Regulation 24 - Management or administration of clients' portfolio - Securities And Exchange Board of India (Portfolio Managers) Regulations, 2020

Management or administration of clients' portfolio. 24. (1) (a) The money or securities accepted by the portfolio manager shall not be invested or managed by the portfolio manager except in terms of the agreement between the portfolio manager and the client. (b) Any renewal of portfolio on maturity of the initial period shall be deemed as a fresh placement 2 [ : ] 3 [ Provided that the requirement under clause (b) shall not apply to the Co-investment Portfolio Manager. ] (2) Notwithstanding anything contained in the agreement referred to in regulation 22 , the funds or securities can be withdrawn by the client before the maturity of the contract under the following circumstances, namely- a) voluntary or compulsory termination of portfolio management services by the portfolio manager or the client 4 [ : ] 5 [ Provided that clause(a) shall not apply in case of the Co-investment Portfolio Manager; ] b) suspension or cancellation of the certificate of registration of the portfolio manager by the Board; c) bankruptcy or liquidation of the portfolio manager. (3) The discretionary portfolio manager shall invest funds of his clients in the securities listed or traded on a recognized stock exchange, money market instruments, units of Mutual Funds and other securities as specified by Board from time to time, on behalf of their clients. Explanation . ─ For the purposes of this sub-regulation: money market instruments includes commercial paper, trade bill, treasury bills, certificate of deposit and usance bills. 7 [ (3A) The portfolio manager shall ensure compliance with the prudential limits on investments as may be specified by the Board. (3B) The prudential limits, as specified under sub-regulation (3A), shall be applicable at the client level at the time of making investments by the portfolio managers. (3C) The portfolio manager shall not be allowed to invest clients funds in unrated securities of their related parties or their associates. Explanation. ─ For the purposes of sub-regulation (3C), the term associate shall mean (i) a body corporate in which a director or partner of the portfolio manager holds, either individually or collectively, more than twenty percent of its paid-up equity share capital or partnership interest, as the case may be; or (ii) a body corporate which holds, either individually or collectively, more than twenty percent of the paid-up equity share capital or partnership interest, as the case may be of the portfolio manager. (3D) The portfolio manager shall put in place an alert based system to monitor compliance with the prudential limits on investments. (3E) The portfolio manager shall ensure investment of its clients funds on the basis of the credit rating of securities as may be specified by the Board: Provided that the requirements under sub-regulations (3A), (3B), (3C) and (3E) shall not apply to investments made prior to the coming into force of the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2022 : Provided further that the requirements under sub-regulations (3A), (3B), (3C), (3D) and (3E) shall not apply to such portfolio managers as may be specified by the Board. ] (4) The portfolio manager offering non-discretionary or advisory services to clients may invest or provide advice for investment up to 25% of the assets under management of such clients in unlisted securities, in addition to the securities permitted for discretionary portfolio management. 1 [ (4A) The portfolio manager may offer discretionary or non-discretionary or advisory services for investment up to hundred percent of the assets under management of the large value accredited investors in unlisted securities, subject to appropriate disclosures in the disclosure document and the terms agreed between the client and the portfolio manager. ] 6 [ (4B) The Co-investment Portfolio Manager shall invest hundred percent of the assets under management in unlisted securities of investee companies where Category I and Category II Alternative Investment Funds managed by it as Manager, make investment; ] (5) Portfolio Managers may invest in units of Mutual Funds only through direct plan. (6) The portfolio manager while investing in units of Mutual Funds through direct plan shall not charge any kind of distribution related fees to the client. (7) The portfolio manager shall not leverage the portfolio of its clients for investment in derivatives. (8) The portfolio manager shall not deploy the clients' funds in bill discounting, badla financing or for the purpose of lending or placement with corporate or non-corporate bodies. (9) The portfolio manager shall not invest the clients funds in the portfolio managed or administered by another portfolio manager. (10) The portfolio manager shall not invest client s fund based on the advice of any other entity. (11) The portfolio manager shall not while dealing with clients funds indulge in speculative transactions i.e, it shall not enter into any transaction for purchase or sale of any security which is periodically or ultimately settled otherwise than by actual delivery or transfer of security except the transactions in derivatives. (12) The portfolio manager shall, ordinarily purchase or sell securities separately for each client. However, in the event of aggregation of purchases or sales for economy of scale, inter se allocation shall be done on a pro rata basis and at weighted average price of the day's transactions. The portfolio manager shall not keep any open position in respect of allocation of sales or purchases effected in a day. (13) The portfolio manager shall not execute off market transfers in client s account except: (a) for settlement of the clients own trades; (b) for providing margin/ collateral for clients own positions; (c) for dealing in unlisted securities in accordance with the regulations; (d) with specific consent of the client for each transaction; (e) for any other reason specified by the Board from time to time. (14) The portfolio manager shall segregate each clients' funds and portfolio of securities and keep them separately from his own funds and securities and be responsible for safekeeping of clients' funds and securities. (15) The portfolio manager shall not hold the securities belonging to the portfolio account, in its own name on behalf of its clients either by virtue of contract with clients or otherwise. (16) The portfolio manager may, subject to authorization by the client in writing, participate in securities lending. ************* NOTES:- 1. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/31 dated 03-08-2021 2. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/58 dated 09-11-2021 w.e.f. 09-12-2021 before it was read as . 3. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/58 dated 09-11-2021 w.e.f. 09-12-2021 4. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/58 dated 09-11-2021 w.e.f. 09-12-2021 before it was read as ; 5. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/58 dated 09-11-2021 w.e.f. 09-12-2021 6. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/58 dated 09-11-2021 w.e.f. 09-12-2021 7. Inserted vide Notification No. SEBI/LAD-NRO/GN/2022/94 dated 22-08-2022 w.e.f. thirtieth day from the date of their publication in the Official Gazette