**Summary:**
This circular, issued by the Securities and Exchange Board of India (SEBI) on August 2, 2023, under reference number SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/133, addresses the audit of firm-level performance data for Portfolio Managers (PMs). It reinforces the existing requirement (as per SEBI Master Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/38 dated March 20, 2023) for PMs to conduct annual audits of their firm-level performance data and submit confirmation of compliance to SEBI within sixty days of the end of each financial year.
The circular mandates that the audit must consider all client portfolios managed by the PM, encompassing both discretionary and non-discretionary portfolio management services. To ensure uniformity, the Association of Portfolio Managers in India (APMI), in consultation with SEBI, will specify standardized Terms of Reference (ToR) for these audits. These standard ToR, effective from October 1, 2023, will require the inclusion of client portfolios under all services, with the exclusion of advisory client performance permissible only if such performance is not reported or published in any marketing material or website, either individually or cumulatively.
PMs are required to submit both a confirmation of compliance with the annual audit requirement, certified by Directors/Partners or authorized personnel, and the audit report itself to SEBI within sixty days from the end of each financial year.
This circular is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, and Regulation 43 of the SEBI Portfolio Managers Regulations, 2020, with the objective of protecting investor interests, promoting the development of the securities market, and regulating the securities market. The circular is available on the SEBI website under the "Legal Circulars" category.
For further information, contact Peter Mardi, Deputy General Manager, Investment Management Department, at 022-26449233 or peterm@sebi.gov.in.
Key Entities Referenced
Portfolio Managers: Entities regulated by SEBI that manage investment portfolios on behalf of clients.
Association of Portfolio Managers in India (APMI): An association related to Portfolio Managers in India, responsible for specifying standardized Terms of Reference for audits.
SEBI Master Circular No. SEBI/HO/IMD/DPoD/1/CIR/2023/38: A circular issued by SEBI on March 20, 2023, related to Portfolio Managers.
Terms of Reference (ToR): Standardized terms specified by APMI in consultation with SEBI, for the audit of firm-level performance data of Portfolio Managers.
Securities and Exchange Board of India (SEBI): The regulatory body governing the securities market in India.
Securities and Exchange Board of India Act, 1992: The legislation that established SEBI and defines its powers.
SEBI Portfolio Managers Regulations, 2020: Regulations issued by SEBI governing the activities of Portfolio Managers.
Investment Management Department: A department within SEBI responsible for overseeing investment management activities.
CIRCULAR
SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/133 August 02, 2023
To
All Portfolio Managers,
Association of Portfolio Managers in India (‘APMI’)
Sir / Madam,
Subject: Audit of firm-level performance data of Portfolio Managers
1. As per paragraph 5.3.1 of the SEBI Master Circular No. SEBI/HO/IMD/IMD-POD-
1/P/CIR/2023/38 dated March 20, 2023 (‘Master Circular’), Portfolio Managers are
required to audit firm-level performance data on an annual basis and submit the
confirmation of compliance with paragraph 4.5.3 of the Master Circular to SEBI within
sixty days of the end of each financial year.
2. As per the aforesaid requirement, Portfolio Managers are required to consider all
clients’ portfolios managed (i.e. clients of both discretionary and non-discretionary
portfolio management services) for the purpose of audit of firm-level performance
data.
3. Standard Terms of Reference by APMI:
3.1. In order to have uniformity, it has been decided that APMI, in consultation with
SEBI, shall specify standardised Terms of Reference (‘ToR’) for aforesaid audit of
firm-level performance data.
3.2. The standard ToR shall inter-alia include requirement for Portfolio Managers to
consider clients’ portfolios under all services for the purpose of audit of firm-level
performance data. Performance of advisory clients may be excluded only if
performance of such clients, either individually or cumulatively, is not reported or
published in any marketing material or website.
3.3. The standard ToR specified by APMI shall be applicable with effect from October
01, 2023, and shall be mandatorily followed by all Portfolio Managers for the
purpose of annual audit of firm-level performance data.
Page 1 of 24. Submission of reports:
4.1. Portfolio Managers shall submit the confirmation of compliance with the
requirement of annual audit of firm-level performance data in line with the
standard ToR specified by APMI, to SEBI within sixty days from the end of each
financial year. The aforesaid report on confirmation of compliance to SEBI shall be
certified by Directors/ Partners of the Portfolio Manager or by person(s) authorized
by the Board of Directors/Partners of the Portfolio Manager.
4.2. Portfolio Managers shall submit audit report on firm-level performance data to
SEBI within sixty days from end of each financial year.
5. The provisions of this circular shall come into effect from the date of issuance of this
circular.
6. 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 the provisions of Regulation
43 of SEBI (Portfolio Managers) Regulations, 2020, to protect the interest of investors
in securities and to promote the development of, and to regulate the securities market.
7. This circular is available on SEBI website at http://www.sebi.gov.in under the category
“Legal -> Circulars”.
Yours faithfully,
Peter Mardi
Deputy General Manager
Investment Management Department
Tel: 022 - 26449233
Email: peterm@sebi.gov.in
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