Sebi announces new rules for onboarding of clients by portfolio managers — an explainer

livemint.com:

Sebi) on Friday altered the rules to ease the digital onboarding process for clients of portfolio managers. Sebi had constituted various working groups to recommend measures to simplify and ease compliances. As part of these efforts, a working group was made to review the present regulatory framework under Sebi (portfolio managers) regulations, 2020 and recommend measures to promote ease of doing business for portfolio managers.

A. A portfolio manager will, before taking up an assignment of management of funds and portfolio, enter into a written agreement with the client that clearly defines the relationship and sets out their mutual rights. ALSO READ: Sebi steps in to curb front running by mutual funds B.

While onboarding a client, a portfolio manager will ensure that the client has understood the fee structure and charges. The new client has to separately sign the annexure on fees and charges and add a note that they have understood the fee details in the following manner: A) Handwritten. B) Typed using a keyboard or written electronically using fingers/pen in case the client is onboarded through digital mode.

This will be applicable from October 1, 2024. The portfolio manager will provide a fee calculation tool to all clients that highlights various fee options with multi-year fee calculations. The fee calculation tool will incorporate the high-watermark principle wherever applicable.