Portfolio Managers Under SEBI (Portfolio Managers) Regulations, 2020 By CS Neha Ahuja


Who are Portfolio Managers?

Portfolio managers are defined under Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020.

As per Regulation 2 (o), Portfolio manager means a body corporate, which pursuant to a contract with a client, advises  or directs  or undertakes  on  behalf  of  the  client  (whether  as  a  discretionary  portfolio manager or otherwise) the management or administration of a portfolio of securities or goods or funds of the client, as the case may be.

Provided  that  the  Portfolio  Manager  may  deal in goods  received  in  delivery  against physical  settlement of commodity derivatives.

As per Regulation 2 (g), Discretionary Portfolio Managers means a portfolio manager who under a contract relating to portfolio manager, exercises or may exercise, any degree of discretion as to the investment of funds or management of the portfolio of securities of the Client, as the case may be.

It means the funds are managed at the discretion of Portfolio Managers on behalf of clients. The Clients does not interfere in the decisions of Portfolio Managers and they are free to take decisions in terms of investment.

No person shall act as a portfolio manager unless it has obtained a certificate of registration from the Board under these regulation Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020. The Certificate granted under the regulations shall be valid unless it is suspended or cancelled by the Board.

The Portfolio Manager has to maintain net worth not less than five crores rupees at all times during the period of Certificate.

Net worth 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.

When it comes to compliance part for Portfolio Managers under SEBI (Portfolio Managers) Regulations, 2020, there are three important personnel that needs to be defined under the organization:

Principal Officer: The Principal Officer should possess the following:

(i) a professional qualification in finance, law, accountancy or business management from a university or an institution recognized by the Central Government or any State Government 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 market including in a portfolio manager, stock broker, investment advisor, research analyst or as a fund manager; and

(iii) the relevant NISM  (National Institute of Securities Market) as specified by the Board from time to time.

Provided  that at  least 2  years  of  relevant  experience  is in  portfolio management or investment advisory services or in the areas related to fund management

Compliance Officer

In- Employment of at least one person who should possess the following qualifications:

(i) graduation from a university or an institution recognized by the Central Government or any State Government or a foreign university; and

(ii) an experience of at least two years in related activities in the securities market including 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 authority related to fund management shall have the same minimum qualifications and experience as specified for the Principal Officer.

Can Principal Officer or employee as specified above can act as Compliance Officer ?

No, the role of Compliance officer shall not  be assigned to the Principal Officer appointed or the employee specified above.

Apart from above three, there is also a requirement to appoint a custodian in respect of securities managed or administered by it.

However, there is no need to appoint custodian in case of a Portfolio Manager who provides only advisory services.

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