SECURITIES AND EXCHANGE BOARD OF INDIA
PRIMARY MARKET DEPARTMENT
Earnest House, 14th Floor
Nariman Point, Bombay 400 021
RPM circular No.1(93-94) October 20, 1993
To All Registered Portfolio Managers
And Merchant Bankers in Category I & II
Undertaking Portfolio Management Activities
Dear Sir,
With the passing of the Securities and Exchange Board of India Act, 1992 and notification of
the Portfolio Managers Rules and Regulations, 1993, no person shall carry on any activity
as a Portfolio Manager unless he is registered with SEBI under Section 12 of the Act. SEBI
has granted Certificate of Registration to certain portfolio managers in terms of Rule 4 and
Regulation 8 of SEBI (Portfolio Managers) Rules & Regulations, 1993. Besides this, certain
Merchant Bankers in Category I and II covered under the proviso to Rule 3 of SEBI
(Portfolio Managers) Rules, 1993 are also authorized to undertake portfolio management
activities, whether as a registered portfolio manager or as a registered merchant banker, will
hereinafter be referred to as Registered Portfolio Managers (RPM).
In terms of powers conferred on it under Section 11 of SEBI Act, 1992, SEBI shall, from
time to time, issue operational guidelines / instructions to the Registered Portfolio Managers
by means of circulars. This is the first circular in the series.Further circulars would bear
continuous serial numbers, valid for the relevant financial year. All RPM should ensure
compliance with instructions contained in such circulars.
A. REGISTRATION
1.
The registration granted pursuant to Chapter II of the Securities and Exchange
Board of India (Portfolio Managers) Regulations, 1993, (hereinafter referred to as
the “Regulations”) will be for the principal as well as for all the branch offices in
India of the Portfolio Managers.
2.
The registration number contained in the certificate of registration should be
quoted in all the correspondence with SEBI, Government authorities, Stock
Exchanges and its clients.
A. GENERAL
1. With a view to ensuring that all Rules, Regulations, Guidelines, Notifications
etc. issued by SEBI, the Government of India and other regulatory
organizations are complied with the Portfolio Manager shall designate a senor
officer, as compliance Officer, who shall co-ordinate with regulatory
authorities in various matters and provide necessary guidance as also ensure
compliance internally. The Compliance Officer shall also ensure that
observations made / deficiencies pointed out by SBEI in the functioning of the
portfolio managers do not recur.
2. Correspondence relating to registration and clarifications on Guidelines /
Circulars issued by SEBI shall be made only by the Principal Office of the
Portfolio manager and not by the branch offices.
3. Necessary code of conduct for the officers and employees of the portfolio
managers should be framed to prevent insider trading, in the light of SEBI
(Insider Trading) Regulations, 1992.
4. Regulations 31 and 32 provide for penalty of suspension / cancellation of
registration for persistent defaults by the Portfolio Managers. However, in
order to give an opportunity to the Portfolio Managers to make up the
deficiencies in their functioning and to strengthen their machinery, SEBI may
issue warning letters or penalty point advices by which Portfolio Managers
would be forewarned in respect of their omissions. A Portfolio Manager who
despite the receipt of three warning letters or penalty point advices, does not
show improvement or fails to make up the deficiencies, may be subjected to
action for default in terms of Regulation 31 or 32 as the case may be.
c.
REPORTING
ACTIVITIES :
REQUIREMENTS
FOR
PORTFOLIO
MANAGEMENT
1.
In terms of Regulations 20 & 23 of SEBI (Portfolio Managers) Regulations, 1993,
the Board prescribes herewith the format (as given in Annexure I) in which a halfyearly report containing information on portfolio management activities is to be
submitted to the Board by the RPMs.
2.
The report is to be submitted twice a year, as on 31st March and 30th September.
3.
The Report should reach the Board within thirty days of the period to which it
relates.
4.
Failure to submit the Report as above shall constitute a default and would render
the RPM liable for action under Regulations 31 and 32 of SEBI (Portfolio Managers)
Regulations, 1993.
A. GUIDELINES FOR ADVERTISEMENT BY PORTFOLIO MANAGERS
SEBI had circulated a Consultative Paper No. VIII on August 18, 1993 suggesting a Code of
Advertisement to be followed by Portfolio Managers. On the basis of various suggestions
and comments received from Merchant Bankers, Financial Institutions, Banks and
Advertising Agencies, SEBI has since formulated a Code of Advertisement governing
advertisements to be issued by Registered Portfolio Managers in connection with their
activities. All RPMs are required to strictly observe the Code of Advertisement set out in
Annexure II.
Please acknowledge receipt of this Circular.
Yours faithfully,
M.D. PATEL
EXECUTIVE DIRECTOR
Encl : as above
Annexure I
HALF YEARLY REPORTING REQURIEMENTS
FOR PORTFOLIO MANAGEMENT ACTIVITIES
(To be submitted within 30 days, for the period ended 30/9 & 31/3 of each year after the end
of respective period)
1. GENERAL INFORMATION
1.1 Name
1.2 Carrying on PMS activities as :-Merchant Banker (Cat I/II)OR Portfolio
Manager
1.3 Registration no:-
2. INFORMATION RELATING TO CHANGES IN DIRECTORS / KEY
MANAGEMENT PERSONNEL / NETWORTH
2.1 Directors resigned / appointed (during the reporting period).
Name of the directors; Date of registration; Reason for resignation.
Name & address of the New directors; Qualification; Experience; Date of
appointment; directorships held in other companies.
2.2 Key management personnel resigned / appointed;
Names of persons left during the period; Designation; Reasons for leaving.
Names of persons joined during the period; Designation; Qualifications;
Experience.
2.3 Capital Adequacy :Net worth as on 30/9 or 31/3 as the case may be;
(Issued Capital + Reserves – Loss – Misc Exp)
3.
OTHER INFORMATION
3.1 Details of all settled and pending disputes;
(Names of the party / Nature of dispute/Pending/settled)
3.2 Indictment or involvement in any economic offence during this reporting
period.]
3.3 Any other information considered relevant to the nature of services rendered
by the Portfolio Manager.
3.4 Describe portfolio management schemes; Floated during the half year
(Enclose a copy of typical contract entered into with the client for
each sheme).
3.5 Enclose a list of approved share brokers whose services were utilised for
PMS activities and state whether any of them were suspended for more than
one week / had defaulted with any Stock Exchange authority
4.
BUSINESS HANDLED DURING THE HALF YEAR
4.1 Portfolio Management Business
Individual Client Corporate Client
Res. Non-Res. Res Non-Res
(Discretionary Nature)
1. Types of services offered
2. No. of Portfolio clients
3. Total amount of funds managed
4. Average size of portfolio
5. Average return to the client
6. Average period of PM Schemes.
(Non-discretionary Nature)
7. Types of services offered
8. No. of Portfolio clients
9. Total amount of funds managed
10. Average size of portfolio
11. Average return to the client
12. Average period of PM Schemes
4.2 Only Portfolio Advisory Services i.e. without dealing in funds of clients :
(Indicate for both Resident / Non-resident clients)
4.3 List of Clients (Corporate clients only)
1. Name and place
2. Amount of portfolio fund managed
3. service rendered.
4.4 Complaints :
1. Total number of complaints received during the period
2. No. of unresolved complaints
3. Period for which complaints are pending (No. of days)
4. Nature of pending complaints / reason for the same
5. Average time taken for complaints redressal.
5.
6.
IRREGULARITIES (If any)
SPECIAL MATTER (if any)
Place : Authorised Signatory
Date :
Please enclose :
(1) A certificate duly signed by the Principal Officer stating that the information required
under Regulation No. 23(ii) of SEBI (Portfolio Managers) Regulations, 1993 has
been reported to SEBI.
(2) A certificate from the auditors relating to Portfolio Management activities are
required under Regulation No. 20(2) of SEBI (Portfolio Managers) Regulations,
1993 and management’s comments on the adverse remarks if any, made by the
auditor.
(If report pertains to the period ended March 31)
Annexure II
Guidelines for Advertisements by
Registered Portfolio Managers
For the purpose of these guidelines, the expression “advertisement” means notices,
brochures, pamphlets, circulars, showcards, catalogues, hoardings, placards,
posters, insertions in newspapers, pictures, films, radio / television programmes or
through any electronic media”.
1. CODE OF ADVERTISEMENT
1.1 An advertisement shall be truthful, fair and clear and shall not contain any
statement, promise or forecast which is untrue or misleading.
1.2 An advertisement shall be considered to be misleading if it contains –
(i)
Statements made about the performance or activities of the Portfolio
Manager in the absence of necessary explanatory or qualifying statements,
which may give an exaggerated picture of the performance or activities of the
Portfolio Manager, than what it really is.
(ii)
An inaccurate portrayal of the past performance or portrayal in a manner
which implies that past gains or income will be repeated in future.
1.3 The advertisement shall not be so designed in content and format or in print as to be
likely to be misunderstood, or likely to disguise the significance of any
statement. Advertisement shall not contain statements which directly or by implication or by
omission mislead the investor.
1.4 The publicity literature should contain only information, the details of which are
contained in the Portfolio Managers scheme particulars.
1.5 As the investors may not be sophisticated in legal or financial matters, care
should be taken that the advertisement is set forth in a clear, concise and
understandable manner. Extensive use of technical or legal terminology or
complex language and the inclusion of excessive details which may detract the
investors should be avoided.
1.6 The advertisement shall not contain information, the accuracy of which is to any
extent dependent on assumptions.
1.7 If however, in any advertisement the Portfolio Manager, indicates any minimum
rate of return or yield to the prospective investors, resources to back such a
guarantee shall also be indicated.
1.8 The advertisement shall not compare one Portfolio Manager with another,
implicitly or explicitly, unless the comparison is fair and all information relevant
to the comparison is included in the advertisement.
2. OBSERVANCE OF CODE OF ADVERTISEMENT
2.1 Every Portfolio Manager shall strictly observe the Code of Advertisement set
out in paragraph in I given above.Any breach of the Code would be construed
as breach of Code of conduct set out in Schedule III to the Securities and
Exchange Board of India (Portfolio Managers) Regulations, 1993.
3. AUTHORITY FOR ISSUE OF GUIDELINES
3.1 These guidelines have been issued in pursuance of sub-section (1) of Section
11 of Securities and Exchange Board of India Act, 1992 by way of measures for
protection of the interests of investors in Securities and for orderly development
and growth of the securities market.