SEBI has revised PMS regulations in which it has asked PMS players not to charge upfront fees from their clients.
In a circular, SEBI said, “No upfront fees shall be charged by the Portfolio Managers, either directly or indirectly, to the clients.”
Here are the other key changes to PMS regulations:
- PMSs have to charge brokerage at actual from clients
- Operating expenses cannot exceed 0.50% per annum on daily average AUM
- Introduces graded exit load structure i.e. PMSs can charge exit load of 3% of the amount redeemed in first year, 2% in second year and 1% in third year. There will be no exit load after three years
- Facilitate direct on boarding of clients
- Uniform reporting standards across the industry. This includes investment objective, description of types of securities, investment approach, allocation across types of securities, basis of selection of securities, indicative tenure and horizon, risks associated and other salient features
- Disclose performance net of all fees and expenses, material change and change in investment approach
- Follow all trail model to compensate distributors and disclose such fees to their clients
- Put in mechanism to ensure that distributors adhere to a code of conduct
These changes will come into effect from May 1, 2020.
