The Securities and Exchange Board of India (SEBI) on Friday came up with the process for launching co-investment services through the portfolio management route.
The capital markets regulator in its circular said, “A manager who is of an AIF (Alternative Investment Fund), who is also a SEBI registered Portfolio Manager and intends to offer co-investment services through the Portfolio Management route, shall do so only.” SEBI will do with prior notice.”
Just last month, the markets regulator amended the rules relating to portfolio managers to facilitate co-investment by investors of alternative investment funds (AIFs) through the portfolio management route.
The regulator said the manager of an AIF who is also a registered portfolio manager and intends to offer co-investment services through the portfolio management route, shall do so only after prior intimation to SEBI.
It further said, any other manager who is not a registered Portfolio Manager, and wishes to provide co-investment services through the Portfolio Management route, shall have to take registration as a Portfolio Manager from SEBI.
Pursuant to grant of registration, if such Portfolio Manager desires to offer Portfolio Management Services (PMS) other than co-investment, he shall be subject to compliance with all the provisions of PMS Rules including eligibility criteria, and subject to prior approval with SEBI
With regard to periodic reporting, the regulator said that portfolio managers will have to submit a monthly report regarding their portfolio management activity on the portal of intermediaries within seven working days of the end of each month.
It needs to be submitted as per the revised format, which contains the details of co-investments offered by the Portfolio Manager.
In addition, Portfolio Managers will be required to submit a report to their clients on quarterly basis as per the revised format which contains the details of co-investments offered by the Portfolio Manager.
The reporting requirements under the revised formats will be applicable from April 2022 for monthly reports to SEBI and quarterly reports to clients.
The regulator clarified that the provisions for direct on-boarding of clients along with fees and charges by specified portfolio managers under PMS rules will not be applicable to co-investment services.
These provisions will remain unchanged for portfolio management services other than co-investment.
Under the PMS Regulations, no upfront fee shall be charged from the clients, directly or indirectly, by the Portfolio Managers.
Also, operating expenses, excluding brokerage, shall not exceed 0.50 percent per annum of the average daily asset under management (AUM) of the client, in excess of the fee charged for the portfolio management service.
As per the rules, at the time of direct on-boarding of the customers, no charges other than the statutory charges will be levied.
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