Portfolio Managers - Regulation of Fees and Charges

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....nt. The contents of the portfolio manager-client agreement are laid out in Regulation 14 to be read with Schedule IV of the SEBI (Portfolio Manager) Regulations 1993. 3. SEBI has been receiving complaints from clients relating to fees and charges being levied by portfolio managers. Upon scrutiny of the complaints, it has come to the notice of SEBI that the clauses relating to fees and charges in the portfolio manager-client agreement do not always clearly reflect the fees and charges payable by the client and the manner of computation of the same. 4. In order to bring about greater uniformity, clarity and transparency with regard to fees and charges, portfolio managers are advised to take the following measures in respect of all client ag....

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....lio value in excess of the previously achieved high water mark of Rs. 12,00,000, rather than on the full return during that year from Rs. 11,00,000 to Rs. 13,00,000. b) All fees and charges shall be levied on the actual amount of clients' assets under management. c) High Water Mark shall be applicable for discretionary and non-discretionary services and not for advisory services. d) In case of interim contributions/ withdrawals by clients, performance fees may be charged after appropriately adjusting the high water mark on proportionate basis. Maximum Liability e) Regulation 14(1)(b)(xiii) of the SEBI (Portfolio Managers) Regulations, 1993 provides that the agreement between the portfolio manager and the client shall, inter alia, ....

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....disputes and provision for arbitration in the portfolio manager - client agreement. l) In case of any dispute regarding fees and charges, the same shall be referred to arbitration for settlement as per the terms of the agreement, under the Arbitration and Conciliation Act, 1996. 5. These measures shall be applicable for all fresh client agreements with effect from November 1, 2010. For existing clients, the revised terms shall be implemented by January 1, 2011. 6. 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....

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....,600 XX Less: Brokerage/DP charges/any other similar charges (e.g. 2% of Rs. 9,80,000) Less: Management Fees (if any) (e.g. 2% of Rs. 9,80,000) Less: Performance fees (if any)(e.g. 20% of Rs. 98,000 - working given below) Less: Any other fees (please enumerate) Total charges during the year   58,800 Net value of the portfolio at the end of the year   11,17,200 % change over capital contributed   11.72% Calculation of Performance Fees for above Serial Nature of Fees Amount in Rs. A Profit for the year 1,96,000 B Less: Minimum profit level (Hurdle Rate@10% on Rs. 980000 98,000 C Amount on which Profit Sharing Fees to be calculated (B-A) 98,000 D Performance Fees (@20% of C) 19,600 Portfolio perfo....