SEBI lays procedure for undertaking co-investment portfolio management service

Capital markets regulator Securities & Exchage Board of India (SEBI), on December 10, came out with the procedure for undertaking co-investment services through portfolio management route.

This comes after SEBI amended rules last month pertaining to portfolio managers to facilitate co-investment by investors of Alternative Investment Funds (AIF) through the portfolio management route.

In a circular, the regulator said that a manager of an AIF who is also a registered portfolio manager, and intends to offer co-investment services through portfolio management route, will do so only after prior intimation to SEBI.

It further said any other manager who is not a registered portfolio manager and wishes to offer co-investment services through portfolio management route, will have to seek registration from SEBI as a portfolio manager.

Pursuant to grant of registration, if such portfolio manager is desirous of offering portfolio management services (PMS) other than co-investment, the same will be subject to compliance with all provisions of the PMS rules including eligibility criteria and with the prior clearance of SEBI.

With regard to periodic reporting, the regulator said portfolio managers will have to submit a monthly report regarding their portfolio management activity, on intermediaries portal within seven working days of the end of each month.

This needs to be submitted as per the revised format, which includes details of co-investment offered by portfolio manager.

Further, portfolio managers will have to furnish a report to their clients on a quarterly basis, as per the revised format which includes details of co-investment offered by portfolio manager.

The reporting requirements under the revised formats will be applicable for monthly reports to SEBI and quarterly reports to clients, from April 2022 onwards.

The regulator clarified that the provisions with respect to fees and charges as well as direct on-boarding of clients by portfolio managers specified under PMS rules will not be applicable to co-investment services.

These provisions will remain unchanged for portfolio management services other than co-investment, it added.

Under the PMS Regulations, no upfront fees will be charged by the portfolio managers, either directly or indirectly, to the clients.

Also, operating expenses excluding brokerage, over and above the fees charged for portfolio management service, will not exceed 0.50% per annum of the client’s average daily assets under management (AUM).

According to rules, a the time of on-boarding of clients directly, no charges except statutory charges will be levied.