SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 22nd August, 2022
SECURITIES AND EXCHANGE BOARD OF INDIA (PORTFOLIO MANAGERS)
(AMENDMENT) REGULATIONS, 2022
No. SEBI/LAD-NRO/GN/2022/94.—In exercise of the powers conferred by sub-section (1) of Section 30 read with sub-section (1) of section 11, clause (b) of sub-section (2) of Section 11 and subsection (1) of Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Securities and Exchange Board of India hereby makes the following regulations to further amend the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, namely:—
1. These Regulations may be called the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2022.
2. They shall come into force on the thirtieth day from the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, —
I. after clause (p) of sub-regulation (1) of regulation 2, the following clause shall be inserted, namely,-
“(pa) “related party” in relation to a portfolio manager, means—
(i) a director, partner or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, partner, manager or his relative is a partner;
(iv) a private company in which a director, partner or manager or his relative is a member or director;
(v) a public company in which a director, partner or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;
(vi) any body corporate whose board of directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director, partner or manager;
(vii) any person on whose advice, directions or instructions a director, partner or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;
(viii) any body corporate which is—
(A) a holding, subsidiary or an associate company of the portfolio manager; or
(B) a subsidiary of a holding company to which the portfolio manager is also a subsidiary;
(C) an investing company or the venturer of the portfolio manager;
Explanation.—For the purpose of this clause, “investing company or the venturer of a portfolio manager” means a body corporate whose investment in the portfolio manager would result in the portfolio manager becoming an associate of the body corporate.
(ix) a related party as defined under the applicable accounting standards;
(x) such other person as may be specified by the Board:
Provided that,
(a) any person or entity forming a part of the promoter or promoter group of the listed entity; or
(b) any person or any entity, holding equity shares:
(i) of twenty per cent or more; or
(ii) of ten per cent or more, with effect from April 1, 2023;
in the listed entity either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at any time, during the immediate preceding financial year;
shall be deemed to be a related party;”
II. in regulation 22,
i. after sub-regulation (1), the following sub-regulation shall be inserted, namely,-
“(1A) The portfolio manager may make investments in the securities of its related parties or its associates only after obtaining the prior consent of the client in such manner as may be specified by the Board from time to time:
Provided that the requirement for obtaining consent shall not apply to such portfolio managers as may be specified by the Board.”
ii. in sub-regulation (4), after clause (d), the following clauses shall be inserted, namely,-
“(da) the details of investment of client’s funds by the portfolio manager in the securities of its related parties or associates;
(db) the details of diversification policy of the portfolio manager:
Provided that the requirements specified above at clauses (da) and (db) above shall not apply to such portfolio managers as may be specified by the Board:
Provided further that the Board may specify disclosure requirements other than the requirements specified at clauses (da) and (db) above;”
III. after sub-regulation (3) of regulation 24, the following sub-regulations shall be inserted, namely,—
“(3A) The portfolio manager shall ensure compliance with the prudential limits on investments as may be specified by the Board.
(3B) The prudential limits, as specified under sub-regulation (3A), shall be applicable at the client level at the time of making investments by the portfolio managers.
(3C) The portfolio manager shall not be allowed to invest clients’ funds in unrated securities of their related parties or their associates.
Explanation. ─ For the purposes of sub-regulation (3C), the term “associate” shall mean–
(i) a body corporate in which a director or partner of the portfolio manager holds, either individually or collectively, more than twenty percent of its paid-up equity share capital or partnership interest, as the case may be; or
(ii) a body corporate which holds, either individually or collectively, more than twenty percent of the paid-up equity share capital or partnership interest, as the case may be of the portfolio manager.
(3D) The portfolio manager shall put in place an alert based system to monitor compliance with the prudential limits on investments.
(3E) The portfolio manager shall ensure investment of its clients’ funds on the basis of the credit rating of securities as may be specified by the Board:
Provided that the requirements under sub-regulations (3A), (3B), (3C) and (3E) shall not apply to investments made prior to the coming into force of the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2022:
Provided further that the requirements under sub-regulations (3A), (3B), (3C), (3D) and (3E) shall not apply to such portfolio managers as may be specified by the Board.”
IV. in Schedule V, after clause (14), the following clause shall be inserted, namely,-
“15) Details of investments in the securities of related parties of the portfolio manager
The details of investment of client’s funds by the portfolio manager in the securities of its related parties or associates.
16) Details of the diversification policy of the portfolio manager
The details of the diversification policy of the portfolio manager for the portfolio of the clients.”
MADHABI PURI BUCH , Chairman
[ADVT.-III/4/Exty./224/2022-23]
Footnote:
1. The Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, were published in the Gazette of India on January 16, 2020 vide No. SEBI/LAD-NRO/GN/2020/03.
2. The Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 were subsequently amended on, –
a. 17th April, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/10.
b. 16th March, 2021 by the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/10.
c. 26th April, 2021 by the Securities and Exchange Board of India (Portfolio Managers) (Second Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/16.
d. 3rd August, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30.
e. 3rd August, 2021 by the Securities and Exchange Board of India (Portfolio Managers) (Third Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/31
f. 9th November, 2021 by the Securities and Exchange Board of India (Portfolio Managers) (Fourth Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/58.
