Sebi streamlines digital onboarding for portfolio managers' clients

Capital markets regulator Sebi on Friday relaxed the digital onboarding process for clients of portfolio managers, a move aimed at facilitating ease of doing business.

While onboarding clients, portfolio managers will have to ensure that new clients use a typed or electronically written note saying that they have understood the fee structure rather than the current practice that focuses on clients giving the same in their own handwriting.

The change, aimed at making digital onboarding easier, would become effective from October 1, the Securities and Exchange Board of India (Sebi) said in a circular.

The move came after Sebi observed certain operational challenges in complying with the requirement of a handwritten note on the annexure of fees in the agreements, including the non-availability of a stylus at the location of the investors.

This requirement was creating a hindrance towards the complete digital onboarding of the clients.

"While on-boarding a client, portfolio manager shall ensure that the new client has separately signed the annexure on fees and charges and added a note, that they have understood the structure for fees and charges in handwritten in case the client is onboarded through physical mode and typed using keyboard or written electronically using fingers/a stylus pen, in case the client is on-boarded through digital mode," Sebi said.

Also, the regulator said that the standard procedure for onboarding of clients through digital mode would be specified by the industry body Association of Portfolio Managers in India (APMI) in consultation with the markets regulator.

Sebi said that portfolio managers will have to provide an annexure detailing the fee calculation.

To facilitate ease of understanding of the critical aspects of the portfolio manager-client relationship, Sebi asked portfolio manager to additionally provide its client 'Most Important Terms and Conditions' document, which needs to be duly acknowledged by the client.

On Thursday, Sebi decided to promote collective oversight of PMS' (Portfolio Management Services) distributors by making registration with the APMI mandatory for them.