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Organize yourselves to avoid unnecessary regulations: Sebi to portfolio managers


Securities and Exchange Board of India executive director Manoj Kumar on Wednesday urged portfolio managers to actively participate in shaping the industry better and come up with proposals for the regulator to consider.

Speaking at a session organized by the Association of Portfolio Managers of India (APMI), Kumar said there are various issues relating to portfolio managers that are under Sebi’s consideration such as benchmarking. At present, there is an absence of clear benchmarks for asset classes like debt and unlisted securities. Also, portfolio managers are free to specify their own benchmarks for schemes rather than a standard set of benchmarks specified in regulations. Portfolio Management Services (PMS) do not have a long-standing industry body unlike the Association of Mutual Funds in India (Amfi) that represents the mutual fund industry.

“You (APMI) have shown a tremendous resilience over time. You have grown in numbers and investor interest and that’s why it assumes significance that you as an industry body, shape the industry better. When you have a large number of investors in any activity, the responsibility also goes up. From that perspective, it is hugely important that you have a collective wisdom. The core of the securities market is trust. Trust is particularly important in parts of the industry like yours that are less regulated. Unless you debate and deliberate and frame regulations as an industry, you will invite unnecessary regulation,” Kumar said at the gathering of portfolio managers.

Industry body APMI was incorporated in December 2021. It is spearheaded by Neeraj Choksi of the NJ Group, Aashish Sommaiya of White Oak Capital and Saurabh Mukherjea of Marcellus Investment Managers. It has started actively seeking members over the past one-two months. It has around 40 members at present out of the 372 odd PMS managers that are registered in India. However, in terms of AUM, APMI members account for 84% of the industry total, according to Rashim Bagga, principal officer, APMI. 

The association has reduced the membership fee for the first year for portfolio managers with AUM less than 500 crore to just 2,100 till 31 July 2022. There are around 200 portfolio managers that have up to 500 crore AUM, according to Bagga, as of March 2022.

According to industry sources, Sebi has formed a working group on benchmarking for portfolio managers post consultation with APMI. 

In response to Sebi’s focus areas, APMI is forming a committee to deliberate on the valuation of securities as well. This is also an issue for debt and unlisted securities. 

The AUM of portfolio managers has risen from less than 10,000 crore 10 years ago to around 2.8 lakh crore at present, according to Saurabh Mukherjea, founder, Marcellus Investment Managers. Portfolio managers gathered at the meeting raised multiple issues with the regulator. These include difficulties in filing documents on the Sebi website, the high costs of custodians for securities and the difficulty in switching them.

Working group on research analysts

In response to a Mint query about whether research analysts can offer model portfolios, a Sebi official present at the gathering said a separate working group within the regulator was looking into the matter. 

In a recent settlement order in respect of Amit Jeswani, Sebi has said that research analysts cannot offer managed/model portfolios but only buy/sell recommendations. This caused considerable confusion among research analysts at fintech platforms who were offering such portfolios. An industry source who spoke to Mint on condition of anonymity said that some research analysts had stopped assigning weights to stocks and are only offering buy-sell recommendations. The fintech platform allocates equal weights in such cases, he added.



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