Sebi mulls mandatory registration of PMS distributors with industry body APMI

The proposals are aimed at promoting ease of doing business initiatives for portfolio managers.

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This came after the Finance Minister in the Budget announcements for the financial year 2023-24 made an announcement to simplify, ease, and reduce the cost of compliance for participants in the financial sector through a consultative approach.

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In its consultation paper, the regulator proposed making registration with APMI mandatory for PMS (Portfolio Manager Services) distributors.

The recommendation is in line with the practice already being followed in the mutual fund industry, wherein, mutual funds distributors are required to register with the Association of Mutual Funds in India (AMFI) and obtain an ARN (AMFI Registration Number) for providing distribution services.

Currently, persons engaged by a portfolio manager to act as a distributor of the PMS, are required to obtain certification from the National Institute of Securities Markets (NISM).

Further, portfolio managers are required to ensure that distributors abide by the Code of Conduct specified under portfolio managers’ rules.

Highlighting the benefits of APMI registration mandatory for PMS distributors, Sebi said it would help in providing single filing for compliance and other declarations for PMS distributors, provide access to industry data, offer easy as well as faster access to portfolio managers, and faster grievance redressal.

Last year, APMI introduced a distributor registration portal through which individuals can obtain APMI Registration Number (APRN) to sell PMS. The registration was voluntary for existing PMS distributors.

Additionally, the Securities and Exchange Board of India (Sebi) suggested facilitating ease in the digital onboarding process for clients of portfolio managers.

While onboarding a client, the portfolio manager should ensure that the client has understood the fee structure, and the words — I/We have understood the fees/charge structure — should be handwritten in cases where the client is being boarded through physical mode.

Further, words should be hand-typed (using a keyboard) by the first holder in case the client is being boarded through a digital mode. Other holders should click on ‘Yes/No’ to indicate that they have understood the fee structure.

The regulator observed that there are certain operational challenges in complying with the requirement of a handwritten note on the annexure of fees in the agreements, including non-availability of a stylus at the location of the investors.

This requirement creates a hindrance towards complete digital onboarding of the clients. The regulator has sought comments from the public till March 7 on the proposals.

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