Requirements for Portfolio Manager Registration

Ashish M. Shaji

13 Feb, 2021

Portfolio managers are also called as investment counsellors, asset managers, investment managers. There are numerous benefits of working with a Portfolio Manager. However, to become a portfolio manager, you are required to get registration. In this article, we will discuss the requirements for portfolio manager registration.

Who is a Portfolio Manager?

As per SEBI (Portfolio Manager Registration) Regulations, 1993, a person who pursuant to an arrangement either in the form of a contract or otherwise advises or undertakes on behalf of their clients the administration of their funds or portfolio of securities as the case may be.

In simple words, we can say that any professional making investment decisions and carrying out investment activities on behalf of individuals or institutions is termed as a Portfolio Manager. 

How to Become a Portfolio Manager?

In order to become a portfolio manager, the applicant is required to submit an application with the Securities Exchange Board of India as the ultimate power regarding their registration and regulation resides with SEBI.

Procedural Requirements for Portfolio Manager Registration-

• In order to register, the applicant is required to submit an application for the same to the Board in Form A. Format for Form A is available in Schedule 1 of the above-mentioned regulations.
• This application must be submitted along with a non-refundable fee of Rs. 1, 00,000 through a demand draft or by direct credit in the SEBI bank account through NEFT/RTGS/IMPS.
• Once the application is received, the Board will analyze the same and make sure that all the requirements for portfolio manager registration are met. Once satisfied, the board shall intimate the same to the applicant.
• Any applicant looking for registration as a portfolio manager under PMS regulations can file their applications on the online system at https://siportal.sebi.gov.in

Requirements for Portfolio Manager Registration

As we have read above in order to apply for portfolio manager registration with SEBI, the applicant is required to submit an application with the Securities Exchange Board of India. After receiving the application, the Board will analyze the application and make sure that the following registration requirements are met:

1. The applicant submitting the application must be a body corporate. No individual is authorized to apply for a Portfolio manager license.
2. Before submitting the application, the applicant must save all the infrastructure necessary for effectively discharging the portfolio management activities, including:
   • Office space
   • Equipment
   • Manpower
3. The principal officer is required to have any one of the following qualifications:
   • A professional qualification in finance, law, accountancy, or business management from a university or an institution recognized by the Central Government or any State Government or a foreign university.
   • Experience of a minimum of ten years in related activities in the securities market, including in a portfolio manager, stockbroker, or as a fund manager.
   • CFA charter from the CFA Institute.
4. The applicant must have a minimum of 2 employees, who have experience of minimum 5 years between them in related activities including stockbroking, investment/fund management, etc.
5. The portfolio manager should have a minimum net worth requirement of 5 crore rupees.
6. If any previous application by the same applicant or any related party was submitted and later rejected by the Board.
7. If the Board had initiated any disciplinary action against any person directly or indirectly connected with the applicant.
8. If the applicant, and director of the applicant organization, Principal officer or any employee specified in point no. 4 above are:
   • Involved in any kind of litigation related to the securities market;
   • Convicted for any offense involving moral turpitude or;
   • Found guilty of any economic offense.
9. The applicant is a fit and proper person.
10. If the work done by the applicant will be in the interest of the investors.

These requirements for portfolio manager registration should be met by an applicant.

Post Registration Requirements for Portfolio Manager Registration

Even after the application for registration is approved by the Board, there are many post-registration conditions that are required to be satisfied by the registered portfolio manager. Some of such requirements include:

1. If there is any change proposed in the status and constitution of the portfolio manager, it is required to obtain prior approval from the Board for the same.
2. If any complaint is received from an investor, the portfolio manager is required to take adequate grievances redressal steps. Such complaints must be resolved within one month.
3. The portfolio manager is required to keep a record of a number of complaints, their nature, and other particulars. And also convey the same to the Board also.
4. The registered portfolio manager is required to maintain the net worth of a minimum of 5 crore rupees at all times.
5. The portfolio manager can accept a minimum of 50 lakh rupees or securities having a minimum worth of 50 lakhs rupees from the client.
6. It shall abide by all the rules and regulations made under the Act.

What are the benefits of working with a Portfolio Manager?

The benefits are as follows:

• Fiduciary responsibility

Portfolio managers have a fiduciary responsibility to act in good faith and honesty and, most importantly, in the best interests of clients. Therefore investment decisions should be free of bias and independent.

• Personalized management of your portfolios

Portfolio managers provide ongoing management of your investments. You give the authority to portfolio managers to make decisions on investment.

• Fee

Portfolio managers charge a percentage of investments they manage. The fee is transparent and lesser than retail management and distribution costs. Fees are fully transparent on client statements and go down as a percentage of your portfolio as your assets grow. 

Conclusion

The above mentioned requirements for portfolio manager registration should be met in order for an applicant to be registered as a portfolio manager. There are pre-registration requirements as well as post registration requirements for portfolio manager registration that are to be satisfied.