The Hindu Business Line : Know more about portfolio managers

Yes. The portfolio manager, before taking up an assignment of management of funds or portfolio of securities on behalf of the client, enters into an agreement in writing with the client clearly defining the inter se relationship and setting out their mutual rights, liabilities and obligations relating to the management of funds or portfolio of securities containing the details as specified in Schedule IV of the SEBI (Portfolio Managers) Regulations, 1993.

What fees can a portfolio manager charge from its clients for the services rendered by him?

The SEBI (Portfolio Managers) Regulations, 1993, have not prescribed any scale of fee to be charged by the portfolio manager to its clients.

However, the regulations provide that the portfolio manager shall charge a fee as per the agreement with the client for rendering portfolio management services.

The fee so charged may be a fixed amount or a return based fee or a combination of both. The portfolio manager shall take prior permission from the client for charging such fees for each activity for which service is rendered by the portfolio manager directly or indirectly (where such service is outsourced),

Is there any specified value of funds or securities below which a portfolio manager cannot accept from the client while opening the account for the purpose of rendering portfolio management service to the client?

The portfolio manager is required to accept funds or securities having a minimum worth of Rs 5 lakh from the client while opening the account for the purpose of rendering portfolio management service to the client.

Is a portfolio manager permitted to invest the fund of its clients in derivatives?

A portfolio manager is permitted to invest in derivatives, including transactions for the purpose of hedging and portfolio rebalancing, through a recognised stock exchange. However, leveraging of portfolio is not permitted in respect of investment in derivatives. The total exposure of the portfolio client in derivatives should not exceed his portfolio funds placed with the portfolio manager and the portfolio manager should basically invest and not borrow on behalf of his clients.

What is the disclosure mechanism of the portfolio managers to their clients?

The portfolio manager provides to the client the Disclosure Document at least two days prior to entering into an agreement with the client.

The disclosure document, inter alia, contains 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 outsourced), portfolio risks, complete disclosures in respect of transactions with related parties as per the accounting standards specified by the Institute of Chartered Accountants of India in this regard, the performance of the portfolio manager and the audited financial statements of the portfolio manager for the immediately preceding three years.

On what basis is the performance of the portfolio manager calculated?

The performance of a discretionary portfolio manager is calculated using weighted average method taking each individual category of investments for the immediately preceding three years and in such cases performance indicators is also disclosed.

Where can an investor look out for information on portfolio managers?

Investors can log on to the Web site of SEBI www.sebi.gov.in for information on SEBI rules, regulations and guidelines pertaining to portfolio managers.

Addresses of the registered portfolio managers are also available on the Web site.

How can the investors redress their complaints?

Investors would find in the disclosure document, the name, address and telephone number of the investor relation officer of the portfolio manager who attends to the investor queries and complaints.

To help out the investors the grievance redressal and dispute mechanism is also provided by the portfolio manager in the Disclosure Document.

Investors can approach SEBI for redressal of their complaints.

On receipt of complaints, SEBI takes up the matter with the portfolio manager concerned and follows up with them. Investors may send their complaints to: Office of Investor Assistance and Education,

Securities and Exchange Board of India,

`Exchange Plaza', C-1, Block G, 4th Floor,

Bandra Kurla Complex, Bandra (E),

Mumbai - 400051.

Note: The answers given here are general in nature. The questions and the answers have been structured to enable the readers gain a broad understanding of SEBI (Portfolio Managers) Regulations, 1993. For exact details the reader is advised to refer to the SEBI (Portfolio Managers) Regulations, 1993 which are available on our Web site.

Readers may also note that these answers do not aim to explain the Regulations in force, since answers to questions involving particular case/fact pattern may depend upon administrative decisions and Court orders, if any, in respect of the same.

Source: www.sebi.gov.in

More Stories on : Financial Services | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page