PMS Disclosure Document and Client On-boarding – Simplified Format 2025 | KYC | MITC

The Disclosure Document is the principal document a prospective PMS client reads before signing. SEBI, in consultation with APMI, notified a simplified format for it by circular dated 9 September 2025. The document now runs in two parts: a static section that changes rarely, and a dynamic section that carries the numbers a client should check every time. This article sets out both, then walks the on-boarding sequence from disclosure through KYC to the signed agreement.

Table of Contents

1. When Must the Disclosure Document Be Given?
2. Part I – The Static Section
3. Part II – The Dynamic Section
4. The On-boarding Sequence
5. KYC, FATCA and NRI Requirements
6. Direct On-boarding and the MITC Document
7. Frequently Asked Questions

Check out NISM X Taxmann's Portfolio Management Services (PMS) Distributors, the official NISM workbook for the NISM-Series-XXI-A certification. It sets out the disclosure document heading by heading, the fifteen-point client agreement, the on-boarding process including NRI mechanics, and the grievance redressal and dispute resolution framework.

1. When Must the Disclosure Document Be Given?

The SEBI (Portfolio Managers) Regulations, 2020 require the disclosure document to be given to the prospective client along with the account opening form, before the agreement is signed.

This changed in 2020. Under the earlier position the document had to reach the prospective client at least two days in advance of signing. Keeping an audit trail of every client having received it two days prior proved onerous in practice and produced gaps in record-keeping, as the working group on the portfolio managers regulation, 1993 noted. The two-day requirement was accordingly discontinued.

The rule now is that the document must be provided at any time before, or at the time of, entering into the agreement, by hard copy or soft copy, and must be available at all times on the portfolio manager’s website. Due care must be taken to present the information in simple language, in a clear, concise and easily understandable manner.

2. Part I – The Static Section

Eleven headings sit in the static section.

No.	Heading	What it must contain
1	Disclaimer clause	That the particulars have been prepared in accordance with the Regulations and filed with SEBI, and that SEBI has neither approved nor disapproved the document nor certified the accuracy or adequacy of its contents.
2	Definitions	All terms used in the document, in the language and terminology provided in the Regulations. Any new term used must be clearly defined, and all terms must be used uniformly throughout the text.
3	Description	History, present business and background of the portfolio manager. Promoters, directors and their background. Top 10 group companies or firms on a turnover basis. Details of the services offered.
4	Penalties and pending litigation	All penalties imposed or directions issued by SEBI, the nature of each, fines for economic offences or securities law violations, pending material litigation with a separate disclosure regarding any pending criminal cases, deficiencies observed in systems and operations, and enquiry or adjudication proceedings initiated.
5	Services offered	Present investment objectives and policies including the types of securities generally invested in, the investment approaches, and the policy on investment in associate or group companies with the maximum percentage permitted.
6	Risk factors	That securities investments are subject to market risk with no assurance of the objective being achieved, that past performance does not indicate future performance, risks arising from the investment approach and asset allocation, risk from non-diversification, a disclosure to that effect where the portfolio manager has no previous experience or track record, and conflicts of interest including those arising from group companies.
7	Nature of expenses	Investment management and advisory fees, custodian fee, registrar and transfer agent fee, brokerage and transaction cost.
8	Taxation	Tax implications of investment in securities and provisions on income, loss and tax deduction at source for various investors.
9	Accounting policies	The accounting policy followed while accounting for client portfolio investments.
10	Investor services	Name, address and telephone number of the investor relation officer, and the grievance redressal and dispute settlement mechanism.
11	Diversification policy	The portfolio manager’s diversification policy for client portfolios.

3. Part II – The Dynamic Section

Five headings sit in the dynamic section. These are the numbers that move, and the ones a distributor should re-check on every mandate.

No.	Heading	What it must contain
12	Client representation	Category of clients, number of clients, funds managed, the discretionary and non-discretionary split if available, associate and group companies over three years, others over three years, and the total. Complete disclosure of related party transactions per ICAI standards.
13	Financial performance	Financial performance of the portfolio manager based on audited financial statements, in terms of the procedure SEBI specifies.
14	Performance of portfolio manager	Performance for the last three years. For a discretionary portfolio manager, performance indicators calculated using the Time Weighted Rate of Return method.
15	Audit observations	Audit observations of the preceding three years.
16	Related party investments	Details of investment of clients’ funds in the securities of the portfolio manager’s related parties or associates.

Heading 14 deserves particular attention. The GIPS glossary defines the time weighted rate of return as a calculation that computes period by period returns, removes the effects of external cash flows, which are generally client driven, and best reflects the portfolio manager’s ability to manage assets according to a specified strategy or objective.

4. The On-boarding Sequence

Client on-boarding runs in three steps.

Step one, the disclosure document. As set out above.

Step two, KYC. Covered in section 5.

Step three, the application form. The format prescribed under the Portfolio Managers Regulations, 2020 requires four blocks of information: general information about the client including name, mailing addresses, photograph and PAN; the client’s investment profile covering investment experience, overall investment goals, risk tolerance stated as low, medium or high, the time period for which investments are proposed, which must match the term of the agreement, and provisions for systematic withdrawal; the investment approach the client opts for; and details of portfolio construction across equity, balanced, debt, mutual funds and other categories.

The agreement follows. It runs to fifteen points, covering the investment objectives and services, the period of the contract and early termination, the investment approach and any client-imposed restrictions on a particular company or industry, the type of instruments and proportion of exposure, the tenure of investments, the terms for early withdrawal, attendant risks, the amount to be invested, the procedure for settling the client’s account, the fees payable, the quantum and manner of fees for each activity whether rendered directly or outsourced, custody of securities, the condition that a discretionary client’s liability shall not exceed their investment, accounting and audit terms, and other terms subject to the regulations.

5. KYC, FATCA and NRI Requirements

Every investor must complete KYC in compliance with the Prevention of Money Laundering Act, 2002. The process verifies proof of identity and proof of residence, requires a document carrying the investor’s photograph, and requires PAN verification. An authorised official of the intermediary conducts in-person verification.

SEBI mandated a uniform KYC procedure with effect from 1 January 2012, so an investor who has completed KYC with one specified intermediary can use it to invest with a portfolio manager and the reverse. The KYC Registration Agency system supports this. Under the 2015 amendment to the PML (Maintenance of Records) Rules, 2005, every reporting entity captures KYC information for the Central KYC Records Registry using the template finalised by CERSAI, and uploads data for all individual accounts opened on or after 1 August 2016.

FATCA and CRS self-certification is mandatory under Rules 114F to 114H of the Income-tax Rules, 1962. Intermediaries that are reporting financial institutions upload those certifications to the KRAs with effect from 1 July 2024.

NRIs face additional documentation: certified true copy of the passport, certified true copy of the overseas address, permanent address, a certified copy of the PIO card where applicable, and for merchant navy NRIs a mariner’s declaration or certified copy of the Continuous Discharge Certificate. All documents must be in English and may be attested by the consulate office or by overseas branches of scheduled commercial banks registered in India.

On the demat side, an NRI states the type as NRI and the sub-type as repatriable or non-repatriable. No RBI permission is required to open the account. Separate demat accounts must be held for repatriable and non-repatriable securities. Joint accounts are permitted, and for determining ownership the first holder is taken into account, so sale proceeds can be repatriated where the first holder is permitted to repatriate even if a joint holder is resident in India.

6. Direct On-boarding and the MITC Document

Portfolio managers must offer clients the option of being on-boarded directly, without the intermediation of persons engaged in distribution services. That option must be prominently disclosed in the disclosure document, in marketing material and on the portfolio manager’s website. Where a client is on-boarded directly, no charges except statutory charges may be levied.

Investors may alternatively invest through distributors.

On the process itself, investors can invest in cash, in securities, or in a combination of the two, worth a minimum of ₹50 lakh. The portfolio manager shall not accept funds or securities worth less than that, except from an accredited investor, and the floor also does not apply to a co-investment portfolio manager. Valuation of securities on the on-boarding date must meet the regulatory criteria. The portfolio manager may sell all or part of those securities to meet the client’s investment objectives within the chosen investment approach.

Two further documents now attach to every mandate. A fee calculation tool must be provided to all clients, with fee illustrations whenever a performance fee is charged. And the portfolio manager must provide a Most Important Terms and Conditions document, in the standard format, alongside the agreement. No fees or charges may be levied beyond those specified in the agreement.

The circular trail behind each of these requirements, from the 2020 regulations through the September 2025 simplified format, is tracked on Taxmann.com | Research. To locate a specific provision across the regulations and circulars in one query, use Taxmann AI.

7. Frequently Asked Questions

When must the PMS disclosure document be given to a client?

At any time before, or at the time of, entering into the agreement, by hard or soft copy. It must also be available at all times on the portfolio manager’s website. The earlier requirement to provide it two days in advance was discontinued in 2020.

What are the two parts of the disclosure document?

A static section of eleven headings covering the disclaimer, definitions, description, penalties and litigation, services offered, risk factors, expenses, taxation, accounting policies, investor services and diversification policy. And a dynamic section of five headings covering client representation, financial performance, three-year performance, audit observations and related party investments.

What is the MITC document in PMS?

The Most Important Terms and Conditions document, which the portfolio manager must provide to clients in the standard format.

Is there a charge for direct on-boarding in PMS?

No charges except statutory charges may be levied where a client is on-boarded directly, without intermediation of a distributor.

Can a PMS account be opened with securities instead of cash?

Yes. Investment may be made in cash, in securities, or in a combination of the two, worth a minimum of ₹50 lakh. The minimum does not apply to an accredited investor or to a co-investment portfolio manager.

How must a discretionary portfolio manager present past performance?

Using the Time Weighted Rate of Return method, for the last three years, in the dynamic section of the disclosure document.

Preparing for the NISM-Series-XXI-A certification, or building an on-boarding checklist? The disclosure document, the client agreement and the full on-boarding sequence are set out in NISM X Taxmann's Portfolio Management Services (PMS) Distributors.