CIRCULAR
SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/133 September 30, 2022
To
All Portfolio Managers
Association of Portfolio Managers in India (APMI)
Dear Sir / Madam,
Subject: Circular for Portfolio Managers
1. Regulation 24(14) of the SEBI (Portfolio Managers) Regulations, 2020 (“PMS
Regulations”) mandates a Portfolio Manager to 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.
2. Regulation 24 (15) of PMS Regulations mandates the Portfolio Managers to 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. Further, circular IMD/DOF
I/PMS/Cir- 4/2009 dated June 23, 2009 specifies conditions subject to which a
Portfolio Manager may keep and maintain the funds of all clients in a separate bank
account which inter-alia includes clear segregation of each client’s fund through
proper and clear maintenance of back office records.
3. In furtherance to the above, it is specified as under:
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3.1. Portfolio Managers shall put in place a written down policy (“policy”), in
compliance with the PMS Regulations and circulars issued thereunder, which
inter-alia detail the specific activities, role and responsibilities of various teams
engaged in fund management, dealing, compliance, risk management, back-
office, etc., with regard to management of client funds and securities including the
order placement, execution of order, trade allocation amongst clients and other
related matters.
3.2. Portfolio Managers shall also put in place a specific policy, in compliance with the
PMS Regulations and circulars issued thereunder, which shall inter-alia provide
for the following:
a) Specific situations (not generic) wherein the orders shall be placed for each
client individually or pooled from trading account of Portfolio Manager.
b) Scenarios / situations in which deviation from the allotment of securities as
intended at the time of placement of order would be permissible, if at all.
c) Scenarios, wherein, the Portfolio Manager is required to place certain margins
/ collaterals in order to execute certain transactions, details on how such
margins / collaterals shall be segregated / placed from amongst various
clients, without affecting the interest of any client.
d) Deviations, if any, shall be on account of exigency only and require prior
written approval of the Principal Officer and Compliance officer of the Portfolio
Manager with a detailed rationale for such deviation.
3.3. The aforesaid policies as mentioned at paras 3.1 & 3.2 shall be approved by the
Board / equivalent body of the Portfolio Manager.
4. Portfolio Managers shall ensure that all clients are treated in a fair and equitable
manner and ensure compliance with the following:
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4.1. Requirements with respect to investments in all instruments:
a) Portfolio Managers shall constitute a dealing team (DT) which shall be
responsible for order placement and execution of all orders in accordance with the
aforesaid policies of the Portfolio Manager. DT may include the Principal Officer or
the person appointed in terms of Regulation 7(2) (e) of PMS Regulations.
b) Portfolio Managers shall ensure that DT is suitably staffed and comply with the
following:
i. All conversations of DT shall be only through the dedicated recorded
telephone lines or through emails from authorized email ids.
ii. Mobile phones or any other communication devices other than the recorded
telephone lines shall not be allowed inside the dealing room.
iii. Access to internet facilities on computers and other devices inside the dealing
room shall be restricted and shall only be used for activities related to trade
execution.
iv. Entry/access to the dealing room shall be restricted to authorized employees
as defined in the aforementioned policies of the Portfolio Manager.
v. There shall be no sharing of information through any mode, except for trade
execution under the approved policies of the Portfolio Manager.
4.2. For equity, equity-related instruments and Mutual Funds units
a) Portfolio Managers with assets under management of INR 1000 crores or more
under discretionary and non-discretionary services, shall have in place an
automated system with minimal manual intervention for ensuring effective funds
and securities management including order management and allocation of
securities to each client.
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b) The aforesaid system shall inter-alia clearly capture details with respect to pre-
order placement allocation as well as final allocation of trades to clients along with
instances of deviation, if any, as mentioned at para 3.2 (d) above.
5. Portfolio Managers shall maintain audit trail of all activities related to management of
funds and securities of clients including order placement, trade execution and
allocation. Further, there shall be time stamping with respect to order placement,
order execution and trade allocation.
6. Implementation Schedule:
6.1. Based on APMI’s (Association of Portfolio Managers in India) deliberations with the
stakeholders, it has been decided that the provisions of this Circular shall be
applicable with effect from April 01, 2023.
6.2. APMI shall endeavour to ensure that all Portfolio Managers adhere to the activity
wise timelines given at Annexure –A so as to ensure compliance with para 6.1
above.
6.3. Portfolio Managers and APMI shall take necessary steps for implementing the
circular, including putting required processes and systems in place to ensure
compliance with the provisions of this circular.
6.4. APMI shall furnish progress in implementation of provisions of this circular to SEBI
on a bi-monthly basis, starting from December 01, 2022.
7. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 read with Regulation 43 of the SEBI
(Portfolio Managers) Regulations, 2020, to protect the interests of investors in
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securities market and to promote the development of, and to regulate the securities
market.
8. The circular is available on SEBI website at www.sebi.gov.in under the categories
“Info for – Portfolio Managers” and "Legal framework - Circulars".
Yours faithfully,
Manaswini Mahapatra
General Manager
+91-22-26449375
manaswinim@sebi.gov.in
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Annexure-A
Timelines to implement the provisions of the circular
Parameters Timeline
1. Board/equivalent body approved written down policy December 31, 2022
Para 3
2. Preventive measures for dealing personnel December 31, 2022
Para 4.1
3. Automated systems with minimal manual intervention February 28, 2023
Para- 4.2
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