Sebi Guidelines For Portfolio Management

Sebi Guidelines For Portfolio Management

Portfolio management is an investment service that is offered by most of the leading financial institutions. Portfolio managers are appointed by the clients to manage their funds and make investments for them. As per the Securities and Exchange Board of India (SEBI), every portfolio manager should be registered with SEBI in order to offer his services to clients. This guideline has been put in place by SEBI to protect the interest of clients.

The guidelines state that a separate bank account should be maintained by each client with the portfolio manager and all transactions should be carried out through this account only. The clients can withdraw money from this account anytime they want. A portfolio manager can trade on behalf of a client only after receiving written instructions from the client. Portfolio managers are not allowed to hold cash or any other assets in their own name on behalf of a client. It is mandatory for portfolio managers to maintain records for five years and these records should be made available for inspection at any time when asked by SEBI or by any other regulatory authority.

What is the capital adequacy requirement of a portfolio manager?

The application must be a legal entity. An applicant must be physically and mentally fit. The portfolio manager must have a net worth of at least Rs. 2 crores. The candidate must have the necessary office space, equipment, and personnel to do the task.

Is there any registration fee to be paid by the portfolio managers?

Every portfolio manager is required to pay Rs. 10 lakhs as registration fees at the time of

 grant of certificate of registration by SEBI.

Eligibility Criteria for Becoming a Portfolio Manager

To become a portfolio manager in India, you must have at least a Master’s degree in Commerce, Economics or Finance. The job experience for the post varies from organization to organization. However, you will have to pass an examination conducted by the Securities and Exchange Board of India (SEBI) for registration as a portfolio manager. You cannot hold the position of portfolio manager until your registration is approved by SEBI.

There are two levels of examinations that need to be passed by the National Institute of Securities Markets (NISM). NISM conducts preparatory courses that prepare you for these examinations.

To become a portfolio manager, it is mandatory that you clear the level 1 and level 2 exams conducted by NISM.

Once you clear these tests, you will qualify as an Associate Portfolio Manager (APM). From here on, you can apply for registration as a portfolio manager with SEBI. Once your application is approved by SEBI, you will be registered as an RIA (Registered Investment Advisor).

The following eligibility criteria should be met to become a portfolio manager:

  • A Bachelor’s degree in any discipline from any recognized university
  • A Master’s degree in Commerce/Finance/Economics from any recognized university
  • Passed level 2 exam conducted by NISM

What is the procedure for obtaining registration as a portfolio manager from SEBI?

This is the procedure for obtaining registration as a portfolio manager from SEBI:

1. Submit the application in Form A to SEBI along with:

  1. The certificate from a Chartered Accountant certifying that the net worth of the applicant is not less than Rs 2 crores (Rs 20 million);
  2. A declaration that no inspection report has been issued under Section 11(2) of SEBI Act, 1992 and there has been no order passed against the applicant under Section 11B or 11D of SEBI Act, 1992; and
  3. A non-refundable deposit of Rs 1,00,000/- either by way of demand draft or banker’s cheque.

2. SEBI will scrutinize the application within 30 days from the date of receipt of complete information and intimate the applicant about deficiency, if any, in the application or issue a registration certificate to the applicant. The certificate will be valid for 5 years from its date of issue.