EXECUTIVE DIRECTOR

INVESTMENT MANAGEMENT DEPARTMENT

SEBI/IMD/CIR No.1/ 70353 /2006

June 28, 2006

To all Portfolio Managers registered with SEBI

1.  It has been come to our notice while perusing disclosure documents/ agreements/ Power of Attorney entered into by the portfolio managers with the clients that many portfolio managers are using the following clause or a similar clause.

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‘ The portfolio managers’ decision in deployment of the Clients’ account is absolute and final and can never be called in question or be open to review at any time during the currency of the agreement or any time thereafter.’

2.  It is felt that every client should have the prerogative to question the decision of portfolio manager and the exercise of discretion by him.

3. Therefore, it is advised that portfolio managers who have incorporated the said clause or similar clause shall modify it as below :-

‘The portfolio managers’ decision ( taken in good faith ) in deployment of the Clients’ account is absolute and final and cannot be called in question or be open to review at any time during the currency of the agreement or any time thereafter except on the ground of malafide, fraud, conflict of interest or gross negligence.

4. These clarifications are being issued in accordance with the provisions of Regulation 39 of SEBI (Portfolio Managers) Regulations, 1993.

Yours faithfully,

R.K. Nair

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