SEBI ensures portfolio managements services only for high net worth investors

Our Bureau Mumbai | Updated on November 21, 2019

File photo   -  Reuters

SEBI has given existing portfolio managers three years to meet the new criteria

The decision of the Securities and Exchange Board of India (SEBI), to tighten norms for portfolio managements services (PMS), will ensure that only well-informed investors will participate in high-risk product offerings, said an expert.

Lav Chaturvedi, ED and CEO, Reliance Securities said, "SEBI's decision to increase the net worth criteria for PMS  is a welcome move which is more to do keeping in mind investors safety and ensure there are serious players in the industry. Second, increasing ticket size will ensure only well informed investors will participate in the high risk products offerings."

On Wednesday, SEBI announced that the net-worth criteria for portfolio managers will now be Rs 5 crore instead of Rs 2 crore, that was announced earlier. Those below Rs 5 crore net-worth will not be registered with SEBI. This would affect thousands of portfolio managers across India, experts said.

SEBI has given existing portfolio managers three years to meet the new criteria. It also raised the minimum ticket size for investors who want to avail services for portfolio managers to Rs 50 lakh from current Rs 25 lakh. SEBI said that portfolio managers would not have to mandatorily appointment a custodian and a compliance officer.

Prakarsh Gagdani, CEO, said, "By increasing the PMS limit SEBI has made it very clear that a major section of the retail investor should come via the mutual fund route. Customised portfolio management is designated only for HNIs, hence clearly demarcating the customer categories."

“Moving the investment to Rs 50 lakhs will ensure larger net worth clients who have the ability to work with an advisor to evaluate better will come into portfolio management schemes. Increase in net worth will ensure serious players remain in the business,” said Ashish Shanker, Head - Investment Advisory, Motilal Oswal Private Wealth Management

Published on November 21, 2019

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