Portfolio Managers can invest up to 30% of client’s portfolio in securities of their own associates: SEBI

Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2022/112, dated: 26.08.2022

The SEBI vide circular no. dated August 22, 2022, notified the SEBI (Portfolio Managers) (Amendment) Regulations, 2022, inter-alia mandates prudential limits on investments in associates/related parties of Portfolio Manager, the requirement of taking prior consent of client for such investments and restrictions based on the credit rating of securities. The definitions of the terms “related party” and “associate” have been provided in the PMS Regulations.

Now, the SEBI has specified the limit on investment in the securities of associates/related parties of Portfolio Managers. Accordingly, the Portfolio Managers shall invest up to a maximum of 30% of their client’s portfolio (as a percentage of the client’s assets under management) in the securities of their own associates/related parties.

Further, this limit is applicable only to direct investments by Portfolio Managers in equity and debt/hybrid securities and not to any investments in the Mutual Funds. Hybrid securities include units of Real Estate Investment Trusts (REITs), units of Infrastructure Investment Trusts (InvITs), convertible debt securities and other securities of like nature.

Further also, the Portfolio Managers are required to obtain a one-time prior positive consent of the client in the format as specified in Annexure A i.e consent form attached to the circular itself. The consent form shall have an option to indicate dissent, in case the client does not want to undertake any investment in the securities of associates/related parties of respective Portfolio Manager.

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