Sebi Issues New Guidelines For Portfolio Managers

Mumbai, February 14: The Securities and Exchange Board of India (Sebi) has come out with new guidelines for portfolio managers on February 13, 2020. The guidelines come after recommendations considered from the working group as well as inputs from public consultation. As per the new guidelines, no upfront fees would be charged by the portfolio managers. “As provided in Regulation 22 (11) of the PMS Regulations, no upfront fees shall be charged by the Portfolio Managers, either directly or indirectly, to the clients,” notes Sebi in the circular. Further, the operating expenses barring brokerage, over and above the fees charged for Portfolio Management Service, should not exceed 0.50 per cent per annum of the client’s average daily Assets Under Management (AUM). 

Sebi also laid down guidelines in case of exit loads, charged during portfolio being redeemed fully or in part by the client. The exit load would be maximum of 3 per cent of the amount redeemed, during the first year of investment, in the second year it would be 2 per cent and in the third year, an exit load of 1 per cent of the amount redeemed. That said, when it comes to the direct on-boarding of clients by portfolio managers, the clients should be given an option by the portfolio managers to be on-boarded without any intermediation of persons engaged in distribution services.  

As per Sebi, the portfolio managers are also required to prominently disclose in disclosure documents, marketing material as well as on websites about the option for direct on-boarding. Further portfolio managers are also required to submit a monthly report regarding their portfolio management activity on Sebi’s intermediaries portal within seven working days of the end of each month. Also, they are required to furnish a report to their clients on a quarterly basis as per the format prescribed by Sebi.