With a view to keeping retail investors away from the portfolio management schemes (PMS), Sebi on Friday raised the minimum investment amount of clients for such schemes to Rs 25 lakh from the earlier Rs 5 lakh. PMS offers investors a range of specialised investment strategies to capitalise on opportunities in the market and made suitable to the needs of individual clients.

In a notification amending the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, the regulator said the new rule will apply to new clients as well as fresh investments by existing clients. “… for the words ‘five lakh’ the words ‘twenty five lakh’ shall be substituted,” Sebi said.

It added that existing investments of clients can continue as such till maturity of the particular investment.

“PMS regulations are light touch regulation and SEBI was worried that retail investors are being drawn into it whereas their interest are not as tightly protected or guarded as it is in mutual fund regulation,” Sebi Chairman U K Sinha had said after a board meeting last month.

“With the amendments, Sebi has tried to synchronise the PMS rules with actual reality of the present time. Such schemes are basically from HNIs and big investors and the Rs 5 lakh ceiling was set long back in 1993 and no longer holds good,” SMC Global Securities Strategist and Head of Research Jagannadham Thunuguntla said.

Sebi had in its last board meeting on January 28 decided enhance the minimum investment amount of clients under PMS.

In the amenedments, Sebi has also said that henceforth portfolio manager will not be allowed to hold the unlisted securities, besides the listed securities, belonging to the portfolio account, in its own name on behalf of its clients.

“Sebi’s enhancement of the minimum limit will help in concentration of quality investors in PMSs and will help them secure qualified and good service. For retail investors there are already other schemes,” CNI Research Chairman and Managing Director Kishore Oswal said.

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SEBI (Portfolio Managers) (Amendment) Regulations, 2012 – Amendment in regulations 15(1A),16(8) and Schedule V

NOTIFICATION No. LAD-NRO/GN/2011-12/37/3689, dated 10-2-2012

In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993, namely:-

1.  These Regulations may be called the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2012.

2.  They shall come into force on the date of their publication in the Official Gazette.

3.  In the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993: –

(i)  in regulation 15(1A),-

(a)  for the words “five lacs” the words “twenty five lacs” shall be substituted;

(b)  the following provisos shall be inserted, namely:-

Provided that the minimum investment amount per client shall be applicable for new clients and fresh investments by existing clients:

Provided further that existing investments of clients, as on date of notification of Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2012, may continue as such till maturity of the investment”.

(ii)  in regulation 16(8),-

(a)  after the words “listed securities”, the words “or unlisted securities” shall be inserted;

(b) in second proviso, for the full stop, a colon shall be substituted;

(c)  after the second proviso, the following shall be inserted, namely:-

Provided further that the portfolio manager shall segregate each client’s holding in unlisted securities in separate accounts in respect of investment by new clients and fresh investments by existing clients:

Provided further that existing investments in unlisted securities of clients, as on date of notification of Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2012 may continue as such till maturity of investment”.

(iii) in Schedule V, under the heading “MODEL DISCLOSURE DOCUMENT FOR PORTFOLIO MANAGEMENT”, in item III after clause 13(ii), for the words “Name and signature of all the Directors of Portfolio Manager” the words “Name and signature of at least two Directors of Portfolio Manger” shall be substituted.

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