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Soon, individuals will be required to obtain APMI Registration Number (APRN) after clearing the NISM examination to distribute PMS products.
In a consultation paper, SEBI has proposed that it will make mandatory for individuals to obtain APRN number to sell PMS. While currently APMI registers new distributors just like AMFI by issuing APRN, it is on voluntary basis. With this, APMI will work like AMFI to issue APRN and code of conduct for PMS distributors.
SEBI highlighted some key benefits of obtaining APRN number for distributors:
- Registration with industry body
- Single point for compliance and declaration
- Access to industry data
- Common KYC
- Training for examination
- Faster grievance redressal
- Updates on guidelines and circular
Similarly, SEBI highlights some of the key benefits for PMS providers like common compliances, common KYD and due diligence and access to distributors among other things.
Further, SEBI has also proposed simplification of existing online client onboarding norms. Since there is a requirement of obtaining a handwritten note that clients have understood the fees/ charges structure before onboarding them, clients are required to be physically present to invest in PMS.
SEBI said that a hand typed (using a keyboard) note from clients can also be obtained to comply with this provision. This will ease the digital onboarding of PMS clients.
However, all PMS providers will have to make a fee calculator tool available to clients. “Every portfolio manager should have an online fee calculation tool that highlights all fee options with multi-year fee calculations with high watermark concept. An email with the link for the same should be sent to all new clients being on boarded,” said SEBI.
Here are some key highlights of the proposals:
- PMS will have to disclose various scenarios in which they charge performance fees
- If fee is charged wrongly, PMS will have to resolve it within 30 days
- PMS cannot levy any fee other than what is prescribed in agreement
- Since terms and conditions are lengthy, SEBI advises PMS to issue a concise document called Most Important Terms and Conditions (MITC) to onboard new clients
- MITC should include provisions related to mutual rights, liabilities and obligations, fees payable, risks involved, investment objective, investment restrictions, tenure and termination of the agreement
- in addition, in MITC, disclosures have to be made related to portfolio risks specific to investment approach, related party transactions, conflicts of interests, performance of portfolio manager and audited financial statements
You can submit your feedback to SEBI by March 7, 2024. You may click here to share your feedback.
