Definition Portfolio means the total holdings of securities of a person. Portfolio managers are persons who in pursuance of a contract/arrangement with client, advise/direct/ undertake on behalf of the client by the discretionary portfolio manager or otherwise, the management/administration of portfolio of securities/funds of clients.
Discretionary portfolio management allows the exercise of
discretion with regard to investment/Management of the portfolio of the
security/funds. Non-Discretionary portfolio manager acts in accordance with the
directions of the client.
Registration
A certificate of Registration from SEBI is mandatory to act as
portfolio manager.
Certificate of Registration is valid for 3 years.
The application fee for registration is ` 1,00,000/-
Registration fee is ` 10,00,000/- Renewal Fee is ` 5,00,000/-
Renewal is also valid for 3 years.
Registration Procedure
The SEBI takes into account the following matters while considering
the application:-
Matters relevant to portfolio management activities
Employment of two persons experienced in portfolio management,
stock broking, investment management.
Persons connected with the applicant should not have been refused
registration.
Capital adequacy requirement of not less than net worth of ` 2 crore.
The applicant/partner/director/principal officer should not have
been convicted for any offence involving moral turpitude/guilty of any economic
offence. The applicant should not have been involved in any litigation
connected with the securities market.
The principal officer of the applicant to have professional
qualification in finance/law/accounting/business management or at least 10
years experience in related activities in the securities market.
The issue of certificate should be in the interest of investors.
The applicant should be a body corporate
There should not have been any disciplinary action taken by SEBI
against any person directly or indirectly connected with the applicant.
The applicant must be a fit and proper person as per the criteria
specified in the SEBI Intermediaries Regulation 2008.
The Future
For the merchant banking division, the development of new services
to meet the changing market conditions is an ongoing process. Today the entire merchant
banking industry in India is faced with the challenge of attracting Non
Resident Indian (NRI) investment into India, particularly under the scheme for
portfolio investments through stock exchange. The Merchant Banking Division is
the process of introducing a comprehensive portfolio advisory service which
will try to fill up the information gap, offer expert counseling on investment
opportunities, undertake to buy/ sell orders, periodically evaluate the
portfolio and look after all the administrative formalities such as attending
to tax returns, collections and remittances of dividends etc., in compliance
with the Reserve Bank of India and SEBI guidelines.
Conclusion
Merchant banking essentially involves selling an issue for a
company and handling related work. In the wake of liberalization of the
financial sector, we are witnessing certain merchant banking prospects emerging
be it an Indian company or foreign or a multinational, playing in the primary
and secondary markets competitively. The mushroom growth of merchant banks has
given rise to unethical means to sell shares. For a healthy growth of the
market operation, the SEBI should enforce strict control on merchant banks and
remove the weeds of manipulation and corruption in the market. Stipulation of
proper checks and regulation will raise the confidence of investing public in
the dynamic and vibrant market mechanism which will be in the larger interests
of the society as well as of the economy.
The growth of the capital market in India in the 90s is mainly due
to the key role played by the merchant banking divisions of leading development
banks as well as commercial banks. In a way, the merchant banks have come to
occupy an important place in the Indian financial scene with seven of the top
ten merchant banking coming from the development banks and other financial
institutions. They dominate the market in providing professional service to the
corporate sector. The future growth of the capital market depends, to a large
extent on the financial services made available by them.