How to Become a Portfolio Manager Registered with SEBI
Meaning – PORTFOLIO MANAGER
A Portfolio Manager is a Body Corporate, which in accordance with a contract with the client, advises or directs, or undertakes on behalf of the client the management of the portfolio of the client’s securities or funds.
The activities of the Portfolio Managers are governed under SEBI (Portfolio Manager Registration) Regulations, 1993.
Portfolio Management- An Overview
Portfolio management is the art of managing the investor’s fund and selecting the right investment policy for the individual considering both aspects of minimum risk with maximum return. In simple terms, it is the management of the individual investment.
Need for Portfolio Management Service: –
In the monetary business, one of the exceptionally wanted jobs or vocations is a portfolio manager. To be a portfolio manager one of the main job is to work intimately with a group of experts and information specialists who are likewise liable for the decisions of creating investment funds and asset management vehicles.
Every day is different for a portfolio manager. Really taking a look at the situation with the financial markets every day and continuously keeping steady over recent developments is crucial. Day-to-day wealth managers or even portfolio managers will meet their examiners to talk about recent developments and market improvements around the world.
Portfolio management is needed for pursuing the following purpose:
- Portfolio management gives the best money growth strategy according to their pay, financial plan, return expectation, time span
- With the assistance of portfolios, the management risk is limited by making the possibilities of benefit.
- Customized investment arrangements can be made for the investors according to their needs & requirement.
There are a couple of things about the job you really want to be aware of if you have any desire to be moved up to overseeing portfolios.
How much a portfolio manager earns in India?
Portfolio Manager pay in India with over 2 years of experience ranges from
₹ 3.0 Lakhs to ₹ 30.0 Lakhs with an average annual salary of ₹ 7.0 Lakhs.
NORMS FOR REGISTRATION AS PORTFOLIO MANAGERS: –
(a) the candidate is a body corporate;
(b) the candidate has the essential infrastructure like sufficient office space, equipment, and manpower to effectively discharge the activities of a portfolio manager;
(c) the candidate has appointed a Compliance Officer;
(d) The Principal officer of the candidate has:
- the professional qualification in finance, law, accountancy, or business management from a university or an institution recognized by the Government or any state government or a Foreign University or CFA charter from CFA Institute or,
- an experience of at least 5 years in related activities in the securities market including as a portfolio manager, stockbroker or investment advisor, research analyst or fund manager; and,
- the applicable NISM certificate as specified by Board from time to time;
Provided that at least 2 years of relevant experience is in portfolio management or investment advisory services or in the areas related to fund management.
(e) notwithstanding the Principal Officer and Compliance Officer, the candidate has in its employment at least one individual with the following qualifications: –
(I) graduation from a university or an institution recognized by the Central Government or any State Government or a foreign university; and
(ii) an experience of at least two years in related activities in the securities market including as a portfolio manager, stockbroker, investment advisor, or as a fund manager.
(f) the candidate satisfies the net worth requirement;
(g) the applicant, its director or partner, principal officer, compliance officer, or the employee is not involved in any litigation connected with the securities market that has an adverse bearing on the business of the applicant;
(h) the applicant, its director or partner, principal officer, compliance officer, or the employee has not been sentenced for any offense including moral turpitude, or has been viewed as at fault for any monetary offense;
(i) the candidate is a fit and proper person;
CAPITAL ADEQUACY REQUIREMENT (Net Worth Requirements): –
The portfolio manager should have a capital adequacy requirement of at least a Net worth of (5 crores) Five crores rupees.
Given further that the portfolio manager will satisfy the net worth requirements under these guidelines, independently and separately, of the capital adequacy requirements, if any, for each activity undertaken by it under the relevant regulations.
“Net Worth” signifies the total value of paid-up equity capital plus free reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written off.
Procedural Requirements for Portfolio Manager Registration: –
- In order to get register, the candidate is required to submit an application for the same to the Board in Form A. Format for Form A is available in Schedule 1 of the SEBI (Portfolio Manager Registration) Regulations, 1993.
- This application should be submitted alongside a non-refundable fee of Rs. 1,00,000 through a demand draft or by direct credit in the SEBI bank account through NEFT/RTGS/IMPS.
- When the application is received, the Board will analyse the same and ensure that all the requirements for portfolio manager registration are met. Once satisfied, the board shall intimate the same to the applicant.
Period of validity of the certificate: –
The certificate of registration granted under guideline 10 will be valid unless it is suspended or cancelled by the Board.
However, there is no concept of renewal of the certificate, each registered Portfolio Manager needs to pay INR 5,00,000/ – over the timespan of three years, to keep the registration in force.
Documents required for registration: –
- Name of Compliance/ Principle Officer, Contact number, Email-id along with applicant name.
- Copy of Pan Card of the applicant.
- Registered address proof i.e. rent agreement utility bills.
- Principle place of business, if other than the registered office address.
- Certificate of Incorporation/ Registration.
- Partnership deed/Memorandum and Article of association.
- Certified Copy Board Resolution.
- Organizational Structure showing functional responsibilities.
- KYC of Directors/partners, Qualifications, and Experience Certificate.
- Other Directorship and associations of Directors/Partners along with interest holding in other Entity.
- Details of Key Management Personnel, Qualifications and Experience along with Directorship, if they hold any,
- Declarations and Undertakings.
- Name, Contact Number, Email-id, and Copy of Pan Card of the Promoter.
- Details of Compliance Officer along with Copy of Pan Card, Qualifications, and Experience Details.
- Details of Principal Officer along with Copy of Pan Card, Qualifications, and Experience Details.
- Copy of NISM Certificate of Principal Officer.
- Number of employees.
- Shareholding pattern of the Applicant.
- Business Plan for the last three years.
- Audited/ Unaudited Financial Statement of the Applicant.
- Net Worth Certificate from a Statutory Auditor.
- Details of Principal Banker and Statutory Auditor.
- Banker Report.
- Copy of Draft Agreement with Client.
- Copy of Draft Disclosure Documents.
What skills are important to become a portfolio manager?
Various skills are necessary for a portfolio manager to create since the job requires the capacity to manage both professional relationships and high-level financial investments. Here are some of the top abilities portfolio managers will utilize regularly while performing their duties.
Interpersonal communication:
Interpersonal communication skills are necessary for an expert job. While managing critical resources and private monetary data, portfolio manager needs to connect strongly with their clients to construct trust and explain their client’s goals and assumptions.
Analytical thinking:
Analytical thinking is vital to think about dangers and open doors and decide on the best solutions for addressing individual clients’ issues. It will likewise assist portfolio managers to work more effectively and beneficially.
Clever thinking:
Clever thinking permits individuals to consider various factors and go with educated and determined choices. This expertise is important for portfolio managers to anticipate which ventures will merit chasing after and to assess risk versus possible returns.
Research abilities:
Portfolio managers do a lot of predictive work like situation examination and assessment. They invest a lot of time in doing business sectors and industry exploration to make informed investment decisions.
The capacity to understand anyone on a profound level:
The capacity to appreciate anyone on a profound level is the capacity to comprehend and deal with your viewpoints, sentiments, and responses as well as that of others. An elevated degree of the capacity to understand people on a deeper level will permit portfolio managers to communicate more effectively, conquer difficulties, pursue better choices, and manage pressure.
Duties of the Portfolio Manager/Compliances of Portfolio Manager: –
The Portfolio Manager shall furnish a report to the investor or the client as mentioned in the contract within the specified time but should not exceed a period of six months.
The report will contain the following:
(a) The composition and also the worth of the portfolio, description of security along with the number as well as amount of each security held in the portfolio, money due, and the total value of the portfolio as of the date of the report.
(b) Deals attempted all through the time of the report, date of the transaction as well as details of sales and purchase.
(c) Expenses incurred in managing the portfolio of the client.
(d) Details of risk predicted by the portfolio manager and furthermore the risk connected with the securities suggested by the portfolio manager for investment or withdrawal.
Benefits and Disadvantages of Portfolio Management: –
Benefits
- Evades Risk- Investment in securities is very dangerous because of the unpredictability of the security market which expands the opportunity for losses. Portfolio management helps in decreasing the risk through the diversification of risk among large people.
- Expands Return- It gives an organized system for examinations and choosing the best class of resources. Investors are able to earn high returns with limited funds.
- Helps in keeping up with or expanding the capacity to scale and sustain a very much managed portfolio longer than any value in contrast to a stock or area that has its pattern of peaks and bottoms.
Disadvantages
- Chance of Over Diversification- Sometimes portfolio managers contribute funds among large categories of assets whose control becomes impossible. In his efforts to diversify the risk it goes beyond the limit to manage it efficiently. Loss arising in such situations is quite high and can bring serious issues.
- No Downside Protection- Portfolio management can only decrease the risk through diversifications however doesn’t give full insurance. At the time of market decline, the idea of a portfolio manager becomes outdated.
- Defective Forecasting- Portfolio management uses historical data for evaluating the returns of securities for investment purposes. In some cases, the historical data collected is incorrect or unreliable or temperamental which leads to wrong forecasts.