Introduction: In the world of finance, a portfolio manager plays a crucial role in helping individuals and businesses effectively manage their investments. This article will provide a comprehensive guide to portfolio managers, including their roles, the services they offer, the types of portfolio management services, eligibility criteria for registration, and the process of becoming a portfolio manager in India.
1. Who is a Portfolio Manager?
A Portfolio Manager is a specialized professional in the financial industry who helps individuals or companies manage their investments. They are hired by clients to create strategies that can make money by investing in different types of assets like stocks or bonds.
In simpler terms, a portfolio manager is like a trusted advisor who helps people or businesses make smart decisions with their money. They work closely with clients to grow their investments and make sure everything is managed properly according to agreed-upon rules and contracts.
In India, a person can operate as a Portfolio Manager only after obtaining valid certificate of registration from the Securities and Exchange Board of India (SEBI).
2. What does a Portfolio Manager do?
A Portfolio Manager is responsible for creating and managing investment plans for their clients. They meet with clients to determine investment objectives and then work with financial analysts to investigate investment opportunities to achieve those objectives.
3. What is Portfolio Management Service?
Portfolio Management Services (PMS) are offered by Portfolio Managers to grow your wealth and achieve financial goals using instruments like stocks, mutual funds and bonds.
4. What are the types of Portfolio Management Services?
Portfolio Management Services are of two types:
i. Discretionary Portfolio Management Services
In discretionary portfolio management service, the portfolio manager individually and independently manages the funds and securities of each client in accordance with the needs of the client.
ii. Non-Discretionary Portfolio Management Services
Under the non-discretionary portfolio management service, the portfolio manager manages the funds in accordance with the directions of the client.
5. Who can engage in the business of Portfolio Management Services?
To work as a Portfolio Manager in India, individuals must acquire a valid certificate from SEBI. This certification is a mandatory requirement for anyone wishing to engage in the business of Portfolio Management.
To initiate the process, interested individuals must ensure they meet the necessary eligibility criteria. These criteria typically include educational qualifications, relevant experience in the financial industry, and adherence to SEBI regulations.
Once the eligibility criteria are met, individuals can proceed with the application for registration. The application should be submitted to SEBI along with all the required documentation and information as specified by the board.
6. What are the eligibility criteria to obtain registration as a Portfolio Manager?
The eligibility criteria for registration as a Portfolio Manager are provided under Regulation 7 (2) of the SEBI (Portfolio Managers) Regulations, 2020. The criteria are as follows:
a. The applicant shall be a body corporate;
b. The applicant must have the necessary infrastructure, such as adequate office space, equipment and manpower to effectively discharge their activities as a portfolio manager;
c. The applicant must have appointed a compliance officer;
d. The applicant should appoint a principal officer who should be:
> A professional qualified in finance, accountancy, business management or law from a university recognized by the Central Government or State Government or any foreign university or any postgraduate professional qualification obtained from Securities Market (Portfolio Management) from NISM of a duration not less than 1 year or is a CFA;
> He must have a minimum of 5 years experience in activities related to the securities market, including portfolio manager, stockbroker, investment advisor, fund manager or research analyst; and
> He must have relevant NISM certification by SEBI from time to time.
e. In addition to the above, the applicant must employ at least one person who possesses the following qualifications:
> A graduate from a recognized university;
> A person with an experience of at least 2 years in activities related to the securities market including portfolio manager, stockbroker, investment advisor or fund manager.
f. No disciplinary action should have been taken by the board against any person connected with the applicant, either directly or indirectly, under the Act, rules or regulations framed hereunder;
g. The applicant should fulfill the net worth requirement as specified under Regulation 9 of SEBI (Portfolio Managers) Regulations, 2020, which is INR 5 crore, subject to exceptions;
h. The applicant or its director, partner, principal officer, compliance officer or employee should not be involved in any litigation with the securities market that might have an adverse effect on the business of the applicant;
i. The applicant should be a fit and proper person; and
j. The certificate should be granted to the applicant in the interest of investors.
7. How to get registered as Portfolio Manager with SEBI?
Once you meet all the eligibility criteria to become a portfolio manager, it is time to apply for and acquire the certificate.
Step 1: To start the process, complete the application for registration using Form-A and apply for the portfolio manager certificate. Submit all the necessary documents along with a non-refundable application fee of Rs. 1 lakh through the SEBI Portal.
Note: While the process is primarily online, SEBI may request a physical copy of the application form if needed. It is recommended to prepare the form in physical format and send it to the designated SEBI officer when requested.
Step 2: Allow SEBI some time to review your application and supporting documents. The duration of this review period depends on the number of applications SEBI is currently processing.
Step 3: Following the review, SEBI may either request additional information or determine that your application qualifies for the portfolio manager certificate.
Step 4: Once SEBI approves your application and considers it suitable for the portfolio manager certificate, you will be required to pay a registration fee of Rs. 10 lakhs to obtain the certificate.
Acquiring the certificate from the SEBI comes with the condition that you will continue to fulfil the moral and regulatory requirements of being a portfolio manager.
For example – Every portfolio manager must always ensure that their minimum net worth is Rs. 5 crores.
8. An illustrative checklist for registration as a Portfolio Manager
a. Applicant name, contact details and Email ID.
b. Name of the Compliance Officer and Principal Officer.
c. PAN Card of the Applicant.
d. Registered Address Proof i.e. rent agreement, bills, etc.
e. Address of the principal place of business in case it is any other place other than the registered office.
f. Certificate of Incorporation or Registration.
g. Memorandum and Article of Association if the applicant is a company. Partnership Deed if the applicant is a partnership firm.
h. Board Resolution
i. KYC of Directors and partners, along with their qualifications and experience.
j. Details of key managerial personnel along with their qualification and experience.
k. Organizational Structure showing the functional activities.
l. Details of the promoter, including Pan card.
m. Details of Compliance officer along with Pan Card.
n. Details of Principal Officer along with Pan Card.
o. Details of associate companies or entities along with ownership details.
p. Details of the statutory auditor and principal banker.
q. Applicant’s shareholding pattern
r. Business Plan of at least 3 years.
s. Applicant’s audited or unaudited financial statements, as the case may be.
t. Certificate of net worth issued by the statutory auditor.
u. Banker’s report.
v. The draft agreement with the client.
w. Draft disclosure document and details of custodian.
9. What is the period of validity of the certificate of registration?
As per Regulation 12 of the SEBI (Portfolio Managers) Regulation of 2020, the certificate of registration granted to the portfolio managers by SEBI shall be valid unless suspended or cancelled by SEBI.
Conclusion: Understanding the role of a portfolio manager and the services they provide is essential for individuals and businesses looking to make informed investment decisions. By following the eligibility criteria and going through the registration process outlined by SEBI, aspiring portfolio managers can establish themselves in this specialized field and offer their expertise to clients seeking professional investment management.
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Hope the article gives you the clarity on the requirements for registration as a Portfolio Manager. In case you have any query or are looking for any professional assistance to make an application, you may write to me at mayank.jha@outlook.
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