Enhancing Ease of Doing Business for Portfolio Managers: SEBI

Introduction

In a move aimed at simplifying and reducing the compliance burden for participants in the financial sector, the Securities and Exchange Board of India (SEBI) has released a consultation paper seeking public feedback on proposed initiatives to improve the ease of doing business for Portfolio Managers (PMS). This article outlines various recommendations put forth by SEBI's Ease of Doing Business (EODB) working group and additional proposals aimed at streamlining processes and enhancing investor experience within the portfolio management industry.

Objective

The primary objective of the consultation paper is to gather comments and suggestions from the public on the proposed ease of doing business initiatives for Portfolio Managers.

Background

The Portfolio Management Services (PMS) are currently regulated by SEBI through the Portfolio Managers Regulations, 2020, and various circulars issued thereunder. The consultation paper stems from the budget announcements for FY 2023-24, emphasizing the need to simplify, ease, and reduce the cost of compliance in the financial sector. SEBI constituted the EODB working group to review the existing framework under PMS Regulations and recommend measures to promote the ease of doing business for Portfolio Managers.

Key Proposals for Public Consultation

• Facilitate Collective Oversight of PMS Distributors: The consultation paper proposes making registration with the Association of Portfolio Managers in India (APMI) mandatory for PMS distributors. This aligns with the practice in the mutual fund industry, where Mutual Funds Distributors are required to register with the Association of Mutual Funds in India (AMFI).
• Facilitate Ease in Digital Onboarding Process: To address operational challenges in the digital onboarding process, recommendations include ensuring clients understand the fee structure and implementing digital mechanisms for acknowledgment. Additionally, Portfolio Managers are advised to provide fee illustrations and a transparent fee calculation process.
• Most Important Terms and Conditions (MITC): To enhance client understanding and focus on critical aspects of the PMS-client relationship, Portfolio Managers may be required to provide a standardized "Most Important Terms and Conditions (MITC)" document, which shall be acknowledged by the client.

Public Comments and Submission Process

SEBI has invited public comments on the proposed initiatives outlined in the consultation paper. Comments and suggestions can be submitted online through a web-based form provided by SEBI. The submission deadline for comments is March 7, 2024.

Conclusion

The consultation paper on ease of doing business initiatives for Portfolio Managers reflects SEBI's commitment to fostering a conducive regulatory environment while promoting investor protection and enhancing operational efficiency within the portfolio management industry.

Stakeholder feedback gathered through this consultation process will play a crucial role in shaping future regulatory reforms in the PMS sector.

Notification and source: Click here