REGISTRATION OF PORTFOLIO MANAGERS
“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.
Registration as a 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 pursuance of sub-regulation (1) and dealt with accordingly.
Application to conform to the requirements.
5. Subject to the provisions of sub-regulation (2) of regulation 4, any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove objections indicated by the Board, within the time specified, not later than 3 weeks.
Furnishing of further information, clarification and personal representation.
6. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to his activity of a portfolio manager for the purposes of disposal of the application.
(2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation.
Consideration of application.
7. (1) For considering the grant of certificate of registration to the applicant, the Board shall take into account all matters which it deems relevant to the activities relating to portfolio management.
(2) Without prejudice to the generality of the foregoing provisions, the Board shall consider whether :-
(a) the applicant is a body corporate;
(b) the applicant has the necessary infrastructure like adequate office space, equipment and the manpower to effectively discharge the activities of a portfolio manager;
(c) the applicant has appointed a compliance officer;
(d) the principal officer of the applicant has–
(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 certification 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.
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) 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) of clause (e) of sub-regulation (2) of regulation 7 within twelve months from such commencement;
(f) any disciplinary action has been taken by the Board against a person directly or indirectly connected with the applicant under the Act or the rules or the regulations made thereunder;
Explanation. ─ For the purposes of sub-clause (f), the expression “person directly or indirectly connected” means any person being an associate, subsidiary company or an associate company within the meaning of sub-section (6) of section 2 of the Companies Act, 2013;
(g) the applicant fulfills the net worth requirement specified in regulation 9;
(h) the applicant, its director or partner, principal officer, compliance officer or the employee as specified in clause (e) is involved in any litigation connected with the securities market that has an adverse bearing on the business of the applicant;
(i) the applicant, its director or partner, principal officer, compliance officer or the employee as specified in clause (e) has at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence;
(j) the applicant is a fit and proper person;
(k) the grant of certificate to the applicant is in the interest of investors.
Criteria for fit and proper person.
8. For the purposes of determining whether an applicant or the portfolio manager is a fit and proper person, the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
Net worth Requirement.
9- The net worth referred to in clause (g) of regulation 7 shall not be less than five crore rupees:
Provided 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 raise its net worth to not less than five crore rupees within thirty-six months from such commencement:
Provided further that the portfolio manager shall fulfill the net worth requirements under these regulations, separately and independently, of the capital adequacy requirements, if any, for each activity undertaken by it under the relevant regulations.
Explanation. ─ For the purposes of this regulation, “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.
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 previously submitted to the Board are found to be false or misleading in any material particular or if there is any material change in the information already submitted;
(c) the portfolio manager shall pay the fees for registration in the manner provided in these regulations;
(d) the portfolio manager shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other particulars of the complaints received; and
(e) the portfolio manager shall maintain the net worth specified in regulation 9 at all times during the period of the certificate.
Period of validity of the certificate
12- The certificate of registration granted under regulation 10 shall be valid unless it is suspended or cancelled by the Board.
Procedure where registration is refused
13. (1) After considering an application made under regulation 4, if the Board is of the opinion that a certificate should not be granted to the applicant, it may reject the application after giving the applicant a reasonable opportunity of being heard.
(2) The decision of the Board to reject the application shall be communicated to the applicant within thirty days of such decision.
Effect of refusal to grant certificate.
14. Any portfolio manager whose application for a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub- regulation (2) of regulation
13 cease to carry on any activity as portfolio manager.
Payment of fees, and the consequences of failure to pay fees.
15. (1) Every applicant eligible for grant of a certificate shall pay such fees within 15 days of receiving intimation from the Board and in such manner as specified in Schedule II:
Provided that the Board may on sufficient cause being shown allow the portfolio manager to pay such fees at any time before the expiry of one month from the date on which such fees become due.
(2) Where a portfolio manager fails to pay the fees as provided in Schedule II, the Board may suspend the certificate, whereupon the portfolio manager shall forthwith cease to carry on the activity as a portfolio manager for the period during which the suspension subsists.