing or assuring, any return and the fee so charged may be a fixed fee or aannual report 2002 - 20033131313131 part-i policies and programmesreturn based fee or a combination of both.accounts of the portfolio manager relating to his transactions.xi the portfolio manager shall not accept from the client, funds or securities worth less than five lacs rupees.xii the portfolio manager shall not borrow funds or securities on behalf of the client. the portfolio manager shall not lend securities held on behalf of clients to a third person except as provided under these regulations.xiii 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.xiv the funds or securities can be withdrawn or taken back by the client before the maturity of the contract under the circumstances specified in the regulations.xv permit portfolio managers to invest in derivatives. however, leveraging of portfolio shall not be permitted in respect of in derivatives.investment xvi the portfolio manager may, subject to authorisation by the client in writing, participate in securities lending.xvii 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.xviii the client may appoint a chartered accountant to audit the books and3232323232annual report 2002 - 2003 |
| 20 The eligible fund managers shall be exempted from the following provisions pertaining to their activities as portfolio managers to eligible investment funds notwithstanding anything contained in these regulations, Schedules thereto or circulars issued thereunder:(i) sub-regulation (1), (2), (3) and (4) of Regulation 22;(ii) sub-regulation (2), (3), (4), (8) and (9) of Regulation 23;(iii) clause (b) of sub-regulation (1) of Regulation 24;(iv) clause (a) of sub-regulation (2) of Regulation 24;(v) sub-regulation (7) of Regulation 24;(vi) sub-regulation (11) of Regulation 24;(vii) Regulation 26;(viii) sub-regulation (3) of Regulation 30;(ix) sub-regulation (1), (2), and (3) of Regulation 31;(x) Form C in Schedule I; and |
| 21 Every portfolio manager shall abide by the Code of Conduct as specified in Schedule III. |
| 22 (1) The portfolio manager shall, before taking up an assignment of management of funds and portfolio on behalf of a client, enter into an agreement in writing with such client that clearly defines the inter se relationship and sets out their mutual rights, liabilities and obligations relating to management of portfolio containing the details as specified in Schedule IV. |
| 22 (2) The agreement between the portfolio manager and the client shall, inter alia, include the following :-(a)(b)(c)the investment objectives and the services to be provided;period of the contract and provision of early termination, if any;investment approach, areas of investment and restrictions, if any, imposed by the client with regard to the investment in a particular company or industry;permissible instruments to be invested in by the portfolio manager for the customer,taking into account factors specific to client s and securities.type of instruments and proportion of exposure;tenure of portfolio investments;terms for early withdrawal of funds or securities by the client s;attendant risks involved in the management of the portfolio;amount to be invested subject to the restrictions provided under these regulations;procedure of settling client 's account including form of repayment on maturity or earlytermination of contract;fees payable to the portfolio manager ;the quantum and manner of fees payable by the client for each activity for which serviceis rendered by the portfolio manager directly or indirectly (where such service is outsourced);custody of securities;in case of a discretionary portfolio manager ; a condition that the liability of a client shallnot exceed his investment with the portfolio manager ;(d)(e)(f)(g)(h)(i)(j)(k)(l)(m)(n)accounting terms, audit and furnishing of the reports to the client s as per the provisionsof these regulations; and(o)other terms of portfolio investment subject to these regulations. |
| 22 (3) The portfolio manager shall provide to the client , the Disclosure Document as specified in Schedule V, along with a certificate in Form C as specified in Schedule I, prior to entering into an agreement with the client as referred to in sub-regulation (1). |
| 22 (4) The Disclosure Document, shall inter alia include the following : (a) the quantum and manner of payment of fees payable by the client for each activity forwhich service is rendered by the portfolio manager directly or indirectly (where suchservice is out sourced);(b) portfolio risks including risk specific to each investment approach offered by the portfoliomanager;(c) complete disclosures of transactions with related parties as per the accounting standardsspecified by the Institute of Chartered Accountants of India;(d) details of conflicts of interest related to services offered by group companies or associatesof the portfolio manager;(e) the performance of the portfolio manager:Provided that the performance of a discretionary portfolio manager shall be calculatedusing Time Weighted Rate of Return for the immediately preceding three years and insuch cases performance indicators shall also be disclosed:Provided further that the portfolio manager may be allowed to disclose performancesegregated on the basis of investment approach;(f)the audited financial statements of the portfolio manager for the immediately precedingthree years. |
| 22 (5) The contents of the Disclosure Document shall be certified by an independent charteredaccountant. |
| 22 (6) The portfolio manager shall ensure that a copy of Disclosure Document is available on the website of the portfolio manager at all times and as soon as the registration is granted. |
| 22 (7) The portfolio manager shall file with the Board , a copy of the Disclosure Document after grant of certificate of registration before circulating it to any client or whenever any material change including change in the investment approach is effected. The portfolio manager shall file the disclosure document with the material change within 7 working days from the date of the change. |
| 22 (8) The portfolio manager shall file disclosure document along with the certificate in Form C as specified in Schedule I. |
| 22 (9) The portfolio manager shall disclose a change in the identity of the Principal Officer to the Board and the clients within 7 working days of effecting the change. |
| 22 (10) The portfolio manager shall report its performance uniformly in the disclosures to the Board, marketing materials and reports to the clients and on its website. |
| 22 (11) 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: Provided that no up-front fees shall be charged by the portfolio manager directly or in-directly to the clients. |
| 23 (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 . |
| 23 (2) The portfolio manager shall not accept from the client , funds or securities worth less than fifty lakh rupees: Provided that the minimum investment amount per client shall be applicable for new client s and fresh investments by existing client s: Provided further that existing investments of client s , as on the date of notification of the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, may continue as such till maturity of the investment or as specified by the Board. |
| 23 (3) The portfolio manager shall act in a fiduciary capacity with regard to the client 's funds. |
| 23 (4) The portfolio manager shall segregate each client s holding in securities in separate accounts. |
| 23 (5) The portfolio manager shall keep the funds of all clients in a separate account to be maintained by it in a Scheduled Commercial Bank. Bank means any bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934). |
| 23 (6) 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). |
| 23 (7) The portfolio manager shall not derive any direct or indirect benefit out of the client's funds orsecurities. |
| 23 (8) The portfolio manager shall not borrow funds or securities on behalf of the client. |
| 23 (9) The portfolio manager shall not lend securities held on behalf of the clients to a third person except as provided under these regulations. |
| 23 (10) The portfolio manager shall ensure proper and timely handling of complaints from his clients and take appropriate action immediately. |
| 23 (11) The portfolio manager shall ensure that any person or entity involved in the distribution of its services is carrying out the distribution activities in compliance with these regulations and circulars |
| 24 (1) (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 on maturity of the initial period shall be deemed as a freshplacement. |
| 24 (2) Notwithstanding anything contained in the agreement referred to in regulation 22, the funds or securities can be withdrawn by the client before the maturity of the contract under the following circumstances, namely-(a) voluntary or compulsory termination of portfolio management services by theportfolio manager or the client ;(b) suspension or cancellation of the certificate of registration of the portfolio managerby the Board;(c) bankruptcy or liquidation of the portfolio manager. |
| 24 (3) The discretionary portfolio manager shall invest funds of his clients in the securities listed or traded on a recognized stock exchange, money market instruments, units of Mutual Funds and other securities as specified by Board from time to time, on behalf of their clients. commercial paper, trade bill, treasury bills, certificate of deposit and usance bills. |
| 24 (4) The portfolio manager offering non-discretionary or advisory services to clients may invest or provide advice for investment up to 25% of the assets under management of such clients in unlisted securities, in addition to the securities permitted for discretionary portfolio management. |
| 24 (5) Portfolio Managers may invest in units of Mutual Funds only through direct plan. |
| 24 (6) The portfolio manager while investing in units of Mutual Funds through direct plan shall not charge any kind of distribution related fees to the client . |
| 24 (7) The portfolio manager shall not leverage the portfolio of its clients for investment inderivatives. |
| 24 (8) 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. |
| 24 (9) The portfolio manager shall not invest the clients funds in the portfolio managed or administered by another portfolio manager. |
| 24 (10) The portfolio manager shall not invest client s fund based on the advice of any other entity. |
| 24 (11) The portfolio manager shall not while dealing with clients funds indulge in speculative transactions i.e, it 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. |
| 24 (12) 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, inter se allocation shall be done on a pro rata 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. |
| 24 (13) The portfolio manager shall not execute off market transfers in client s account except:(a)for settlement of the clients own trades;(b) for providing margin/ collateral for clients own positions;(c)for dealing in unlisted securities in accordance with the regulations;(d) with specific consent of the client for each transaction;(e)for any other reason specified by the Board from time to time. |
| 24 (14) 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 . |
| 24 (15) The portfolio manager shall not hold the securities belonging to the portfolio account, in its own name on behalf of its clients either by virtue of contract with clients or otherwise. |
| 25 Foreign portfolio investors may avail of the services of a portfolio manager. |
| 26 Every portfolio manager shall appoint a custodian in respect of securities managed or administered by it: Provided that this regulation shall not apply to a portfolio manager who provides only advisoryservices. |
| 27 (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 auditor s 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 willindicate the data, facts and opinion leading to that investment decision:Provided that such a record shall be maintained under the hands of the PrincipalOfficer of the portfolio manager. |
| 27 (2) Every portfolio manager shall intimate to the Board the place where the books of accounts, records and documents are maintained . |
| 27 (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 |
| 28 Every portfolio manager shall furnish to the Board a net worth certificate issued by a chartered accountant as and when required by the Board . |
| 29 The portfolio manager shall preserve the books of account and other records and documents mentioned under this chapter for a minimum period of five years. |
| 30 (1) (a) The portfolio manager shall maintain separate client-wise accounts.(b) The funds received from the clients, investments or disinvestments, all the credits to theaccount of the client like interest, dividend, bonus, or any other beneficial interest receivedon the investment and debits for expenses, if any, shall be properly accounted for anddetails 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 . |
| 30 (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. |
| 30 (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 . |
| 30 (4) The client may appoint a chartered accountant to audit the books and accounts of the portfolio |
xxiii. sebi (portfolio managers) (amendment) regulations, 2012 w.e.f. february 10, 2012. the key changes effected include the following: a) minimum investment amount per client enhanced from ` 5 lakh to ` 25 lakh. b) segregation of holding ensured in individual demat accounts in respect of unlisted securities.c) name and signature on disclosure document of at least two directors, instead of all the directors. |
| 31 (1) The portfolio manager shall furnish periodically a report to the client, as agreed in the contract, but not exceeding a period of three months and as and when required by the client and such report shall contain the following details, namely: -(a)the composition and the value of the portfolio, description of securities and goods,number of securities, value of each security held in the portfolio, units of goods, valueof goods, cash balance and aggregate value of the portfolio as on the date of report;(b)(c)(d)(e)(f)transactions undertaken during the period of report including date of transaction anddetails of purchases and sales;beneficial interest received during that period in the form of interest, dividend, bonusshares, rights shares, etc;expenses incurred in managing the portfolio of the client;details of risk foreseen by the portfolio manager and the risk relating to the securitiesrecommended by the portfolio manager for investment or disinvestment;default in payment of coupons or any other default in payments in the underlying debtsecurity and downgrading to default rating by the rating agencies, if any;(g)details of commission paid to distributor(s) for the particular client. |
| 31 (2) 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 . |
| 31 (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. |
| 32 The portfolio manager shall take steps to rectify the deficiencies made out in the auditor s report within two months from the date of the auditor s report as specified in sub-regulation (2) of Regulation 30. |
| 33 The Board may ask portfolio manager to disclose any information as and when required including the following: -(a) particulars regarding the management of a portfolio;(b) any change in the information or particulars previously furnished, which have abearing on the certificate granted to him;(c) the names of the clients whose portfolio it has managed;(d) particulars relating to the net worth requirement as specified in regulation 9. |
| 34 (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, instructionsetc., issued by the Board or the Central Government and for redressal of investors' grievances:Provided that the role of compliance officer shall not be assigned to the principal officer appointedin terms of clause (d) of sub-regulation (2) of regulation 7 or the employee of the portfolio managerappointed in terms of clause (e) of sub-regulation (2) of regulation 7. |
| 35 (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). |
| 35 (2) The purposes referred to in sub-regulation (1) may be as follows: -(a)(b)to ensure that the books of account are being maintained in the manner required;to ensure 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 orany other person on any matter having a bearing on the activities of the portfoliomanager; and(d)to investigate suo motu in the interest of securities market or investors ' interest into theaffairs of the portfolio manager. |
| 36 (1) Before undertaking an inspection under regulation 35, the Board shall give a reasonable notice to the portfolio manager. |
| 36 (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. |
| 36 (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 37. |
| 37 (1) It shall be the duty of every director, 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. |
| 37 (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. |
| 37 (3) The inspecting authority shall in the course of inspection, be entitled to examine or record statements of any principal officer, director, partner and employee of the portfolio manager. |
| 37 (4) It shall be the duty of every director, 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. |
| 38 The inspecting authority shall, as soon as possible, submit an inspection report to the Board. |
| 39 The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. |
| 40 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 35 and the obligation of the portfolio manager and his employees in regulation 37 shall be applicable to the investigation under this regulation. the expression "qualified auditor" shall have the same meaning as given to it under section 141 of |
f)sebi (portfolio managers) rules, 1993 i.sebi (debenture trustees) rules, 1993sebi (registrars to an issue and share transfer agents) rules, 1993securities contracts (regulation) (manner of increasing and maintaining public shareholding in recognised stock exchanges) regulations, 2006g)sebi (bankers to an issue) rules, 1994the notification contained a saving provision whereby all action taken under the rules pertaining to market intermediaries before the rescission shall continue to be valid. the saving provision also permits institution of investigation, legal proceeding, etc. in respect of rights, liabilities etc. accrued before the rules. simultaneously, on the same date, sebi amended the corresponding regulations relating to market intermediaries by incorporating substantive provisions of the rules into the regulations.the rescission of ii.sebi (procedure for holding inquiry and imposing penalty by adjudicating officer) amendment rules, 2006and the sebi (procedure for holding imposing penalty by inquiry adjudicating officer) rules, 1995 were further amended by the captioned amendment rules on november 14, 2006the securities contracts (regulation) (manner of increasing and maintaining public shareholding in recognised stock exchanges) regulations, 2006, were notified on november 13, 2006 vide s.o. no.1950 (e). the regulations were notified under section 4b (8) of the securities contracts (regulation) act, 1956. the main features of the regulations are as follows:a)the regulations shall be applicable to all recognised stock exchanges in respect of which the scheme for corporatisation and / or demutualisation has been approved by sebi under section 4b of sc(r)a, 1956. these regulations specify that in recognised stock exchanges shall be increased to at least 51 per cent in the following manner for the purpose of demutualisation of the stock exchanges:the public shareholding offer for sale of shares held by shareholders having trading rights therein by issue of prospectus ; or100 part four: regulatory changes recognised stock exchanges covered under the regulations have to enter into agreements with depositories for dematerialisation of their shares. at least 51 per cent of the equity share capital of a stock exchange should be continuously held by public. all recognised stock exchanges to which the regulations are applicable are required to monitor and ensure compliance with the same. they shall report on a quarterly basis confirming compliance to sebi. |
| 41 A portfolio manager who contravenes any of the provisions of the Act, rules or regulations framed thereunder shall be liable for one or more action specified therein including the action |
| 42 (1) The Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, shall stand repealed from the date on which these regulations come into force. |
| 42 (2) Notwithstanding such repeal, (a) anything done or any action taken or purported to have been done or taken including registrationor approval granted, fees collected, registration or approval, suspended or cancelled, anyadjudication, enquiry or investigation commenced or show-cause notice issued under the repealedregulations, prior to such repeal, shall be deemed to have been done or taken under thecorresponding provisions of these regulations;(b) any application made to the Board under the repealed regulations, prior to such repeal, andpending before it shall be deemed to have been made under the corresponding provisions of theseregulations;(c) the previous operation of the repealed regulations or anything duly done or sufferedthereunder, any right, privilege, obligation or liability acquired, accrued or incurred under therepealed regulations, any penalty, incurred in respect of any violation committed against therepealed regulations, or any investigation, legal proceeding or remedy in respect of any suchright, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if therepealed regulations has never been repealed; |
| 42 (3) After the repeal of Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, any reference thereto in any other regulations made, guidelines or circulars issued thereunder by the Board shall be deemed to be a reference to the corresponding provisions of theseregulations. |
| 42A (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets . |
| 42A (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the |
| 43 In order to remove any difficulties in respect of the application or interpretation of these |