PORTFOLIO MANAGER REGISTRATION

SEBI Portfolio Manager Registration in India: Complete Guide to PMS Licensing

Portfolio Management Services (PMS) providers in India must obtain mandatory registration from the Securities and Exchange Board of India (SEBI) under the SEBI (Portfolio Managers) Regulations, 2020, to legally manage securities portfolios on a discretionary or non-discretionary basis for high-net-worth clients, ensuring investor protection through stringent financial, operational, and compliance standards. A portfolio manager acts as a fiduciary, offering personalized investment strategies, asset allocation, and risk management for clients investing at least ₹50 lakhs, distinguishing PMS from mutual funds by its customized, fee-based model (typically 1-2.5% management fee + performance incentives).

Who is a Portfolio Manager?

A portfolio manager is a body corporate who, pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise), the management or administration of a portfolio of securities or the funds of the client. Every Portfolio Manager shall abide by the Code of Conduct as specified in Schedule III.

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PMS Classification

Portfolio Management Services (PMS) in India

Portfolio Management Services (PMS) in India are regulated by SEBI and are classified based on investment control and asset classes to cater to diverse investor objectives and risk profiles.

PMS by Investment Control

Discretionary PMS

The portfolio manager exercises full discretion over investment decisions, independently selecting strategies and securities to achieve stated objectives without requiring client approval for individual trades.

Non-Discretionary PMS

The manager recommends investment opportunities and executes transactions only after receiving explicit approval from the client for each proposed decision.

Advisory PMS

The portfolio manager provides investment advice and recommendations, while clients retain complete control over decision-making and execution of trades.

PMS by Asset Class

Equity PMS

Primarily invests in equities, categorized by market capitalization or investment strategies such as value, growth, or thematic investing, aiming for long-term capital appreciation with higher market risk.

Debt PMS

Focuses on fixed-income instruments like bonds and government securities, offering relatively stable returns with lower risk, ideal for income generation and capital preservation.

Hybrid PMS

Combines equity and debt instruments in a balanced allocation to manage risk while pursuing both growth and income objectives.

Multi-Asset PMS

Diversifies investments across equities, debt, commodities, REITs, InvITs, and alternative assets to enhance returns and reduce overall portfolio risk.

The Portfolio Managers Regulations by SEBI has enumerated the following general responsibilities on the portfolio managers:

In contrast to the non-discretionary portfolio manager, each client’s funds must be managed in accordance with the client’s instructions by the discretionary portfolio manager, who must manage them individually and independently in a manner that does not resemble that of a mutual fund.

The portfolio manager shall not accept from the client, funds or securities worth less than fifty lakh rupees
The minimum investment amount per client shall be applicable for new clients and fresh investments by existing clients Provided further that subject to appropriate disclosures in the disclosure document and the terms agreed between the client and the portfolio manager, the requirement of minimum investment amount per client shall not apply to an accredited investor
The requirement of minimum investment amount per client shall not apply to the co-investment portfolio manager.
With regard to the client’s funds, the portfolio manager must act as a fiduciary. The portfolio manager shall segregate each client’s holding in securities in separate accounts.
The portfolio manager shall keep the funds of all clients in a separate account to be maintained by it in a Scheduled Commercial Bank.
The portfolio manager shall transact in securities within the limitation placed by the client himself with regard to dealing in securities under the provisions of the Reserve Bank of India Act, 1934 (2 of 1934).
The portfolio manager shall not derive any direct or indirect benefit out of client’s funds or securities.
The portfolio manager is not allowed to borrow money or securities on the client’s behalf.
Except as permitted by these regulations, the portfolio manager may not lend securities held on behalf of clients to a third party.
The portfolio manager shall ensure proper and timely handling of complaints from his clients and take appropriate action immediately.
The portfolio manager shall ensure that any person or entity involved in the distribution of its services is carrying out the distribution activities in compliance with these regulations and circulars issued thereunder from time to time.

The client can anticipate what kind of reports the portfolio manager will provide?

As agreed, upon in the contract, the portfolio manager is obligated to provide the client with a report every six months, but no longer than that, and whenever the client requests it. This report must include the following information:

The composition and the value of the portfolio, description of security, number of securities, value of each security held in the portfolio, cash balance and aggregate value of the portfolio as on the date of report;
The dates of all transactions that took place during the reporting period, as well as the specifics of purchases and sales;
Beneficial interest received during that period in respect of interest, dividend, bonus shares, rights shares and debentures;
The costs associated with managing the client’s portfolio; (e) details of risk foreseen by the portfolio manager and the risk relating to the securities recommended by the portfolio manager for investment or disinvestment.

This report may also be available on the website with restricted access to each client. In accordance with the client’s agreement, the portfolio manager must also provide the client with documents and information exclusive to portfolio management. The client has the right to inquire about the portfolio managers’ specific.

Process of Registration

After the Board determines that the applicant satisfies the requirements outlined in Regulation 6, it will notify the applicant and issue a certificate in Form B following receipt of the fees outlined in Schedule II. The application for obtaining the certificate needs to be made to SEBI along with non-refundable fee. The application needs to be made in Form A of Schedule I2. Form A is a very detailed form. It mostly needs the following information:

Organization Structure

The objectives of the entity seeking registration (Memorandum and Articles of Association / Partnership Deed to be enclosed). Copy of Board Resolution to be enclosed.
Date and Place of Incorporation (date / month / year / place / ROC Registration No.).
Status of the Applicant (e.g. Limited Liability Partnership (LLP)). If listed, names of recognized stock exchanges to be provided. Organization Chart showing functional responsibilities to be enclosed.
Particulars of all Directors / Partners – Name, Address, Qualification, Date of Appointment, DIN, PAN (copy), Contact details, Experience, and other directorships / partnerships.
Key Management Personnel – Name, Address, Qualification, Date of Appointment, DIN, PAN, Contact details, Experience, and other directorships.
Particulars of Promoters – Type (Individual / Corporate), Name, PAN, Address, Telephone, Mobile, Email.
Particulars of Compliance Officer – Name, PAN, Address, Qualification, Date of appointment, Experience.
Particulars of Principal Officer – Name, Qualification, Date of Appointment, PAN, Certification details (test, result, validity).
Number of employees and number of employees for Portfolio Management Services.
Name and activities of associate companies / entities.
Details of registration with SEBI or any other Government Regulatory body and list of major shareholders / partners holding 5% or more voting rights.