Sebi clears air on new PMS guidelines

The Securities and Exchange Board of India (Sebi) has finally come out with a circular to clear the ambiguities surrounding new guidelines for portfolio management services (PMS). The regulator said that portfolio managers would now need to operate through individual bank accounts for each customer.

According to the circular, "There shall be a clear segregation of each client's fund through proper and clear maintenance of back office records. Portfolio managers shall also maintain an accounting system containing separate client-wise data for their funds and provide statement to clients for such accounts at least on a monthly basis."

It also directed the portfolio managers to transfer funds on a daily basis to each client's bank account.

Last year, Sebi had said that portfolio managers should not hold the securities belonging to the portfolio account in a single demat account. Following the guideline, there were differences in the PMS industry on whether the new guidelines extend to bank accounts too. In May, some portfolio managers wrote to Sebi for clarification. The fresh circular has come in response to the letter.