SEBI has vide its circular dated 26th July, 2021 mandated the setting up of an inter operable platform for the mutual fund investors, where in one site they are able to view everything related to their mutual fund investments as well carry out transactions therein, instead of navigating to multiple sites. Salient features are :
- RTAs shall implement standardized practices, system interoperability amongst themselves to jointly develop a common industry wide platform that will deliver an integrated, harmonized, elevated experience to the investors across the
industry. AMCs and Depositories shall facilitate the RTAs for development of the proposed platform.
- The aforesaid platform shall, inter alia in phases, enable a user-friendly interface for investors for execution of mutual fund transactions viz. purchase, redemption, switch etc., initiation and tracking of service requests viz. change of email id / contact number / bank account details etc., initiation and tracking of queries and complaints, access investment related reports viz. mutual fund holdings (both in demat and standard Statement of Account), transactions reports (including historic transactions), capital gains/loss report, details of unclaimed dividend/redemption etc. Through this platform, investors will be able to access these services for all Mutual Funds in an integrated manner. In this regard,
AMCs, RTAs and Depositories shall take necessary measures to provide data via APIs on a real time basis to the proposed platform. Additionally, RTAs and Depositories shall also share their respective data feeds between themselves for generation of investment related reports.
- The platform may also over time, provide services to the distributors, registered investment advisors, AMCs, Stock Exchange platforms and digital platforms for transacting in mutual funds to further augment ease of investing and servicing of investors through the above stakeholders in consultation with SEBI.
- AMCs, RTAs and Depositories shall review and agree to harmonize the processes across the industry to provide a single-window, integrated, simplified investment and service experience for the investors.
- AMCs, RTAs, and Depositories shall adopt the data definitions and standards as provided / recommended by SEBI for data exchange amongst various participants.
- The Platform should be scalable with robust cyber security protocols and supported through an API-based architecture. In this regard, the platform shall adopt the Cyber Security and Cyber Resilience framework specified by SEBI from time to time to “MIIs” (Market Infrastructure Institutions such as Stock Exchanges, Depositories and Clearing Corporations) and “Qualified RTAs” (QRTAs). Further, on request basis, APIs could be exposed to other industry
stakeholders such as distributors, registered investment advisors, Stock Exchange platforms and digital platforms etc. with due approval of the concerned Mutual Fund on mutually agreed terms.
- The RTAs are jointly and severally responsible for compliance with all the applicable regulations including system audit and cyber security audit. Further, RTAs shall ensure that the platform complies with the guidelines for Business
Continuity Plan (BCP) and Disaster Recovery (DR) specified by SEBI from time to time to “MIIs”.
- All the stakeholders are advised to collaborate and work together towards the development and implementation of the proposed investor-friendly platform.
- AMCs and Depositories shall facilitate and RTAs shall make the aforesaid platform operational in a phased manner (starting with non-financial transactions) and shall be fully operational by December 31, 2021.
- AMCs, RTAs, Depositories, AMFI and key stakeholders are advised to create awareness about this initiative amongst the investors.
- Any RTA providing its services to Mutual Fund(s), subsequent to issuance of this circular, shall follow the guidelines specified in this circular or amendments thereto as may be intimated by SEBI from time to time.
SEBI has vide its circular dated 13th February 2020 revised its guidelines for Portfolio Managers.
Gist of the revisions are given below:
- Date of circular was on 13th Feb, 2020.
- It is relating to guidelines issued by SEBI that are mandatory required to be followed by Portfolio Managers.
- The provisions of this Circular shall be applicable with effect from May 01, 2020.
- The guidelines are issued by SEBI based on the recommendations of a Working Group and also some inputs from public consultation.
- SEBI has reviewed the framework for regulation of Portfolio Managers and the SEBI (Portfolio Managers) Regulation, 2020 has been notified on 16th Jan, 2020.
- As per the circular there has been modification made in Fees and Charges which are charged by Portfolio Managers and are mentioned below:-
- Regulation 22 (11) of the PMS Regulation states that no advance fees shall be charged by the Portfolio Managers either directly or indirectly, to the clients.
- Also brokerage at actual cost shall be charged as expense to clients and not any other costs shall be added.
- It is to be noted that Operating expenses excluding brokerage , over and above the fees charged by Portfolio Managers for the service shall not go beyond 0.50% per annum of the clients daily Asset Under Management.
- In case the client wishes to redeem its investments in full or in part before the agreed period of time than in such case the exit load shall be charged as under:-
- In the 1st year of investment = maximum 3% of amount redeem.
- In the 2nd year of investment = maximum 2% of amount redeem.
- In the 3rd year of investment = maximum 1% of amount redeem.
- After the period of 3 years from the date of investment, no exit load shall be charged.
- Also the charges for all the transactions in a financial year including broking, demat, custody, etc. incurred by self or by associates shall not exceed 20% per service.
- In case of direct on-boarding of clients by Portfolio Managers the following points need to be kept in mind which are mentioned as below:-
- In case of distribution of services the Portfolio Managers shall provide an option to client to be on-boarded directly without involving any intermediary.
- Portfolio Managers shall clearly disclose in its Disclosure Documents and also on its website about the option for direct on-boarding.
- It is to be noted that only statutory charges shall be charged in case of direct on-boarding of clients.
- All the information with respect to Investment Approaches offered by Portfolio Managers shall be uniform across all types of regulatory reporting, client reporting, disclosure document, marketing materials and any such document which relates to services offered by Portfolio Managers.
- Any description of investment approach provided by Portfolio Managers shall, includes the following:-
- investment objective
- description of types of securities e.g. equity or debt, listed or unlisted, convertible instruments, etc.
- basis of selection of such types of securities as part of the investment approach
- allocation of portfolio across types of securities(v)appropriate benchmark to compare performance and basis for choice of benchmark
- indicative tenure or investment horizon
- risks associated with the investment approach
- other salient features, if any.
- Portfolio Managers shall report to SEBI on periodical basis as per the provisions of circular dated on 18th Nov, 2003 which is relating to ‘Improvement in Corporate Governance’ that is on annual basis.
- SEBI has also clarified that with effect from financial year 2019-20 Portfolio Managers is required to submit the following information to the Board:-
- A certificate by CA duly certifying the net worth as on March 31st every year based on audited account within 6 months from the end of financial year.
- Also a certificate of compliance with PMS Regulations and circulars issued thereunder, duly signed by the Principal Officer within 60 days of end of each financial year.
- Further, Portfolio Managers shall submit a monthly report regarding their activities on SEBI Intermediaries Portal within 7 working days of the end of each month as per Annexure A.
- Also Portfolio Managers shall furnish a report in the format provided at Annexure B to their clients on a quarterly basis.
- According to the Regulation 22 (4) (e) of PMS Regulations, it is clarified that the Portfolio Managers shall:-
- Consider all cash holdings and investments in liquid funds, for calculation of performance.
- Report performance data net of all fees and all expenses (including taxes).
- Clearly disclose any change in investment approach that may impact the performance of client portfolio, in the marketing material.
- Ensure that performance reported in all marketing material and website of the Portfolio Manager is the same as that reported to SEBI.
- Ensure that the aggregate performance of the Portfolio Manager (firm-level performance) reported in any document shall be same as the combined performance of all the portfolios managed by the Portfolio Manager.
- Provide a disclaimer in all marketing material that the performance related information provided therein is not verified by SEBI.
- The performance data of Portfolio Managers shall be audited annually and the same shall be reported to SEBI within 60 days of end of each financial year. Also the said report shall be certified by Manager, Partners of the Portfolio Managers.
- Further to Regulation 23 (10) of PMS Regulations, it is clarified that Portfolio Managers shall:-
- Utilize services of only such distributors who have a valid AMFI Registration Number or have cleared NISM-Series-V-A exam.
- Pay fees or commission to distributors only on trial-basis. Further, any fees or commission paid shall be only from the fees received by Portfolio Managers.
- Ensure that prospective clients are informed about the fees or commission to be earned by the distributors for on-boarding them to specific investment approaches.
- Ensure that distributors abide by the Code of Conduct as specified in Annexure C.
- Have mechanism to independently verify the compliance of its distributors with the Code of Conduct.
- Ensure that, within 15 days from the end of every financial year, a self-certification is also received from distributors with regard to compliance with Code of conduct.