Markets watchdog Sebi on Thursday issued guidelines for portfolio managers and said they cannot charge upfront fee from clients. Sebi (Portfolio Managers) Regulations, 2020, were notified on January 16.
New Delhi, Feb 13: Markets watchdog Sebi on Thursday issued guidelines for portfolio managers and said they cannot charge upfront fee from clients.
Sebi (Portfolio Managers) Regulations, 2020, were notified on January 16.
In addition, certain changes to the regulatory framework for portfolio managers have been mandated.
"As provided in Regulation 22 (11) of the PMS Regulations, no upfront fees shall be charged by the portfolio managers, either directly or indirectly, to the clients," Sebi said in a circular.
According to the regulator, brokerage at actuals should be charged to clients as expense.
"Operating expenses excluding brokerage, over and above the fees charged for Portfolio Management Service, shall not exceed 0.50 per cent per annum of the client's average daily Assets under Management (AUM)," it added.
For redemption of client portfolio in the first three years of investment, an exit load charge ranging from 1-3 per cent would be charged.
After the three-year period, there would be no exit load.
Charges for all transactions in a financial year through self or associates would be capped at 20 per cent by value per associate per service.
"Any charges to self/ associate shall not be at rates more than that paid to the non-associates providing the same service," the circular said.
The regulator noted that portfolio managers should provide an option to clients to be on-boarded directly, without intermediation of persons engaged in distribution services.
"At the time of on-boarding of clients directly, no charges except statutory charges shall be levied," it said.
Further, Sebi said information about 'Investment Approach' offered by portfolio managers should be uniform across all types of regulatory reporting and marketing materials, among others.
Portfolio managers would be required to provide a certificate from a qualified chartered accountant certifying net worth as on March 31, on the basis of audited accounts. This has to be done within six months from the end of a financial year.
The provisions of the circular would come into effect from May 1.
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