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SEBI has tightened PMS regulations. In line with mutual fund regulations, the market regulator has asked portfolio managers to put in place a written down policy to define role and responsibilities of various team engaged in fund management, dealing, compliance, risk management and backend in line with the SEBI regulations.
The market regulator said that PMS companies will have to create a set process to manage clients’ funds and securities – order placement, execution of order and so on.
Further, SEBI clarified that PMS will have to put in place a policy to provide for specific situations where they place order, deviate from the allotment of securities, place margins to execute transaction or deviate due to exigency.
SEBI has also tightened the rules for dealing team in PMS. Here are some key changes:
- All conversation of DT is allowed only through recorded lines and emails
- Mobile phone or any other communication device other than recorded telephone is not allowed in the dealing room
- Internet can only be used for trading or execution
- Entry and access to dealing room is restricted to authorized employees
- No sharing of information through any mode is allowed except for trade execution
PMS with AUM of Rs.1000 crore or more under discretionary or non-discretionary PMS will have to put in place an automated system to ensure effective funds and securities management to reduce manual dependency.
All activities related to management of funds and securities of clients are subject to audit, clarified SEBI.
SEBI has asked portfolio managers to implement these changes by April 1, 2023. The Association of Portfolio Managers in India (APMI) has been entrusted with the task to review the progress and submit a bi-monthly report starting from December 1, 2022.
