Sebi directs PMS providers to share commission details with clients

Topics Sebi | PMS investors | Markets

While PMS industry is regulated by Sebi, it still advised investors to carefully read terms of agreement before signing it.
The Securities and Exchange Board of India has directed portfolio management service (PMS) providers to disclose to clients the commission payouts they made to distributors.

Experts say this will bring in more transparency. “From the perspective of clients, it will give them clarity whether the product being sold to them by an advisor or distributor is because of the high commissi­ons or on the product’s merit,” said Kamal Manocha, CEO, PMS AIF World.   

As part of the frequently asked questions (FAQs), the market regulator said that PMS players will need to share “details of commission paid to distributor(s) for the particular client”. The FAQs were given by Sebi, following introduction of new norms for the PMS ind­ustry, which came into force at the beginning of the year. While the PMS industry is regulated by Sebi, it still advised investors to carefully read the ter­ms of agreement before signing it. 


“The services of a portfolio manager are governed by the agreement between the portfolio manager and the investor. The agreement shou­ld cov­er the minimum details as specified in the Sebi Port­f­o­lio Manager Regulations. How­ever, additional requirements can be specified by the portfolio manager in the agreement with the client,” Sebi said. The markets regulator also clarified on a scenario in which breach of 25-per cent cap for unlisted securities will be considered as non-compliance.

“An active breach due to investor action, subsequent to corporate actions like subsc­r­i­p­tion to rights issue, which res­u­lts in breach of 25 per cent limit applicable to non-discretionary portfolios, shall be co­nsidered as non-compliance.”

However, a passive breach due to corporate actions will not be considered non-compliant. On partial withdrawal by investors, Sebi said investors can make such withdrawals in accordance with terms of agreement with the portfolio manager.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel