Market regulator SEBI said that the portfolio manager cannot impose a lock-in period for investment but they can only charge early exit fees on an agreement basis between the client and the portfolio manager. However, there is no restriction imposed on the number of non-associated stock brokers, depository participants, or custodians that may be engaged by a portfolio manager.
Portfolio manager, the body corporate, advises or directs or undertakes on behalf of the client the management of a portfolio of securities or funds can charge fees from the client for rendering portfolio management services. Fees charged can be a fixed amount or performance-based or the combination of both. These details should be included in the written agreement between the client and the portfolio manager. The agreement between a portfolio manager and a client will also include the quantum and the manner of fee payable by the client for the services rendered by the portfolio manager directly or indirectly.
According to the SEBI norms, portfolio managers are required to have a minimum net worth of ₹5 crores. Such a manager is required to accept minimum ₹50 lakh or securities having a minimum worth of ₹50 lakh from the client for opening a Portfolio Management Services account. Sebi said that, in respect of the withdrawal of portfolios, a client may withdraw partial amounts from his portfolio, as per the terms of the agreement between the client and the portfolio manager. However, the value of the investment in the portfolio after such withdrawal will not be less than the applicable minimum investment amount. All transaction charges in a financial year through self or associates will be fixed at 20 percent by value per associate, including self, per service.
There is no need for prior approval from the watchdog in case of any changes in status or constitution or control. But the portfolio manager has to inform SEBI about the proposed material change, which may have a bearing on the registration process. According to SEBI, they have to submit such information to the regulator at least 30 days before such changes or as and when the decision for such changes is approved by the directors or partners.
