Key Points- SEBI Circular - Portfolio Managers: Facilitating Digital On-boarding and Enhancing Transparency


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In a digital age where convenience and transparency are paramount, regulatory bodies continually evolve to ensure that financial markets uphold these principles. The Securities and Exchange Board of India (SEBI) has been at the forefront of this evolution, recently issuing a groundbreaking circular aimed at Portfolio Managers (PMs). The circular, SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/35, dated May 02, 2024, heralds a new era of streamlined processes and enhanced disclosures. It reflects SEBI's commitment to simplifying compliance while fostering a robust investment environment. For students preparing for compliance exams, understanding the intricacies of such regulatory updates is not just beneficial but essential. Let's delve into the key points of this circular, exploring its implications for PMs and investors alike.

Background: SEBI formed working groups to simplify compliance under SEBI Regulations. A group was formed specifically for Portfolio Managers (PMs) to enhance ease of business. Public consultation followed recommendations.

Digital On-boarding:

  • Amendments to Regulation 22(1) of SEBI (Portfolio Managers) Regulations, 2020 to simplify client on-boarding.
  • Clients must understand fee structures and sign annexures, modified for both physical and digital on-boarding.
  • Effective from October 01, 2024.
  • APMI to specify digital on-boarding procedures.

Fee Calculation Tool:

  • PMs to offer a fee calculation tool to clients showing fee options and multi-year calculations, incorporating the high watermark principle.
  • Link to be provided in advance to new clients on-boarded after October 01, 2024.

Additional Fee Disclosures:

  • Modifications to PMS-client agreement and periodic reports for fee disclosures.
  • Illustrations for different scenarios of fee changes.
  • Effective from October 01, 2024.

Most Important Terms and Conditions (MITC) Document:

  • PMs to provide an MITC document for client understanding, acknowledged by clients.
  • Compliance for new clients from October 01, 2024, and for existing clients by January 01, 2025.
  • Standard format to be specified by APMI.
  • Standard formats to be specified by APMI.

No Additional Fees: PMs must not levy additional fees beyond those specified in the annexure to the PMS-client agreement.

Effective Date and Standard Procedures:

  • Circular effective from October 01, 2024.
  • APMI to issue standard procedures and formats by July 31, 2024.

Legal Basis: Issued under SEBI Act, 1992, to protect investor interests and regulate the securities market.

Accessibility: Circular available under "Legal -> Circulars" on SEBI's website.

LINK of Circular: