In an FAQ on PMS, SEBI has clarified that PMS players will have to disclose distributors’ commission to investors.
SEBI said that portfolio managers will have to furnish a quarterly report to the clients in which they have to disclose details of commission paid to distributor for the particular client among other things.
This would bring PMS at par with mutual funds in terms of disclosure of commission of distributors.
Remember that from October 1, 2020, PMS players will move to all trail model. Such a compensation has to be made by fees received by portfolio managers (from scheme). Also, PMS and distributors will have to ensure that prospective investors are well informed about the fees or commission earned by their distributors before on-boarding them.
Currently, mutual fund distributors or individuals who have cleared NISM Series VA exam can become PMS distributors.
Further, the market regulator has clarified that PMS players cannot impose lock-in period on the investments of their clients. However, PMS players can charge exit loads from the clients for early exit.
On top up investment of existing clients who have invested in PMS with Rs.25 lakh (earlier regulations), SEBI said that these investors will have to invest such that they meet minimum investment value of Rs.50 lakh in PMS. For instance, if an investor has Rs.30 lakh in PMS, he has to invest another Rs.20 lakh to meet the minimum investment criteria if he wishes to top us his investment portfolio in PMS.
In addition, SEBI has clarified that partial withdrawal is allowed in PMS to the extent that they maintain a minimum investment value of Rs. 50 lakh in PMS. SEBI said, “The client may withdraw partial amounts from his portfolio, in accordance with the terms of the agreement between the client and the portfolio manager. However, the value of investment in the portfolio after such withdrawal shall not be less than the applicable minimum investment amount.”
