New Delhi, Nov 24 () Capital market regulator Sebi's new norms for portfolio managers are expected to further safeguard investors' interest and also help the industry become more competitive by weeding out non-serious players due to higher networth requirements, experts have said.
The Sebi board on Wednesday decided to raise the minimum investment amount of clients for portfolio management schemes to Rs 50 lakh from the earlier Rs 25 lakh.
Besides, it has decided to increase the networth requirement of portfolio managers to Rs 5 crore from Rs 2 crore, Sebi Chairman Ajay Tyagi told reporters after the board meeting.
Experts are of the opinion that the new norms, which have been finalised after detailed discussions with all stakeholders including the government, would ensure that only serious players remain in the industry and the interest of smaller investors is safeguarded by way of higher entry barriers.
While there have been some concerns that the higher networth requirements look restrictive, experts opined that the smaller players who are serious about catering to their clients can use the investor advisor route.
The new norms have also been welcomed by the investor advisor fraternity, besides wealth managers and several portfolio management service (PMS) providers.
Ashish Shanker, Head of Investment Advisory at Motilal Oswal Private Wealth Management, said it a positive decision by the Securities and Exchange Board of India (Sebi).
"Moving the investment (threshold) to Rs 50 lakh will ensure larger networth clients who have the ability to work with an advisor to evaluate better will come into portfolio management schemes.
"Increase in networth will ensure serious players remain in the business," Shanker said.
Under the new norms, the existing portfolio managers will have to meet the enhanced requirement within 36 months.
PMS offers investors a range of specialised investment strategies to capitalise on opportunities in the market, as per the needs of individual clients.
The Sebi board has approved amendment to the Sebi Portfolio Managers Regulations, which will enhance the eligibility criteria and define the role of principal officer clearly.
Under the new norms, a portfolio manager needs to mandatorily employ minimum one person with defined eligibility criteria in addition to principal and compliance officer.
"Minimum investment by clients of portfolio managers to be increased from Rs 25 lakh to Rs 50 lakh. Existing investments of clients may continue as such till end date of PMS agreement or as specified by the board," Sebi said.
The regulator further said discretionary portfolio managers will invest only in listed securities, money market instruments and mutual funds, while non discretionary managers will have to invest not more than 25 per cent of their assets under management in unlisted securities.
The appointment of custodian will be mandatory for all portfolio managers, except for those providing only advisory services to clients.
Prakarsh Gagdani, CEO at 5Paisa.com said, "By increasing the PMS limit, Sebi has made it very clear that major section of the retail investor should come via mutual fund route. Customised portfolio management is designated only for HNIs, hence clearly demarcating the customer categories." BJ ABM ABM
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