Securities Exchange Board of India (SEBI) recently issued a directive focused on enhancing oversight of distributors involved in Portfolio Management Services (PMS). This directive is part of SEBI's ongoing efforts to simplify compliance procedures and foster transparency within the financial services sector.
Regulation 23(11) of the SEBI (Portfolio Managers) Regulations, 2020 mandates that portfolio managers ensure distributors comply with regulations and adhere to the specified Code of Conduct. Moreover, Annexure 2B to the Master Circular dated March 20, 2023, delineates the Code of Conduct that distributors must adhere to.
SEBI formed a working group to review the existing regulatory framework under the SEBI (Portfolio Managers) Regulations, 2020, with the aim of simplifying compliance processes and fostering a conducive business environment. After considering the recommendations of the working group, a public consultation was conducted to gather feedback from industry stakeholders.
As a result of the consultation and review process, SEBI decided to introduce collective oversight of PMS distributors at the industry level. The directive stipulates that any individual or entity engaged in distributing PMS must obtain registration with the Association of Portfolio Managers of India (APMI). Portfolio Managers must ensure that any individual or entity involved in distributing their services is registered with APMI in accordance with the criteria set by APMI.
The directive will be effective from January 01, 2025, providing stakeholders with sufficient time to prepare for compliance. APMI will issue the criteria for distributor registration by July 01, 2024, offering clarity and guidance to industry participants.
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