Markets regulator Sebi on Wednesday came out with operating guidelines to provide portfolio management services at the international financial services centre (IFSC), wherein applicants need to have a networth of at least USD 7,50,000.
In a circular, the regulator said portfolio manager (PM) operating in IFSC will not accept funds or securities worth less than USD 70,000 from clients. The guidelines have been put in place after receiving representations from various stakeholders.
Any Sebi-registered intermediary (except the trading member or clearing member) or its international associates in collaboration with such registered intermediary may provide portfolio management services in IFSC, by setting up a branch in the centre, subject to the prior approval of the markets watchdog.
Further, the intermediaries need to ensure that exclusive manpower will be allocated for providing portfolio management services (PMS) from the branch in IFSC. The branch will comply with all the provisions specified in the operating guidelines.
The parent entity will be required to ring-fence its domestic operations, legally, financially, operationally and technologically, from its operations at IFSC.
Other entities (that is in the form of a corporate or LLP or any other similar structure recognised under the laws of its parent jurisdiction), based in India or in a foreign jurisdiction, desirous of operating in IFSC as a PM, may form a company or LLP to provide portfolio management services.
However, the formation of a separate company or LLP will not be applicable in case the applicant is already a company or LLP in IFSC.
With regard to the networth requirement, Sebi said applicants need to have a net worth of at least USD 7,50,000.
In case the PM is set up as a branch, the net worth requirement is to be met by the parent entity and if the PM is set up as a subsidiary, the net worth requirement is to be fulfilled by the subsidiary itself.
However, if the subsidiary does not meet the criteria, the net worth of the parent entity will be considered.
Sebi said PM operating in IFSC will keep the funds of all clients in a separate account to be maintained by them in the IFSC Banking Unit.
In respect of certification requirements, Sebi said employee having decision making authority related to fund management and who are resident outside India may have certification from any other organisation or institution or stock exchange which is recognised by a financial market regulator in that foreign jurisdiction.
However, certification from NISM will be mandatory in case such persons deal in Indian securities markets.
Under the guidelines, an applicant needs to submit a non-refundable fee of USD 1,500 for grant of the registration certificate. Further, the registration fee has been fixed at USD 15,000 and renewal of registration fee after every three years has been set at USD 7,500.