The Securities and Exchange Board of India on 22nd August 2022, has published the Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2022 which shall come into force from 21st September 2022.
Through this amendment, the definition for the term “related party “under section 2(1)(PA) has been notified as follows:
“Related party” in relation to a portfolio manager, means—
- a director, partner or his relative;
- a key managerial personnel or his relative;
- a firm, in which a director, partner, manager or his relative is a partner
- a private company in which a director, partner or manager or his relative is a member or director;
- a public company in which a director, partner or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;
- any body corporate whose board of directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director, partner or manager;
- a related party as defined under the applicable accounting standards;
- such other person as may be specified by the Board:
Provided that,
- any person or entity forming a part of the promoter or promoter group of the listed entity;
- any person or any entity, holding equity shares: (i) of twenty per cent or more; or (ii) of ten per cent or more, with effect from April 1, 2023; in the listed entity either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at any time, during the immediate preceding financial year; shall be deemed to be a related party.
The portfolio manager may make investments in the securities of its related parties or its associates only after obtaining the prior consent of the client in such manner as may be specified by the Board from time to time: Provided that the requirement for obtaining consent shall not apply to such portfolio managers as may be specified by the Board.
Further, the portfolio manager shall ensure compliance with the prudential limits on investments as may be specified by the Board. The prudential limits, shall be applicable at the client level at the time of making investments by the portfolio managers. The portfolio manager shall not be allowed to invest clients’ funds in unrated securities of their related parties or their associates.
