TaxTMI 
TaxTMI 
SECURITIES AND EXCHANGE BOARD OF INDIA (PORTFOLIO MANAGERS) REGULATIONS, 2020
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.... "body corporate" shall have the meaning assigned to it under sub-section (11) of Section 2 of the Companies Act, 2013 (18 of 2013) as amended from time to time; (c) "certificate" means a certificate of registration issued by the Board; (d) "change of status or constitution" in relation to a portfolio manager─ (i) means any change in its status or constitution of whatsoever nature; and (ii) without prejudice to generality of sub-clause (i), includes- (a) amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 230 of the Companies Act, 2013 (18 of 2013) or the corresponding provision of any other law for the time being in force; and (b) any change in control over the body corporate; (c) "change in control", in relation to a portfolio manager being a body corporate, shall be construed with reference to : ─ (i) the definition of control in terms of Regulation 2(1)(e) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 as amended from time to time, if its shares are listed on any recognized stock exchange; (ii) in any other case, change in the controlling interest in the....
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....the management or administration of portfolio of securities or the funds of the client, as the case may be; and (ii) all other operations of the portfolio manager. (6) "securities lending" means securities lending as per the Securities Lending Scheme, 1997 specified by the Board. (2) Words and expressions used and not defined in these regulations but defined in the Act shall have the meanings respectively assigned to them in the Act. CHAPTER II REGISTRATION OF PORTFOLIO MANAGERS Registration as portfolio manager. 3. No person shall act as a portfolio manager unless it has obtained a certificate of registration from the Board under these regulations. Application for grant of certificate. 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. (2) Notwithstanding anything contained in sub-regulation (1), any application made by a person prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in Form A of Schedule I shall be treated as an application made in pu....
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.... Exchange Board of India (Portfolio Managers) Regulations, 2020, shall comply with sub clauses (i) and (ii) of clause (d) of sub-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 its employment at least one person with 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 in clause (d) of sub-regulation (2) of regulation 7: Provided further 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 comply with sub clauses (i) and (ii) ....
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....ves (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. Procedure for registration. 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. (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). Conditions of registration. 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 information or particulars previousl....
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....gers exclusively, pertaining to their activities as portfolio managers to eligible investment funds. (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 investment funds. Procedure to be followed by an existing Portfolio Manager. 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-tax Act, 1961; and (b) it intimates the Board prior to undertaking such activity and submit declarations as specified in clause (1) of Schedule VI. Procedure to be followed by an applicant for fresh registration. 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-tax Act, 1961; (b) it complies with the requirements specified under Chapter II of ....
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.... 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 (xi) Schedules IV and V. CHAPTER IV GENERAL OBLIGATIONS AND RESPONSIBILITIES Code of Conduct. 21. Every portfolio manager shall abide by the Code of Conduct as specified in Schedule III. Contract with clients and disclosures. 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. (2) The agreement between the portfolio manager and the client shall, inter alia, include the following :- (a) the investment objectives and the services to be provided; (b) period of the contract and pr....
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....tes of the portfolio manager; (e) the performance of the portfolio manager: Provided that the performance of a discretionary portfolio manager shall be calculated using 'Time Weighted Rate of Return' for the immediately preceding three years and in such cases performance indicators shall also be disclosed: Provided further that the portfolio manager may be allowed to disclose performance segregated on the basis of investment approach; (f) the audited financial statements of the portfolio manager for the immediately preceding three years. (5) The contents of the Disclosure Document shall be certified by an independent chartered accountant. (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. (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....
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....Reserve Bank of India Act, 1934 (2 of 1934). (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). (7) The portfolio manager shall not derive any direct or indirect benefit out of the client's funds or securities. (8) The portfolio manager shall not borrow funds or securities on behalf of the client. (9) The portfolio manager shall not lend securities held on behalf of the clients to a third person except as provided under these regulations. (10) The portfolio manager shall ensure proper and timely handling of complaints from his clients and take appropriate action immediately. (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 issued thereunder from time to time. Management or administration of clients' portfolio. 24. (1) (a) The money or securities accepted by the portfolio manager shall not be invested or managed by the portfolio manager except in term....
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....ally or ultimately settled otherwise than by actual delivery or transfer of security except the transactions in derivatives. (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. (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. (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. (15) T....
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....ments or disinvestments, all the credits to the account of the client like interest, dividend, bonus, or any other beneficial interest received on the investment and debits for expenses, if any, shall be properly accounted for and details 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. (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. (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. (4) The client may appoint a chartered accountant to audit the books and accounts of the portfolio manager relating to his transactio....
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....anted 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. Appointment of compliance officer. 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, instructions etc., 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 appointed in terms of clause (d) of sub-regulation (2) of regulation 7 or the employee of the portfolio manager appointed in terms of clause (e) of sub-regulation (2) of regulation 7. (2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him. CHAPTER V INSPECTION AND DISCIPLINARY PROCEEDINGS Right of inspection by the Board. 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 subregu....
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....ctor, 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. Submission of report to the Board. 38. The inspecting authority shall, as soon as possible, submit an inspection report to the Board. Action on inspection or investigation report. 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. Appointment of Auditor. 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. Explanation. ─ For the purposes of sub-regulation (2) of regulation 30 and under this regulati....
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....may issue clarifications or guidelines in the form of circulars. SCHEDULE I FORMS FORM A Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 Application for grant of certificate of registration Name of Applicant: ___________________________ Name of Contact Person: ___________________________ (Note: Compliance Officer / Principal Officer only) Designation of Contact Person: ___________________________ Mobile No: ___________________________ Email: ___________________________ Instructions: 1. Applicants shall submit a completed application form together with appropriate supporting documents to the Board. 2. It is important that this application form should be filled in accordance with the regulations. 3. Application for registration shall be considered provided it is complete in all respects. 4. Answers shall be typewritten. 5. Information that is required to be provided in more detail may be given on separate sheets which should be attached to the application form. 6. All signatures shall be original. PART: I GENERAL INFORMATION 1.0 PARTICULARS OF THE APPLICANT 1.1 Name of the Applicant: 1.2 PAN No. (Attach Copy of PAN Card) 1.3....
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....ation that the personnel mentioned above is currently employed with the organization. (2) Undertaking by the personnel concerned that the details provided regarding them are true to the best of their knowledge and belief. (3) Supporting documents for work experience 2.7 Particulars of Promoters: [Type (Individual/ Corporate); Name; PAN (Copy of PAN Card); Address; Telephone No.; Mobile; Email] 2.8 Particulars of Compliance Officer [Name; PAN (Copy of PAN Card); Qualification, Date of Appointment; Address;] Experience: Company Name Designation Area of Work Nature of Work Experience (In yrs) (Separate sheet may be attached for information on work experience) 2.9 Particulars of Principal Officer [Name; PAN (Copy of PAN Card); Qualification, Date of Appointment; Address;] Certification Details: Certification Program Date of Test Result Percentage Certificate No. Validity From Validity Till Following documents to be provided: 1. Bio-Data detailing the relevant experience as per Reg 7(2)(d) of SEBI Portfolio Managers Regulations, 2020. 2. Copy of Certifications. 3. Certificate stating that the Principal Officer has been appointed and is compliant with the requi....
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....g revaluation reserves) (c) Total (a) + (b) 5.2 Net worth of Applicant (Net worth certificate not older than 3 months from the date of application to be enclosed) 5.3 Deployment of Resources (Rs. in Crore) Year prior to the preceding year of current year Preceding year Current year (a) Fixed Assets (b) Plant and Machinery and office equipment (c) Investments (Details should be given separately) (d) Others 5.4 Major Sources of Income: (Rs. in Crore) Year prior to the preceding year of current year Preceding year Current Year 5.5 Net Profit (Rs. in Crore) Year prior to the preceding year of current year Preceding year Current Year 5.6 Particulars of Principal Banks: Name, Contact Person; Address; Telephone No.; Mobile; Email 5.7 Particulars of Auditors: Name; Type (Internal/ External); Contact Person; Address; Telephone No.; Mobile; Email 5.8 Declaration of submission of Banker's Report from two Banks 6.0 OTHER INFORMATION 6.1 Details of all settled and pending disputes of previous 3 years: Nature of dispute Name of the party Status (Pending/ settled) Dispute Details 6.2 Indictment of involvement in any economic offences in the last three years. 6.3 An....
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....eclaration of compliance with clause (e) of sub-regulation (1) of Regulation 27 - regarding maintenance of records for Investment rationale. 10.9 Declaration of availability of Disclosure document on website of Portfolio Manager. DECLARATION This declaration must be signed by two directors/designated partners I/We hereby, apply for Registration as Portfolio Manager. I/We do hereby declare that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my/our registration. For and on behalf of ____________________________________________________________ (Name of Applicant) _________________________________ ____________________________ Director/Designated Partner Director/Designated Partner _________________________________ ____________________________ Name in Block Letters Name in Block Letters Place: Place: Date: Date: FORM B Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 [Regulation 10] Certificate of Registration I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act....
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....egistration in force, shall pay fee of five lakh rupees every three years , from the date of grant of certificate of registration or from the date of grant of certificate of registration granted prior to the commencement of the Securities and Exchange Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016, as the case may be, within three months before expiry of the block period for which fee has been paid. 4. The fee referred to in paragraph (2) shall be paid by the portfolio manager within fifteen days from the date of receipt of intimation from the Board under regulation 10 by way of demand draft in favour of 'Securities and Exchange Board of India' payable at Mumbai or at the place where respective regional or local office is located or by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI. 5. The fees specified in paragraphs (1) and (3) above, shall be payable by the portfolio manager by a demand draft in favour of "Securities and Exchange Board of India" payable at Mumbai or at the place where respective regional office is located by way of direct credit in the bank ....
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....nsfer of the clients' securities and for claiming and receiving dividends, interest payments and other rights accruing to the client. It shall also take necessary action for conversion of securities and subscription for/renunciation of rights in accordance with the clients' instruction. 10. A portfolio manager shall endeavor to - a. ensure that the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before any investment decision is taken by them; b. render the best possible advice to the client having regard to the client's needs and the environment, and his own professional skills; c. ensure that all professional dealings are effected in a prompt, efficient and cost effective manner. 11. (1) A portfolio manager shall not be a party to - a. creation of false market in securities; b. price rigging or manipulation of securities; c. passing of price sensitive information to brokers, members of the recognized stock exchanges and any other intermediaries in the capital market or take any other action which is prejudicial to the interest of the investors. (2) No por....
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....s to clients; (iii) maintenance of records of client wise transaction and related books of accounts; (iv) provisions regarding audit of accounts as required under the SEBI (Portfolio Managers) Regulations, 2020; (v) settlement of accounts and procedure therefor including the provisions for payment on maturity or early termination of the contract. 4. Investment objectives and guidelines - (i) Types of securities in which investment would be made specifying restrictions, if any. (ii) Particulars regarding amount, period of management, repayment or withdrawal. (iii) Taxation aspects such as Tax Deducted at Source etc. (iv) Condition that the portfolio manager shall not lend the securities of the client unless authorized by him in writing. 5. Risk factors (i) A detailed statement of risks associated with each type of investment including the standard risks associated with each type of investment. 6. Period of agreement- the agreement shall provide the period of the agreement in years, terms of termination and/or provision for renewal in case of a renewable agreement. 7. Conditions under which agreement may be altered, terminated and implications thereof, such as set....
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...., whether setting off against the account etc., type of documents evidencing receipt of payment of fees. 13. Liability of portfolio manager- Liability of portfolio manager in connection with recommendations made, to cover errors of judgment, negligence or willful misfeasance and in connection with discharge of duties or acts of other intermediaries, brokers, custodians etc. 14. Liability of client- restricting the liability of the client to the extent of his investment. 15. Death or Disability- providing for continuation/termination of the agreement in event of client's death/disability, succession, nomination, representation etc. to be incorporated. 16. Assignment- Conditions for assignment of the agreement by client. 17. Governing Law- The law/jurisdiction of country/state which governs the agreement to be stated. 18. Settlement of grievances/disputes and provision for arbitration- Provisions to cover protection of act done in good faith or Risks and losses, provisions for redressal of grievances, dispute resolution mechanism, reference for arbitration and the situations under which such rights may arise, may be made. SCHEDULE V DISCLOSURE DOCUMENT [Regulation 22] G....
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....mber III. Contents of the Document 1. Disclaimer clause A statement to the effect that the particulars have been prepared in accordance with the SEBI (Portfolio Managers) Regulations, 2020 and filed with SEBI. This Document has neither been approved nor disapproved by SEBI nor has SEBI certified the accuracy or adequacy of the contents of the Document. 2. Definitions All terms used in the Disclosure Document be defined. The language and terminology used in the Disclosure Document shall be as provided in the Regulations. Any new term if used shall be clearly defined. All terms shall be used uniformly throughout the text of the Disclosure Document. 3. Description (i) History, Present Business and Background of the portfolio manager. (ii) Promoters of the portfolio manager, directors and their background. (iii) Top 10 Group companies/firms of the portfolio manager on turnover. basis (latest audited financial statements may be used for this purpose) (iv) Details of the services being offered: Discretionary/ Non-discretionary / Advisory. 4. Penalties, pending litigation or proceedings, findings of inspection or investigation for which action may have been taken or initiat....
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.... to services offered by group companies of the portfolio manager if any. 7. Client Representation (i) Category of clients No. of clients Funds managed (Rs. Cr.) Discretionary / Non-Discretionary (if available) Associates / group companies (Last 3 years) Others (last 3 years) Total (ii) Complete disclosure in respect of transactions with related parties as per the standards specified by the Institute of Chartered Accountants of India. 8. Financial Performance The Financial Performance of the portfolio manager based on audited financial statements and in terms of procedure specified by the Board for assessing the performance. 9. Performance of Portfolio Manager Portfolio Management performance of the portfolio manager for the last three years, and in case of discretionary portfolio manager disclosure of performance indicators calculated using 'Time Weighted Rate of Return' method in terms of Regulation 22 of the SEBI (Portfolio Managers) Regulations, 2020. 10. Audit Observations Audit observations of the preceding 3 years 11. Nature of expenses (i) Investment management and advisory fees. (ii) Custodian fee. (iii) Registrar and transfer agent fee. (iv) Br....
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.... SCHEDULE VI Declaration for Eligible Fund Managers [Chapter III] 1. Declaration by an existing portfolio manager which intends to act as an eligible fund manager (must be signed by two directors or designated partners, as the case may be) We hereby declare that we are a SEBI registered portfolio manager with Registration Number ………… We intend to provide our services to eligible investment funds. In this regard, we declare that: (a) We are compliant with subsection 4(a) of section 9A of Income-tax Act, 1961 (We are not an employee of the eligible investment fund or a connected person of the fund); (b) We are compliant with subsection 4(c) of section 9A of Income-tax Act, 1961 (We are acting in the ordinary course of our business as a portfolio manager); (c) We are compliant with subsection 4(d) of section 9A of Income-tax Act, 1961 (We along with our connected persons shall not be entitled, directly or indirectly, to more than twenty per cent of the profits accruing or arising to the eligible investment fund from the transactions carried out by the fund through us); and (d) We shall comply with any other requirements as may be specified by th....