Circular for Portfolio Managers
Summary
This circular mandates Portfolio Managers to segregate client funds and securities from their own assets in compliance with SEBI PMS Regulations. It requires the establishment of written policies for fund management, dealing team operations, and fair treatment of clients. The provisions become effective from April 1, 2023, with specific implementation timelines outlined in Annexure-A.
Text
Regulation 24(14) of the SEBI (Portfolio Managers) Regulations, 2020 mandates a Portfolio Manager to 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.
Regulation 24 (15) of PMS Regulations mandates the Portfolio Managers to not hold the securities belonging to the portfolio account, in its own name on behalf of its clients either by virtue of contract with clients or otherwise.
Portfolio Managers shall put in place a written down policy (“policy”), in compliance with the PMS Regulations and circulars issued thereunder, which inter-alia detail the specific activities, role and responsibilities of various teams engaged in fund management, dealing, compliance, risk management, back-office, etc., with regard to management of client funds and securities including the order placement, execution of order, trade allocation amongst clients and other related matters.
Portfolio Managers shall also put in place a specific policy, in compliance with the PMS Regulations and circulars issued thereunder, which shall inter-alia provide for: a) Specific situations (not generic) wherein the orders shall be placed for each client individually or pooled from trading account of Portfolio Manager. b) Scenarios / situations in which deviation from the allotment of securities as intended at the time of placement of order would be permissible, if at all. c) Scenarios, wherein, the Portfolio Manager is required to place certain margins / collaterals in order to execute certain transactions, details on how such margins / collaterals shall be segregated / placed from amongst various clients, without affecting the interest of any client. d) Deviations, if any, shall be on account of exigency only and require prior written approval of the Principal Officer and Compliance officer of the Portfolio Manager with a detailed rationale for such deviation.
The aforesaid policies as mentioned at paras 3.1 & 3.2 shall be approved by the Board / equivalent body of the Portfolio Manager.
Portfolio Managers shall ensure that all clients are treated in a fair and equitable manner and ensure compliance with the following:
Portfolio Managers shall constitute a dealing team (DT) which shall be responsible for order placement and execution of all orders in accordance with the aforesaid policies of the Portfolio Manager. DT may include the Principal Officer or the person appointed in terms of Regulation 7(2) (e) of PMS Regulations.
All conversations of DT shall be only through the dedicated recorded telephone lines or through emails from authorized email ids.
Mobile phones or any other communication devices other than the recorded telephone lines shall not be allowed inside the dealing room.
Access to internet facilities on computers and other devices inside the dealing room shall be restricted and shall only be used for activities related to trade execution.
Entry/access to the dealing room shall be restricted to authorized employees as defined in the aforementioned policies of the Portfolio Manager.
There shall be no sharing of information through any mode, except for trade execution under the approved policies of the Portfolio Manager.
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Source: SecMarx — Circular for Portfolio Managers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.