Sebi Eases Digital Onboarding Process for Portfolio Managers' Clients
MAS Team | 06 May 2024
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The Securities and Exchange Board of India (Sebi) has amended regulations to simplify the digital onboarding process for clients of portfolio managers. This move comes after Sebi constituted various working groups to recommend measures to ease compliances. One such group was tasked with reviewing the regulatory framework under Sebi (Portfolio Managers) Regulations, 2020, and suggesting steps to promote ease of doing business for portfolio managers.
 
Key Changes:
1. Written Agreement: Before undertaking the management of funds and portfolios, a portfolio manager must enter into a written agreement with the client, clearly defining their relationship and outlining mutual rights.
 
2. Fee Structure Understanding: While onboarding a client, a portfolio manager must ensure that the client comprehends the fee structure and charges. The new client has to separately sign the annexure on fees and charges, acknowledging their understanding of the fee details. This can be done either handwritten, typed using a keyboard, or written electronically using fingers/pen in case of digital onboarding. This change will be applicable from October 1, 2024.
 
3. Fee Calculation Tool: Portfolio managers will provide a fee calculation tool to all clients, highlighting various fee options with multi-year fee calculations. The tool will incorporate the high-watermark principle wherever applicable. The link to access this tool will be provided in advance to all new clients onboarded on or after October 1, 2024.
 
4. Additional Fee Disclosures: When performance fees are charged, the annexure for fees and charges in the portfolio management service-client agreement will also contain additional fee disclosures. These include one-year and multi-year fee illustrations covering different scenarios, such as an increase, decrease, or unchanged portfolio value.
 
5. 'Most Important Terms and Conditions' Document: To facilitate ease of understanding the critical aspects of the portfolio manager-client relationship, the portfolio manager will additionally provide a 'most important terms and conditions' document, which should be duly acknowledged by the client.
 
These changes aim to enhance transparency, promote understanding, and streamline the onboarding process for clients, ultimately fostering a more efficient and conducive environment for portfolio managers to operate.