An Overview of Registration of Portfolio Managers

A portfolio manager is a body corporate who advises or directs, or undertakes on behalf of the client, management or administration of the portfolio of the client. This can be done only after entering into a contract with the client. “Portfolio” of a client means the total security held by the client. As per the Securities Exchange Board of India (Portfolio Managers) Regulations of 2020 (SEBI (Portfolio Manager) Regulations, 2020), before starting to work as a portfolio manager, the person has to obtain a certificate of registration from the Securities Exchange Board of India (SEBI).

Eligibility criteria for registration as a Portfolio Manager

The eligibility criteria for registration as a Portfolio Manager are provided under Regulation 7 (2) of the SEBI (Portfolio Managers) Regulations, 2020. The criteria are as follows:

1. The applicant shall be a body corporate;
2. The applicant must have the necessary infrastructure, such as adequate office space, equipment and manpower to effectively discharge their activities as a portfolio manager;
3. The applicant must have appointed a compliance officer;
4. The applicant should appoint a principal officer who should be:
5. A professional qualified in finance, accountancy, business management or law from a university recognized by the Central Government or State Government or any foreign university or any postgraduate professional qualification obtained from Securities Market (Portfolio Management) from NISM of a duration not less than 1 year or is a CFA; or
6. He must have a minimum of 5 years experience in activities related to the securities market, including portfolio manager, stockbroker, investment advisor, fund manager or research analyst; or
7. He must have relevant NISM certification by SEBI from time to time.
8. In addition to the above, the applicant must employ at least one person who possesses the following qualifications:
9. A graduate from a recognized university;
10. A person with an experience of at least 2 years in activities related to the securities market including portfolio manager, stockbroker, investment advisor or fund manager.
11. No disciplinary action should have been taken by the board against any person connected with the applicant, either directly or indirectly, under the Act, rules or regulations framed hereunder;
12. The applicant should fulfill the net worth requirement as specified under Regulation 9 of SEBI (Portfolio Managers) Regulations, 2020, which is INR 5 crore, subject to exceptions;
13. The applicant or its director, partner, principal officer, compliance officer or employee should not be involved in any litigation with the securities market that might have an adverse effect on the business of the applicant;
14. The applicant should be a fit and proper person; and
15. The certificate should be granted to the applicant in the interest of investors.

Procedure for Registration of Portfolio Managers

Step 1: Filling out the Application form for the grant of a certificate

For getting registered as a portfolio manager, the eligible person should apply to SEBI under Form A of Schedule I. The application form should be accompanied by a non-refundable application fee prescribed under Schedule II. The applications made prior to the coming into force of these regulations, shall be considered as an application in pursuance of these regulations if it is made in a manner similar to that prescribed under Form A of Schedule I.

Step 2: Submission of the Application to SEBI

After filling out the application, it should be submitted to SEBI. The application should be complete and should conform to the instructions prescribed under the regulations and in the Form A.

Step 3: Review of Application by the SEBI

On receiving an application filed by the applicant, the SEBI will verify the application. SEBI may call for the applicant to furnish any information or clarification relating to the activities of the portfolio manager. SEBI may also call upon the applicant or its principal officer to appear before SEBI for personal representation. If the application is incomplete or is not in conformity with the instructions laid down, then it shall be rejected. However, before rejecting the application, SEBI shall give an opportunity to the applicant to remove the objections raised by SEBI within a time limit which shall not be more than 3 weeks.

Step 4: Approval for Grant of Certificate of Registration

While reviewing the application, SEBI will take into account all matters it deems necessary to carry out the activities relating to portfolio management. For granting the certificate of registration, SEBI should be satisfied with the application. After reviewing the application, if SEBI is satisfied with the application, then SEBI shall intimate to the applicant the approval of the application and demand payment of the registration fee specified in Schedule II.

Step 5: Grant of Certificate of Registration

Once the applicant makes payment of the requisite fees, SEBI shall grant the certificate of registration.

Online Process for Registration of Portfolio Managers

A body corporate willing to get registered as Portfolio Manager is required to make an online application to SEBI on its Intermediary Portal. The Online Process of Registration of Portfolio Managers is as follows:

1. The applicant has to make a fresh application for registration as a portfolio manager. Thereafter, a Log-in ID and Password will be generated.
2. The login ID and password, along with the URL of the SEBI portal, will be e-mailed to either the Compliance Officer or the Principal Officer.
3. The applicant should fill up all the details by clicking the "Fresh Registration" option available under the tab "Portfolio Manager" on the SEBI Intermediary Portal (SI Portal).
4. Before filling out the application, the applicant should go through the details of every tab, which can be accessed by clicking the "Blue Question Mark" available on the top right corner of each page.
5. The details filled under each tab should be saved by clicking on the "Save Draft" option available.
6. After filling in the details, the applicant should submit the online application form by clicking the "Final Submit" option available.
7. Thereafter, the applicant's task is to submit the requisite fee for registration after SEBI has approved granting a certificate of registration.
8. After filling in the details regarding fees, the fee paid is adjusted against the outstanding amount as per the instructions given under the "Blue Question Mark" available on the top right corner of the page.
9. After the fees is adjusted, the fee details are to be saved and submitted by clicking the "Submit" button for SEBI's final approval.

Procedure to be followed when Certificate of Registration is not granted

If, after reviewing the application, SEBI is of the opinion that the certificate of registration should not be granted, then it will reject the application. However, the rejection of the application can be done only after giving an opportunity to be heard to the applicant. If, after giving an opportunity of being heard, SEBI is still not satisfied, then it shall communicate the rejection of the application within 30 days from the date of the decision. The effect of refusal to grant a certificate to the applicant is that the portfolio manager is barred to carry on any activity as a portfolio manager from the date of receipt of the communication regarding the same.

Checklist for registration as a Portfolio Manager

1. Applicant name, contact details and Email ID.
2. Name of the Compliance Officer and Principal Officer.
3. PAN Card of the Applicant.
4. Registered Address Proof i.e. rent agreement, bills, etc.
5. Address of the principal place of business in case it is any other place other than the registered office.
6. Certificate of Incorporation or Registration.
7. Memorandum and Article of Association if the applicant is a company. Partnership Deed if the applicant is a partnership firm.
8. Board Resolution
9. KYC of Directors and partners, along with their qualifications and experience.
10. Details of key managerial personnel along with their qualification and experience.
11. Organizational Structure showing the functional activities.
12. Details of the promoter, including Pan card.
13. Details of Compliance officer along with Pan Card.
14. Details of Principal Officer along with Pan Card.
15. Details of associate companies or entities along with ownership details.
16. Details of the statutory auditor and principal banker.
17. Applicant’s shareholding pattern
18. Business Plan of at least 3 years.
19. Applicant's audited or unaudited financial statements, as the case may be.
20. Certificate of net worth issued by the statutory auditor.
21. Banker’s report.
22. The draft agreement with the client.
23. Draft disclosure necessary paper and details of custodian.

Post Registration Compliance by Portfolio Manager

After the grant of the certificate of registration, the portfolio managers are required to comply with the following conditions:

1. They have to follow the provisions of the Act and the regulations;
2. They will have to obtain prior approval from SEBI in case of change in control in the manner as prescribed by SEBI;
3. They will have to intimate SEBI in writing if any information or particulars previously submitted to SEBI are false or misleading in any material or in case of any material change in information already submitted;
4. They will have to deposit the fee for registration in the manner provided in these regulations;
5. They will have to take adequate steps for the redressal of the grievance of the investors within 1 month from the date of receipt of such complaint and intimate SEBI about the number, nature and other particulars of the complaints received;
6. The portfolio manager will have to maintain the net worth as specified in Regulation 9 at all times during the validity of the certificate of registration.