The Securities and Exchange Board of India (SEBI) is proposing amendments to the SEBI (Portfolio Managers) Regulations, 2020, to streamline the disclosure document process. The primary objective is to delete Schedule V, which currently prescribes the format of the disclosure document, from the regulations and instead issue it as a circular. This change aims to improve the ease of doing business for portfolio managers and enhance investor understanding. Under current regulations, any material change to the disclosure document necessitates re-dissemination of the entire document to clients and filing with SEBI, making it cumbersome. To address this, SEBI proposes dividing the disclosure document into dynamic and static sections. The dynamic section will contain frequently changing information like client representation, financial performance, and audit observations, while the static section will cover stable details such as definitions and service descriptions. This restructuring means only the dynamic section would need to be circulated for updates, with changes clearly highlighted. This move will enable more agile updates to the disclosure format, as changes will no longer require amending the regulations. The core content requirements of the disclosure document, as specified in Regulation 22(4), will remain unchanged.
Securities and Exchange Board of India
Proposal to amend Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 – deletion of Schedule V prescribing format of disclosure document from SEBI (Portfolio Manager) Regulations, 2020 and its issuance as a circular
1. Objective
This memorandum seeks approval of the Board for carrying out amendments to the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 (hereinafter referred to as ‘PMS Regulations’) for deletion of Schedule V containing the format of disclosure document from PMS Regulations, and its issuance as a circular. As an ease of doing business initiative, it is also proposed to restructure and simplify the disclosure document format.
2. Extant Regulatory Provisions
2.1. Portfolio Managers are regulated through SEBI (Portfolio Managers) Regulations, 2020 and the circulars issued thereunder.
2.2. The disclosure document is a compendium of essential information issued so as to enable clients to make informed decisions about engaging the portfolio manager(s). Regulation 22 (4) of the PMS Regulations (enclosed at Annexure- 1) prescribes a broad list of disclosures that the disclosure document should contain, including the quantum and manner of fees payable by the client for each activity, portfolio risks, complete disclosures in respect of transactions with related parties, the performance of the portfolio manager and the audited financial statements of the portfolio manager.
2.3. Schedule V of the PMS Regulations prescribes the format of the disclosure document, containing 16 aspects that need to be incorporated, such as description of the portfolio manager, details of penalties or litigation, risk factors etc.
2.4. In terms of the PMS Regulations, the updated disclosure document is to be made available on the website of the portfolio manager at all times and also to be filed with the board, every time any material change is carried out.
3. Feedback and Challenges
3.1. As per the extant regulatory provisions, in case of any material change in the disclosure document, the entire document needs to be disseminated to all clients, and filed with the Board. This makes it difficult for investors to identify the changes as well as being operationally inconvenient for the portfolio managers.
3.2. Feedback was also received from the industry body, Association of Portfolio Managers in India (APMI), that the model disclosure document, as provided in schedule V of SEBI (Portfolio Managers) Regulations 2020, needs to be simplified for better understanding by investors.
4. Proposal w.r.t. model disclosure document
4.1. In order to address the above challenges, the following is proposed:
4.1.1. The disclosure document may be divided into dynamic and static sections. The dynamic section would contain the content that undergoes frequent changes whereas, the static section would contain disclosures that rarely change. A brief on the proposed disclosures under each section, is given below (detailed breakup of sixteen parameters, separated in dynamic and static section is given in Annexure II):
4.1.1.1. Dynamic Section: This section will contain portfolio manager specific information such as client representation, financial performance, performance of portfolio manager, audit observations and details of investments.
4.1.1.2. Static Section: This section will contain information such as definitions, description of portfolio manager, services offered, risk factors etc.
4.1.2. Any material change in the updated disclosure document that is circulated to investors, may be clearly highlighted.
4.2. The above approach would be operationally convenient for portfolio managers, as only the dynamic section of the disclosure document would be circulated to the clients. It will also be easier for investors to identify the material changes with the specific changes clearly highlighted in the communication.
4.3. Since the disclosure document format is enshrined in the PMS Regulations, any change in the format is currently possible only through amending the regulations. It is therefore proposed to delete the format of the disclosure document from the regulations, and issue it as a Circular in the manner mentioned at paragraph 4.1 above. The contents of the disclosure document, as specified vide Regulation 22 (4) of SEBI (Portfolio Managers) Regulations, 2020 are not being proposed to be changed in any manner.
5. This has been Excised for reasons of confidentiality
6. Proposal for consideration and approval of the Board
6.1. The Board may consider and approve the proposals at aforementioned paragraphs 4.1 and 4.3.
6.2. Draft amendment to the SEBI (Portfolio Managers) Regulations, 2020, for the proposed amendment is placed at Annexure-III.
6.3. The Board may authorize the Chairman to carry out suitable amendments to the regulations and to take any other consequential or incidental steps for implementation of the decisions of the Board.
(This has been excised for reasons of confidentiality.)
Annexure-1
Reg. 22(4) of SEBI (Portfolio Managers) Regulations, 2020 specifies the contents of the Disclosure document as under:
The Disclosure Document, shall inter alia include the following :─
(a) the quantum and manner of payment of fees payable by the client for each activity for which service is rendered by the portfolio manager directly or indirectly (where such service is out sourced);
(b) portfolio risks including risk specific to each investment approach offered by the portfolio manager;
(c) complete disclosures of transactions with related parties as per the accounting standards specified by the Institute of Chartered Accountants of India;
(d) details of conflicts of interest related to services offered by group companies or associates of the portfolio manager;
(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;
(e) the performance of the portfolio manager:
Provided that the performance of a discretionary portfolio manager shall be calculated using ‘Time Weighted Rate of Return’ for the immediately preceding three years and in such cases performance indicators shall also be disclosed: [Provided further that the performance of the Co-investment Portfolio Manager shall be calculated in the manner as agreed between the Co-investment Portfolio Manager and the client]
Provided further that the portfolio manager may be allowed to disclose performance segregated on the basis of investment approach;
(f) the audited financial statements of the portfolio manager for the immediately preceding three years
Annexure- II – To be notified as a circular
Annexure-III – Amendment to the SEBI (PMS) Regulations, 2020 shall be notified after following the due process.
Source: SEBI Board meeting 18th June 2025: https://www.sebi.gov.in/sebiweb/about/AboutAction.do?doBoardMeeting=yes#
