The Securities and Exchange Board of India (SEBI) on Saturday decided to hike the minimum investment limit in the portfolio management scheme (PMS) to Rs 25 lakh per client from the current Rs 5 lakh. This may result in portfolio management services soon going out of the reach of many retail investors.
In retail investors' interest
The capital market regulator is worried that retail investors are being drawn into PMS when their interests are not as well protected or guarded as in the case of mutual fund regulations.
So, it sees this decision as yet another effort to protect the interest of the retail investor.
Outlining the rationale for such a move, the SEBI Chairman, Mr U. K. Sinha, pointed out that PMS regulations, framed in 1993, are “light-touch regulations”.
The decision to hike the minimum investment limit comes despite valiant efforts by portfolio managers and wealth managers to retain the minimum investment level at Rs 5 lakh per client.
In portfolio management services, investors get a range of specialised investment strategies to capitalise on opportunities in the market. Portfolios are suited to individual client needs and risk appetite, say industry insiders
Mr Sinha said that the enhanced investment threshold will apply on a prospective basis. It will apply only for new investors and existing accounts will not get affected. However, existing investors in PMS are welcome to increase the investments in such schemes if they have the capacity to do so.
Preferential allotments
SEBI has also decided to ease norms for mutual funds and insurance companies participation in preferential allotments. As broad-based investment vehicles with widespread investor base, these entities will be permitted to participate in preferential allotment of the issuer company even if they had bought or sold shares in the last six months.
Marked-to-market
In debt schemes of mutual funds, the SEBI board decided to have marked-to-market valuation where the balance period is 60 days or more. Earlier, the marked-to-market valuation was required only for 91 days and beyond.
SEBI's approach is that all the securities should be brought to day-to-day valuation. In order not to make it disruptive, the capital market regulator has brought it down to 60 days from 91 days.
“Net asset values will become more realistic… which means the risk that people might be taking or the inter-scheme transfer they might be doing to the extent will be curbed,” Mr Sinha said when asked if this move would have any implications on NAVs of various schemes.
Advertisement code
SEBI has also decided to liberalise the advertisement code for asset management companies. The code will be principle based as far as possible, according to Mr Sinha.
On the issue of reservation to convertible debt holders in rights/bonus issues, this reservation will be available only to compulsorily convertible debt holders. This is because conversion in such cases is not at the option of the holders of these instruments.