Portfolio managers are defined as persons who, in pursuance of a contract with client, advise/ direct undertake on their behalf the management/ administration of portfolio of securities/ funds of clients. The term portfolio means the total holding of securities belonging to any person. The portfolio management can be:
- Discretionary: the first type of portfolio management permits the exercise of discretion in regard to investment/ management of the portfolio of the securities /funds.
- Non-discretionary: the non-discretionary portfolio manager should manage the funds in accordance with the direction of client.
In order to carry on portfolio management services, a certificate of registration from SEBI is mandatory for all portfolio managers. But for category 1 and 2 merchant banker a separate registration is not required to act as a portfolio manager. They have, however, To carry on the portfolio management activity within the framework of SEBI regulations applicable to portfolio managers. The SEBI regulation applicable to portfolio manager. The SEBI is authorized to grant and renew certificate of registration as a prior permission to portfolio managers on the payment of the requisite registration/renewal fee. A certificate/ renewal of registration is valid for three years. An application for renewal must be made three months before the expiry of the validity of the certificate. The annual registration fee payable to SEBI was Rs 2.5 lakh for the first two year and Rs. 1 lakh for the third year. The renewal fee was rs 75,000 per annum. After November 1999, the registration fee and renewal fee after every three years in Rs. 5 lakh respectively. The portfolio manager is also to give an undertaking to take adequate steps for the redresses of grievance of clients within one month of the receipt of complaint, keep SEBI informed about the number, nature, and other particular of complaints and abide by its rules and regulations.
Procedure for Registration
While considering the application for registration made in the prescribed form, the SEBI takes into accounts all matters relevant to the activities relating to portfolio manger and in particular.
- Necessary infrastructure like adequate office staff, equipment and manpower to discharge his activities.
- Has in employment a minimum of two persons with experience to conduct portfolio management business.
- A person directly/ indirectly connected with the applicant, that is, associated/subsidiary/inter-connected pr Group Company has not been granted registration;
- Capital adequacy of not less than net worth of Rs. 50 lakh in term of capital plus free reserves.
- The applicant/ partner/ director/principal officer has not been convicted for nay offence involving moral turpitude/ guilty of any economic offence;
- The applicant/partner/director/partner/ principal officer is not involved in any litigation connected with the securities market;
- The applicant has professional qualification in finance/law/accounting/business management; and
- Grant of certificate is in the interest of the investors.