The Board may grant a time-limited exemption from all or specified Portfolio Managers Regulations to a person or class of persons. The exemption may operate for up to twelve months and is intended to support live-environment testing of innovative products, processes, services and business models in the securities-market regulatory sandbox. Applicants must satisfy conditions specified by the Board.

Regulation 43 permits relaxation of strict enforcement for portfolio managers where it serves clients' interests or securities market development. Relaxation may be procedural or technical, arise from non-compliance caused by factors beyond the portfolio manager's control, or prevent undue hardship to clients. Applications must state the relevant details and grounds, be filed with the Board, and be accompanied by a non-refundable prescribed fee through authorised payment modes.

Portfolio managers who contravene the Act, rules, regulations, or circulars and guidelines issued under them are liable to action available under securities laws or any other law in force. Regulation 42 places this liability within the procedure for action in case of default and preserves enforcement consequences authorised by applicable securities and other laws. Liability arises from such non-compliance and is not confined to a single enforcement framework.

Inspection expense recovery permits the Board to recover from a portfolio manager expenses it incurs for the purposes of inspecting or investigating that manager's books of account, records and documents. Recoverable costs include, without limitation, auditor fees paid for such inspection or investigation. The portfolio manager bears these expenses where its books, records and documents are examined or investigated by the Board.

Regulation 40 permits the Board to appoint a qualified auditor, in addition to an inspecting authority, to inspect or investigate a portfolio manager's books of account or affairs. The appointed auditor has the same powers as the inspecting authority under regulation 35, and the portfolio manager must comply with the obligations under regulation 37 during the auditor's inspection or investigation.

Action on inspection or investigation reports permits the Board, after considering such reports, to take measures it considers fit and appropriate. Available measures include action under securities laws or any other law in force, enabling a regulatory response to matters identified through inspection or investigation.

Regulation 38 requires the inspecting authority, in inspection and disciplinary proceedings concerning portfolio managers, to submit an inspection report to the Board as soon as possible. The obligation establishes a prompt reporting mechanism through which inspection findings are placed before the Board for consideration within the applicable regulatory and disciplinary framework.

Portfolio managers and their directors, partners, officers and employees must produce relevant books, accounts and documents, and furnish information concerning portfolio-management activities within the required time. They must permit reasonable access to relevant premises and records, including computer data, provide copies of material relevant to inspection, and facilitate examination or recording of statements. All such persons must provide reasonable assistance connected with the inspection.

Inspection procedure requires the Board to give reasonable notice before commencing an inspection under Regulation 35. The Board may dispense with notice where it records written reasons that dispensing with notice serves investor interests or the public interest. During the inspection, the portfolio manager remains bound to discharge all obligations provided under Regulation 37.

Inspection of portfolio managers may be undertaken by persons appointed by the Board to verify maintenance of books, records and documents, and compliance with applicable statutory and regulatory requirements. Inspection may investigate complaints concerning a portfolio manager's activities and may also be initiated on the Board's own motion in the interests of the securities market or investors.

The Board may prescribe additional conditions and restrictions for effective implementation of the portfolio manager regulatory framework, including client segregation, maintenance of records, fees, and limits on investments in associates of a portfolio manager. These conditions may apply to the portfolio management service route for investment in mutual fund units where appropriate.

A portfolio manager must not accept from a client funds, securities, or their combination valued below twenty-five lakh rupees. Renewal of a portfolio upon expiry of the initial agreement period is deemed a fresh investment and remains subject to the minimum-investment requirement.

Portfolio managers may invest client funds only in direct plans of mutual funds in India. Permissible investments include index funds, exchange traded funds and specialised investment funds.

Regulation 31 establishes eligibility criteria for registration of a portfolio manager exclusively offering Portfolio Management Service Route for Investment in Mutual Fund Units (PRIM). The applicant must maintain adequate infrastructure, appoint a principal officer and compliance officer, and maintain the prescribed minimum net worth separately from capital requirements for other business activities. The principal officer must hold prescribed qualifications, valid NISM certification, and at least two years' relevant securities-market experience.

PRIM providers must apply for a certificate of registration and comply with conditions specified by the Board. Existing portfolio managers may be permitted to offer PRIM through segregated investment approaches, subject to the applicable regulatory conditions.

PRIM, the portfolio management service route for investment in mutual fund units, is governed by the dedicated framework in Chapter VI. Other provisions of the Portfolio Managers Regulations, along with related guidelines and circulars, apply on a mutatis mutandis basis unless inconsistent with the Chapter VI framework. Specified registration-related clauses, operational requirements, Chapters III and IV, and identified obligations and conditions are excluded from that general application.

Disputes, claims and differences between investors and portfolio managers arising from securities-market activities must be submitted to a prescribed dispute resolution mechanism, which may include mediation, conciliation and/or arbitration. A body corporate may be recognised to handle and monitor grievance-redressal processes.

Portfolio managers must appoint a compliance officer responsible for monitoring adherence to the Act and applicable notifications, guidelines and instructions, and for redressal of investor grievances. Eligibility is subject to Board specifications. The role cannot be assigned to the principal officer or the specified employee, and the compliance officer must immediately and independently report observed non-compliance to the Board.

Portfolio managers must provide the Board, whenever required, with information concerning portfolio management. Disclosure obligations extend to particulars previously furnished where changes may affect the certificate granted, the names of clients whose portfolios are managed, and particulars establishing compliance with the prescribed net-worth requirement. The disclosure framework concerns current information relevant to client relationships and financial eligibility.

Portfolio managers must rectify deficiencies identified in the auditor's report within two months from the date of that report. This requirement forms part of their general obligations and responsibilities, applies to auditor's reports within the prescribed audit-report framework, and imposes a defined timeframe for corrective action in response to audit-identified deficiencies.