Format of ‘Disclosure Document’ for Portfolio Managers
Summary
SEBI issues a circular to simplify the 'Disclosure Document' format for Portfolio Managers by deleting Schedule V of the PM Regulations, 2020. The new document is divided into static and dynamic sections with specific certification and filing requirements for changes. A draft standard template including definitions and disclaimers is provided in Annexure-I. This section defines key terms used in the portfolio management agreement, including Distributor, Eligible Investors, and Portfolio Manager. It outlines specific definitions for financial entities such as FPIs, NRIs, and Large Value Accredited Investors. The text concludes with disclosure requirements regarding the portfolio manager's background, penalties, and services offered. This section details investment policies regarding associates and group companies, followed by a comprehensive disclosure of risk factors. It categorizes risks into general market risks, equity-related risks, debt and money market risks, derivatives risks, and mutual fund scheme risks. The text outlines specific financial hazards such as interest rate, liquidity, credit, and concentration risks affecting portfolio values. The document outlines disclaimer
Text
The portfolio manager shall provide to the client, the Disclosure Document as specified in Schedule V, along with a certificate in Form C as specified in Schedule I, prior to entering into an agreement with the client as referred to in sub-regulation (1).
As a part of an initiative for ease of doing business, it has been decided, in consultation with the Association of Portfolio Managers of India (APMI), to delete the Schedule V from the SEBI (Portfolio Managers) Regulations, 2020 containing the format of ‘Disclosure Document’ and issue the same in a simplified manner through this circular.
The ‘Disclosure Document’ has been divided into two sections viz. static and dynamic. The format of ‘Disclosure Document’ along with template is given in Annexure-I.
PMS to ensure that each parameter of ‘Disclosure Document’ begins on a fresh page. Only the page(s) containing change(s) in any parameter would need to be certified by independent Chartered Accountant and Principal Officer of the PMS. The same shall also be highlighted in the communication to clients.
The updated Disclosure Document Page(s) in which changes are carried out shall be simultaneously communicated to the clients, updated on the website of portfolio manager and filed with the Board within 7 working days from the date of change.
All other requirements, terms and conditions as enshrined in the SEBI (Portfolio Managers) Regulations, 2020 shall remain unchanged including the contents of the ‘Disclosure Document’ which have been specified in Regulation 22 (4) of SEBI (Portfolio Managers) Regulations, 2020 and their certification from an Independent Chartered Accountant as specified under Regulation 22 (5) of SEBI (Portfolio Managers) Regulations. 2020.
The provisions of this circular shall be applicable with immediate effect.
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 43 of SEBI (Portfolio Managers) Regulations, 2020, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Classification of sixteen parameters of Model Disclosure document Part-I Static section includes Disclaimer clause, Definitions, Description, Penalties/pending litigation, Services offered, Risk factors, Nature of Expenses, Taxation, Accounting policies, Investors services, and Details of diversification policy.
Part-II Dynamic Section includes Client Representation, Financial performance, Performance of Portfolio Manager, Audit Observations (of the preceding 3 years), and Details of investments in the securities of related parties of the portfolio manager.
This Document has been prepared in accordance with the SEBI (Portfolio Managers) Regulations, 2020 and filed with SEBI. This Document has neither been approved nor disapproved by SEBI nor has SEBI certified the accuracy or adequacy of the contents of this Document.
“Accredited Investor” means any person who is granted a certificate of accreditation by an accreditation agency who: (i) in case of an individual, HUF, family trust or sole proprietorship has: (a) annual income of at least two crore rupees; or (b) net worth of at least seven crore fifty lakh rupees... (ii) in case of a body corporate, has net worth of at least fifty crore rupees...
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Source: SecMarx — Format of ‘Disclosure Document’ for Portfolio Managers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.