Portfolio Managers

Portfolio managers are defined as persons who, in pursuance of a contract with clients, advise/direct/undertake on their behalf, the management/administration of portfolio of securities/funds of clients. The term portfolio means the total holdings of securities belonging to any person. The portfolio managers can be (1) discretionary (2) non-discretionary. The first type of portfolio management permits exercise of discretion in regard to investment /management of the portfolio of securities/funds. In order to carry on portfolio management services, a certificate of registration from the SEBI is mandatory. But for category I and Category II merchant bankers, a separate registration is not required to act as portfolio managers. They have, however, to carry on Portfolio management activity within the framework of the SEBI regulations applicable to portfolio managers. The SEBI is authorized to grant and renew certificate of registration as a prior permission to portfolio managers on payment of the requisite registration/renewal fee. The annual registration fee payable to SEBI is Rs 2.5 lakh for the first two years and Rs 1 lakh for the third year. The renewal fee is Rs 75,000 per annum. He has also to give an undertaking to take adequate steps for the redressal of grievances of clients within one month of the receipt of the complaint, keep the SEBI informed about the number, nature and other particulars of the complaints and abide by its rules and regulation. A certificate/renewal of registration is valid for three years. Application for renewal must be made three months before the expiry of the validity of the certificate.

Procedure for Registration:

While considering application for registration made in the prescribed form, the SEBI takes into account all matters relevant to the activities relating to the portfolio manager and in particular.

1. Necessary infrastructure like adequate office staff, equipment and manpower to discharge his activities.
2. Has in employment a minimum of two persons to conduct portfolio management business.
3. A person directly / indirectly connected the applicant i.e., associate / subsidiary/ inter-connected or group company has not been granted registration.
4. Capital adequacy of not less than net of Rs 50 lakh in terms of capital plus free reserves;
5. The applicant/partner/director/ principal officer has not been convicted for my offence involving moral turpitude/guilty of any economic offence.
6. The applicant/partner/director/partner /principal officer is not involved in any litigation connected with the securities market.
7. The applicant has professional qualification in finance/ law/ accounting /business management and
8. Grant of certificate is in the interest of the investors.

General Obligations and Responsibilities:

Code of conduct: A portfolio manager has to, in the conduct of business observe high standards of integrity and fairness in all his dealings with his clients and other portfolio managers. The money received by him from a client for an investment purpose should be deployed as soon as possible, and money due and payable to a client should be paid forthwith.

A portfolio manager has to render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgment. He should either avoid any conflict of interest in his investment or disinvestment decision, or where any conflict of interests arise, ensure fair treatment to all his customers. He must disclose to the clients, possible sources of conflict of duties and interest, while providing unbiased services. A portfolio manager should not place his interest above those of his clients.

He should not make any statement or become privy to any act, practice or unfair competition, which is likely to be harmful to the interests of other portfolio managers or is likely to place them in a disadvantageous position in relation to the portfolio manager himself, while competing for or executing any assignment.

Any exaggerated statement, whether oral or written should not be made by him to the client either about the qualification or the capability to render certain services or his achievements in regard to services rendered to other clients.

At the time of entering into a contract, he should obtain in writing from the client, his interest in various corporate bodies which enables him to obtain unpublished price-sensitive information of the body corporate.

A portfolio manager should not disclose to any clients or press any confidential information about his client, which has become to his knowledge.

Where necessary and in the interest of the client he should take adequate steps for registration of the transfer of the clients’ securities and for claiming and receiving dividends, interest payments and other rights accruing to the client. He must also take necessary action for conversion of securities and subscription/ renunciation of/or rights in accordance with the clients’ instructions.

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