Maintenance of Clients' Funds in a separate Bank Account by Portfolio Managers

DEPUTY GENERAL MANAGER
INVESTMENT MANAGEMENT DEPARTMENT
DIVISION OF FUNDS - I
Email: maninderc@sebi.gov.in

IMD/DOF I/PMS/Cir- 4/2009
June 23, 2009

All Registered Portfolio Managers

Dear Sir/ Madam,

Sub: Maintenance of Clients’ Funds in a separate Bank Account by Portfolio Managers

1. Regulation 16(7) of the SEBI (Portfolio Managers) Regulations, 1993, states that “the portfolio manager shall segregate each client’s funds and portfolio of securities and keep them separately from his own funds and securities and be responsible for safe keeping of clients’ funds and securities.”

2. With regard to the above, it is hereby clarified that portfolio managers may keep the funds of all clients in a separate bank account maintained by the portfolio manager subject to the following conditions:

a) There shall be a clear segregation of each client’s fund through proper and clear maintenance of back office records

b) Portfolio Managers shall not use the funds of one client for another client

c) Portfolio Managers shall also maintain an accounting system containing separate client-wise data for their funds and provide statement to clients for such accounts at least on monthly basis

d) Portfolio Managers shall reconcile the client-wise funds with the funds in the aforesaid bank account on daily basis

3. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with regulation 39 of SEBI (Portfolio Managers) Regulations, 1993 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

4. This circular is available on SEBI website at www.sebi.gov.in under the category ‘Legal Framework’.

Yours faithfully,

Maninder Cheema