LETTER NO. IMD/DoF-1/25115/2011, DATED 4-8-2011

1. By your letter, dated May 12, 2010, you have given the factual position of the matter as under :

  •   As per SEBI (Portfolio Managers) Regulations, 1993, maintenance of a common bank account across all clients and aggregation and execution of orders in the common client code of the portfolio manager is allowed. In such cases the trades are to be allocated at the weighted average price to the clients.
  • However, in case of investment in units of Mutual Funds, the transactions are required to be carried out in separate code of each client as a separate folio of each client is to be maintained by the Fund. As a result the Portfolio Manager cannot place orders in one common client code but has to place it in different codes for each client.
  • You have submitted that the ..
  • Portfolio Manager intends to do the following –

 (a)  In case of Purchase Transaction: Execute transactions in separate codes of the clients, so that the folios are correctly maintained by the Mutual Funds and make pay-in to NJ India Invest (P.) Ltd. from a common bank account of the Portfolio Manager that is used to hold the client’s funds.

 (b)  In case of sale Transactions: Execute transaction in separate codes of the clients, so that the folios are correctly maintained by the Mutual Funds and receive pay-out from NJ India Invest (P.) Ltd. to a common bank account of the Portfolio Manager that is used to hold the client’s funds.

2. On these facts, you had sought an interpretive letter on the following questions:

Whether, allowing the Portfolio Manager to operate in the manner mentioned hereinabove will be in compliance with the applicable laws, rules, regulations, circulars, guidelines etc. issued by SEBI from time to time.

3. Without necessarily agreeing with your analysis, our view on the issues raised by you are as under:-

The above proposal for buying and selling of Mutual Fund units is in compliance with Regulation 16(5) and 16(7) of SEBI (Portfolio Managers) 1993 and circulars issued thereunder.

4. This position is based on the representation made to the division in your letter under reference. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred.

5. You may note that the above views are expressed only with respect to the clarification sought on applicability of SEBI (Portfolio Managers) Regulations, 1993 and do not affect the applicability of any other law or requirements.

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