Regulations pertaining to Portfolio Managers amended to include disclosures on related party investment and diversification policy
Securities and Exchange Board of India (“SEBI”) amends Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 to regulate portfolio manager’s investments in the securities of its related parties and include Diversification Policy in the Disclosure Document.
On 22nd August, 2022, SEBI published the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2022 (“Amendment”) that will become effective from 4th September, 2022.
Key Highlights of the Amendment –
- Definition of related party has been added to the Regulation.
- Portfolio managers must obtain prior consent from the client to make investments in the securities of its related parties or its associates.
- The Disclosure Document must include details of diversification policy of the portfolio manager.
- The Disclosure Document must include details of investment of client’s funds by the portfolio manager in the securities of its related parties or associates.
- Portfolio Managers must comply with prudential limits on investments specified by the Board. Prudential limit is applicable at the client level at the time the portfolio manager is making investments. An alert-based system must be set up to monitor compliance with the prudential limits on investments.
- Portfolio Manager must not invest clients’ funds in unrated securities of their related parties or their associates.
- Clients’ funds must be invested on the basis of the credit rating of securities.
