Types of Portfolio Managers

Portfolio managers can be classified into two primary categories:

1. Discretionary Portfolio Managers: These managers have the authority to make investment decisions on behalf of the client without prior approval. They tailor the investment strategy based on the client’s objectives and risk appetite.
2. Non-Discretionary Portfolio Managers: In this model, portfolio managers operate strictly according to the client’s directives. They provide recommendations, but the client retains the ultimate decision-making power.

Regulatory Framework

Governing Rules

The services of portfolio managers are governed by the agreement or contract established between the manager and the client. This contract outlines the scope of services, fees, responsibilities, and other important terms.

Capital Adequacy Requirement

As per SEBI regulations, the capital adequacy requirement for portfolio manager registration is a minimum net worth of ?50 lakhs. This requirement ensures that the portfolio manager has sufficient capital to conduct operations responsibly.

Requirements for Portfolio Manager Registration

To become a registered portfolio manager, several prerequisites must be met:

1. Corporate Status: The applicant must be a corporate body.
2. Fit and Proper Individual: The applicant must meet specific standards of integrity and competence.
3. Capital Adequacy: A net worth of at least ?50 lakhs is required.
4. Infrastructure: The portfolio manager must possess adequate office space, equipment, and workforce to effectively carry out activities.
5. Legal Standing: Neither the applicant nor its partners or directors should be engaged in litigation related to the securities market.
6. Experience: At least two employees with relevant experience are required to manage portfolio operations.
7. Qualifications: Applicants must have professional qualifications in finance, accounting, law, or business management from recognized institutions.
8. Investor Interest: The grant of a registration certificate must be in the interest of investors.

Portfolio Manager Registration Process

Steps to Register

1. Fill Form A: Initiate the registration process by filling out Form A.
2. Additional Information: The SEBI board may request further information or clarification regarding portfolio management activities.
3. Board Appearance: If required, the principal officer may need to appear before the SEBI board for a discussion.
4. Registration Fee: Upon meeting all requirements, the applicant will be informed to submit a registration fee of ?10 lakhs.
5. Certificate Grant: After successful processing, a certificate in Form B will be issued.

Renewal of Registration Certificate

To maintain the registration, portfolio managers must ensure compliance with all SEBI regulations and submit any necessary documentation for renewal.

Conditions for Penalty Imposition

A portfolio manager may face penalties for various reasons, including:

1. Regulatory Violations: Failure to comply with SEBI regulations.
2. Investor Complaints: Not adequately addressing or responding to investor complaints.
3. Fee Non-Payment: Failing to pay required fees.
4. Misconduct: Engaging in improper or unprofessional conduct.
5. Inaccurate Reporting: Providing inaccurate information or failing to submit required reports.
6. Capital Maintenance: Not maintaining the required capital adequacy.
7. Obligation Failures: Failing to fulfill prescribed obligations.
8. Registration Conditions: Contravening the conditions of registration.

Inaccuracies regarding registration conditions, fee payment failures, and documentation issues can lead to penalties and impact the registration process.

Role of Compliance in Portfolio Management

Compliance is crucial in ensuring that portfolio managers adhere to the regulatory framework set forth by SEBI. Firms like Compliance Calendar LLP offer specialized services to assist portfolio managers in navigating the complexities of registration, documentation, and compliance.

Our Services

At Compliance Calendar LLP, we strive to provide comprehensive support in the portfolio manager registration process:

• Documentation Assistance: Ensuring accurate and complete documentation to avoid penalties.
• Condition Fulfillment: Assisting clients in meeting registration requirements.
• Direct Coordination: Our consultants directly liaise with regulatory officials for effective follow-ups and acknowledgments.
• Renewal Support: We guide clients through the renewal of their registration certificates.
• Inspection Preparation: Our expert team provides support during inspections by regulatory authorities.