How to become a Portfolio Manager in India?
You can become a portfolio manager by acquiring a portfolio manager certificate of registration from SEBI (Securities and Exchange Board of India).
Broadly, there are two steps to acquiring the portfolio manager certificate:
- Meet certain requirements
- Apply for the certificate
In this article, we will discuss in detail the requirements you need to meet and the portfolio manager certificate application steps. But first, let’s understand what a portfolio manager is.
What is a Portfolio Manager?
The SEBI (Securities and Exchange Board of India) defines a portfolio manager as follows -
A portfolio manager is a body corporate who, pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise), the management or administration of a portfolio of securities or the funds of the client.
Simply put, a portfolio manager manages investment securities (stocks, bonds, mutual funds etc.) for their investor/client as per a contract/agreement.
Note: Only a corporate body can be granted a portfolio manager certificate by SEBI. Individuals are not allowed to apply.
In India, SEBI-registered portfolio managers operate Portfolio Management Services or PMS for clients who can invest Rs. 50 lakh and above.
Close to 400 SEBI-registered portfolio managers provide portfolio management services in India.
Roles of a Portfolio Manager
The most crucial role of a portfolio manager is to manage the client’s investment portfolio independently (discretionary PMS) or to assist the client (non-discretionary and advisory PMS) in investment activities.
The principles of portfolio management stress the importance of customizing portfolio management to the needs and situations of each client. However, it is up to the portfolio manager if it desires to offer customized investment services.
In some cases, the portfolio manager may have expertise in stock picking and offers the service of wealth maximization by investing in his stock picks. In other cases, the portfolio manager may offer customized asset-allocated portfolios to different clients to suit their needs.
At Dezerv PMS, our expertise lies in customized portfolio management. We understand your needs and financial goals and recommend a personalized portfolio.
The SEBI has regulated a portfolio manager's most critical roles and responsibilities. Here are some of them:
- Take care that the portfolio management is happening in line with the contract/agreement with the client
- Provide a view of client portfolios that clients can access at any time
- Recommend/make changes in the investment portfolio as and when required
- Provide portfolio updates to clients to keep them informed about investment activities in their portfolios
- Provide market updates to clients to keep them informed about crucial events that may impact their money
- Provide prompt support or customer service if the client has queries
Requirements to Become a Portfolio Manager in India
The following conditions must be met before you can become a SEBI-registered portfolio manager in India:
- The portfolio management company must assign a ‘Principal Officer.’ The Principal Officer is generally the person who leads the investment activities at the PMS.
- The Principal Officer must have a professional qualification in finance (like CFA) and a minimum of 5 years of financial experience (in portfolio management, accountancy etc.).
- The Principal Officer must have appeared for and passed the NISM XXI-A and XXI-B examinations.
- The portfolio management company must assign a ‘Compliance Officer.’
- The PMS company must have at least one employee (other than Principal and Compliance Officers) with at least 2 years of experience in investment management.
- The PMS company must have adequate infrastructure (like office space, laptops, enough employees etc.) to operate as a PMS.
- The portfolio management company must have a net worth of at least Rs. 5 crore.
- The portfolio management company must have a clause in their MoA (Memorandum of Agreement) that the company can undertake PMS business.
- The portfolio management company must have an active bank account in a well-recognised bank.
- The portfolio management company must have a tie-up with a custodian that will hold the securities under the client’s name/ownership. This is basically having a tie-up with a broker that can provide demat accounts to the PMS clients.
- The applicant or a related party must not have previously been subject to regulatory action. In rare cases, your application may still be considered if the offence was minor.
Important: The SEBI regulations and Portfolio Manager requirements stated above are subject to change, and additional minor requirements may not be covered above. Please refer to the SEBI website or consult a professional who can help you acquire a Portfolio Manager’s certificate.
Step by step process to apply for the Portfolio Manager Certificate
Once you meet all the requirements to become a portfolio manager, it is time to apply for and acquire the certificate.
Step 1: Apply for the portfolio manager certificate and furnish all required documents and a non-refundable application fee of Rs. 1 lakh.
Step 2: Wait for the SEBI to review your application and supporting documents. The waiting time varies depending on the number of applications SEBI is processing.
Step 3: After the SEBI reviews your application, it may either seek additional information or consider your application fit to be granted the portfolio manager certificate.
Step 4: Once the SEBI deems your application fit to be granted the portfolio manager certificate, you must pay a registration fee of Rs. 10 lakh to acquire the certificate.
Step 5: The certificate must be renewed every 3 years by paying a renewal fee of Rs. 5 lakh.
Acquiring the certificate from the SEBI comes with the condition that you will continue to fulfil the moral and regulatory requirements of being a portfolio manager.
For example - Every portfolio manager must always ensure that their minimum net worth is Rs. 5 crores.
Becoming a Portfolio Manager: Frequently Asked Questions
What is the fee to acquire a portfolio manager certificate from the SEBI?
You need to pay an application fee of Rs. 1 lakh and a registration fee of Rs. 10 lakh to acquire a portfolio manager certificate from the SEBI. Further, you must renew your certificate every 3 years by paying a renewal fee of Rs. 5 lakh.
How much time does it take to get the portfolio manager certificate?
The time required to get the portfolio manager certificate from SEBI depends on the number of applications the SEBI is handling. But expect it to be at least a few months.
Can the SEBI refuse to grant a certificate of registration?
Yes, the SEBI can refuse to grant a certificate of registration if it believes that the portfolio doesn’t comply with the requirements and regulations. However, you will be granted enough time to comply before rejecting your application.
What is the difference between SEBI registered portfolio manager and SEBI registered investment advisor?
A SEBI registered portfolio manager is granted to a corporate body only, whereas a SEBI registered investment advisor can also be granted to individuals. A portfolio manager can offer services only to investors with more than Rs. 50 lakh to invest, whereas an investment advisor can provide services to all investors. Other subtle differences also exist.
What is the difference between SEBI registered portfolio manager and AMFI registered mutual fund distributor?
A SEBI registered portfolio manager is granted to a corporate body only, whereas an AMFI registered mutual fund distributor (MFD) can also be granted to individuals. The main difference between the two is that portfolio managers can advise on all types of securities like stocks, bonds, mutual funds etc. In contrast, MFDs can sell, provide information and offer only ‘incidental advice’ on mutual funds only.