Portfolio Managers - Facilitating ease in digital on-boarding process for clients and enhancing transparency through disclosures
Summary
This circular modifies the SEBI (Portfolio Managers) Regulations, 2020 to facilitate digital on-boarding and enhance transparency for clients. It mandates specific fee calculation tools, additional fee disclosures, and a 'Most Important Terms and Conditions' document for Portfolio Managers. These measures aim to simplify compliance and protect investor interests through standardized formats issued by APMI.
Text
While on-boarding a client, Portfolio Manager shall ensure that the new client has separately signed the annexure on fees and charges and added a note, that they have understood the structure for fees and charges, in handwritten or electronic mode depending on on-boarding method.
The above provision shall be applicable from October 01, 2024.
The standard procedure for on-boarding of client through digital mode shall be specified by APMI, in consultation with SEBI.
Portfolio Manager shall provide a fee calculation tool to all clients that highlights various fee options with multi-year fee calculations. Such tool shall incorporate the high watermark principle, wherever applicable.
The link to access the said tool shall be provided in advance to all new clients, on-boarded on or after October 01, 2024.
Whenever performance fees is charged to the client, the annexure for fees and charges to the PMS-client agreement, shall also contain the following additional fee illustrations: One year and multi-year fee illustrations that cover different scenarios viz. increase in the portfolio value by a certain percentage, decrease in the portfolio value by a certain percentage and when the portfolio value remains unchanged. The said illustrations shall also suitably incorporate the high watermark principle.
The above illustrations shall be provided for new clients, on-boarded on or after October 01, 2024.
The standard formats for the above fee illustrations shall be specified by APMI, in consultation with SEBI.
In partial modification to the format of periodic report to be provided to the client, as specified in Annexure 5D to the Master Circular, Portfolio Manager shall also provide an annexure detailing the fee calculation.
The above provision shall be applicable from October 01, 2024.
The standard format for the annexure detailing the fee calculation shall be as specified by APMI, in consultation with SEBI.
In order to facilitate ease of understanding of the critical aspects of the Portfolio Manager-client relationship, Portfolio Manager shall additionally provide to its client a “Most Important Terms and Conditions (MITC)” document, which shall be duly acknowledged by the client.
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Source: SecMarx — Portfolio Managers - Facilitating ease in digital on-boarding process for clients and enhancing transparency through disclosures. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.