Circular for Portfolio Managers
Summary
This circular mandates prudential investment limits for Portfolio Managers in the securities of their associates and related parties. It requires Portfolio Managers to obtain prior consent from clients before making such investments and adhere to minimum credit rating standards for debt and hybrid securities. Additionally, it prescribes specific disclosure requirements regarding these investments in periodic reports to clients. This section mandates Portfolio Managers to disclose details of investments in related parties and passive breach rectification steps in their Disclosure Document. It exempts advisory services, co-investment services, and specific government-mandated clients from these requirements, while imposing conflict of interest disclosures on them. The document includes a client consent format for investing in associates' securities and waiving rebalancing obligations for passive breaches.
Text
The amendment to SEBI (Portfolio Managers) Regulations, 2020 shall come into force on the thirtieth day from the date of their publication in the Official Gazette.
Portfolio Manager shall invest up to a maximum of 30 percent of their client’s portfolio in the securities of their own associates/related parties with specific sub-limits for equity, debt, and hybrid securities.
The aforementioned limits shall be applicable only to direct investments by Portfolio Managers in equity and debt/hybrid securities of their own associates/related parties and not to any investments in the Mutual Funds.
Portfolio Managers shall obtain a one-time prior positive consent of client in the format specified at Annexure A as a part of the agreement mandated under Regulation 22(1) of the PMS Regulations.
Portfolio Manager shall not make any investments in the securities of associates/related parties without the prior consent of the client at the time of on boarding new clients.
In the event of passive breach of the specified investment limits, a rebalancing of the portfolio shall be completed by Portfolio Managers within a period of 90 days from the date of such breach.
Portfolio Managers offering discretionary portfolio management services shall not make any investment in below investment grade securities.
Portfolio Managers offering non-discretionary portfolio management services shall not make any investment in below investment grade listed securities but may invest up to 10% of AUM in unlisted unrated securities of issuers other than associates/related parties.
Portfolio Managers shall disclose details of investment of client’s funds in the securities of associates/related parties of the Portfolio Manager in the periodical report.
Portfolio Manager shall ensure compliance with the following: i. Disclosure of the details of investment of clients’ funds in the securities of associate/related parties in the Disclosure Document under the head “Details of investments in the securities of related parties of the Portfolio Manager”, in the following format:
Portfolio Managers shall ensure that any material changes in the above information is updated in the Disclosure Document and uploaded on their respective websites within 7 days.
The requirements as specified at para 2 above and in Regulations 22 (1A), 22(4) (da) & (db), 24 (3A) to 3(E) of PMS Regulations shall not be applicable for advisory portfolio management services, co-investment portfolio management services and for client categories who in turn manage funds under government mandates and/or are governed under specific Acts of State and/or Parliament.
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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.