Maintenance of Clients’ Funds in a separate Bank Account by Portfolio Managers
Summary
This circular clarifies that Portfolio Managers may maintain all clients' funds in a single separate bank account rather than individual accounts. This arrangement is permitted only if strict segregation of client funds is maintained through proper back-office records and accounting systems. The Portfolio Manager must prohibit cross-utilization of funds, provide monthly statements, and perform daily reconciliations.
Text
the portfolio manager shall segregate each client’s funds and portfolio of securities and keep them separately from his own funds and securities and be responsible for safe keeping of clients’ funds and securities.
portfolio managers may keep the funds of all clients in a separate bank account maintained by the portfolio manager subject to the following conditions:
There shall be a clear segregation of each client’s fund through proper and clear maintenance of back office records
Portfolio Managers shall not use the funds of one client for another client
Portfolio Managers shall also maintain an accounting system containing separate client-wise data for their funds and provide statement to clients for such accounts at least on monthly basis
Portfolio Managers shall reconcile the client-wise funds with the funds in the aforesaid bank account on daily basis
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 regulation 39 of SEBI (Portfolio Managers) Regulations, 1993 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Maintenance of Clients’ Funds in a separate Bank Account by Portfolio Managers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.