SEBI establishes a procedure for undertaking a co-investment portfolio management service


This comes after SEBI last month changed the rules for portfolio managers to make it easier for AIF investors to co-invest through portfolio management.

On December 10, the capital markets regulator Securities & Exchage Board of India (SEBI) issued the procedure for undertaking co-investment services through portfolio management.

This comes after SEBI last month changed the rules for portfolio managers to make it easier for investors in alternative investment funds (AIFs) to co-invest through portfolio management.

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, does not only do so after first informing SEBI.

He further stated that any other manager who is not a registered portfolio manager and wishes to offer co-investment services through portfolio management will need to apply for registration with SEBI as a portfolio manager. .

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

Regarding periodic reporting, the regulator has stated that portfolio managers will be required to submit a monthly report regarding their portfolio management activity, on the Intermediary Portal within seven business days of the end of each month.

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

In addition, portfolio managers will be required to provide a report to their clients on a quarterly basis, in accordance with the revised format which includes details of the co-investment offered by the portfolio manager.

Reporting requirements under the revised formats will apply to monthly reports to SEBI and quarterly reports to clients, starting in April 2022.

The regulator clarified that the provisions relating to fees and charges as well as direct onboarding of clients by portfolio managers specified in the PMS rules will not apply to co-investment services.

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

Under the PMS Regulation, no initial fees will be charged by portfolio managers, directly or indirectly, to clients.

In addition, non-brokerage operating expenses, in addition to the fees charged for the portfolio management service, will not exceed 0.50% per annum of the client’s average daily assets under management (AUM).

According to the rules, at the time of direct onboarding of customers, no fees except statutory fees will be charged.

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