The capital market regulator has allowed portfolio managers to transfer their business, or portfolios of their clients, to another entity after obtaining SEBI's approval.
Portfolio management services (PMSes) can now transfer their business or a select investment approach (es) within the same group, or can transfer their business in its entirety to an entity outside the group, subject to certain conditions.
In a circular issued on October 24, the Securities and Exchange Board of India (SEBI) said, "As an initiative towards ease of doing business and for the purpose of simplification, it has been decided to allow transfer of PMS business."
For transfer of PMS business from one portfolio manager to another, both holding portfolio manager registration and belonging to the same group, the following two conditions must be met.
One, if the entire PMS business is transferred, the certificate of PMS registration of transferor must be surrendered within a period of 45 working days from the date of completion of transfer.
Two, if there is the transfer only of select investment approach or approaches, then the transferor can continue to hold certificate of PMS registration.
Inter-group transfers
Between a portfolio manager and another manager of a different group, only entire businesses can be transferred. Transfer of select investment approach or approaches between such entities has not been permitted.
For such transfers, a joint application by both parties need to be made to SEBI, and the entire transfer should be completed not later than two months from SEBI's granting of approval.
The circular added, "Until the transfer process is complete, the transferor shall continue to act as Portfolio Manager but shall not onboard any new client(s). At the end of two months or upon completion of all the formalities, whichever is earlier, the transferor shall surrender its registration certificate by following the surrender process."
The transferee company will need to ensure that all regulatory requirements are met and, once the transfer is complete, "the acts, deeds, pending actions/ litigations, other obligations against the transferor, if any, shall be the responsibility of the transferee".