• Who is a Portfolio Manager?

A portfolio manager is a body corporate who, pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise), the management or administration of a portfolio of securities or the funds of the client.

• What is the difference between a discretionary portfolio manager and a non- discretionary portfolio manager?

The discretionary portfolio manager individually and independently manages the funds of each client in accordance with the needs of the client.

The non-discretionary portfolio manager manages the funds in accordance with the directions of the client.

• What is the procedure of obtaining registration as a portfolio manager from SEBI?

For registration as a portfolio manager, an applicant is required to pay a non-refundable application fee of Rs.1,00,000/- by way of demand draft drawn in favour of ‘Securities and Exchange Board of India’, payable at Mumbai.

The application in Form A along with additional information (Form A and additional information available on SEBI Website : www.sebi.gov.in.) submitted to the at the below mentioned address

Investment Management Department - Division of Funds- 1

Securities and Exchange Board of India

SEBI Bhavan, 3rd Floor A Wing,

Plot No. C4-A, ‘G’ Block,

Bandra-KurlaComplex,

Bandra (E), Mumbai - 400 051.

• What is the capital adequacy requirement of a portfolio manager?

The portfolio manager is required to have a minimum networth of Rs. 2 crore.

• Is there any registration fee to be paid by the portfolio managers?

Yes. Every portfolio manager is required to pay Rs. 10 lakhs as registration fees at the time of grant of certificate of registration by SEBI.

• How long does the certificate of registration remain valid?

The certificate of registration remains valid for three years. The portfolio manager has to apply for renewal of its registration certificate to SEBI, 3 months before the expiry of the validity of the certificate, if it wishes to continue as a registered portfolio manager.

• How much is the renewal fee to be paid by the portfolio manager?

The portfolio manager is required to pay Rs. 5 lakh as renewal fees to SEBI.

• Is there any contract between the portfolio manager and its client?

Yes. The portfolio manager, before taking up an assignment of management of funds or portfolio of securities on behalf of the client, enters into an agreement in writing with the client, clearly defining the inter se relationship and setting out their mutual rights, liabilities and obligations relating to the management of funds or portfolio of securities, containing the details as specified in Schedule IV of the SEBI (Portfolio Managers) Regulations, 1993.

• What fees can a portfolio manager charge from its clients for the services rendered by him?

SEBI Portfolio Manager Regulations have not prescribed any scale of fee to be charged by the portfolio manager to its clients.

However, the regulations provide that the portfolio manager shall charge a fee as per the agreement with the client for rendering portfolio management services. The fee so charged may be a fixed amount or a return based fee or a combination of both. The portfolio manager shall take specific prior permission from the client for charging such fees for each activity for which service is rendered by the portfolio manager directly or indirectly (where such service is outsourced).

• Is there any specified value of funds or securities below which a portfolio manager can’t accept from the client while opening the account for the purpose of rendering portfolio management service to the client?

The portfolio manager is required to accept minimum Rs. 5 lakhs or securities having a minimum worth of Rs. 5 lakhs from the client while opening the account for the purpose of rendering portfolio management service to the client.

Portfolio manager can only invest and not borrow on behalf of his clients.

• Are investors required to open demat accounts for PMS services?

 Yes. For investment in listed securities, an investor is required to open a demat account in his/her own name.

• What kind of reports can the client expect from the portfolio manager?

 The portfolio manager shall furnish periodically a report to the client, as agreed in the contract, but not exceeding a period of six months and as and when required by the client and such report shall contain the following details, namely:-

 (a) the composition and the value of the portfolio, description of security, number of securities, value of each security held in the portfolio, cash balance and aggregate value of the portfolio as on the date of report;

 (b) transactions undertaken during the period of report including date of transaction and details of purchases and sales;

 (c) beneficial interest received during that period in respect of interest, dividend, bonus shares, rights shares and debentures;

 (d) expenses incurred in managing the portfolio of the client;

 (e) details of risk foreseen by the portfolio manager and the risk relating to the securities recommended by the portfolio manager for investment or disinvestment.

 This report may also be available on the website with restricted access to each client. The portfolio manager shall, in terms of the agreement with the client, also furnish to the client documents and information relating only to the management of a portfolio. The client has right to obtain details of his portfolio from the portfolio managers.

• What is the disclosure mechanism of the portfolio managers to their clients?

The portfolio manager provides to the client the Disclosure Document at least two days prior to entering into an agreement with the client.

The Disclosure Document contains the quantum and manner of payment of fees payable by the client for each activity, portfolio risks, complete disclosures in respect of transactions with related parties, the performance of the portfolio manager and the audited financial statements of the portfolio manager for the immediately preceding three years.

Please note that the disclosure document is neither approved nor disapproved by SEBI nor does SEBI certify the accuracy or adequacy of the contents of the Documents.

• Does SEBI approve any of the services offered by portfolio managers?

 No. SEBI does not approve any of the services offered by the Portfolio Manager. An investor has to invest in the services based on the terms and conditions laid out in the disclosure document and the agreement between the portfolio manager and the investor.

• Does SEBI approve the disclosure document of the portfolio manager?

 The Disclosure Document is neither approved nor disapproved by SEBI. SEBI does not certify the accuracy or adequacy of the contents of the Disclosure Document.

• What are the rules governing services of a Portfolio Manager?

The services of a Portfolio Manager are governed by the agreement between the portfolio manager and the investor. The agreement should cover the minimum details as specified in the SEBI Portfolio Manager Regulations. However, additional requirements can be specified by the Portfolio Manager in the agreement with the client. Hence, an investor is advised to read the agreement carefully before signing it.

• Is premature withdrawal of Funds/securities by an investor allowed?

 The funds or securities can be withdrawn or taken back by the client before the maturity of the contract. However, the terms of the premature withdrawal would be as per the agreement between the client and the portfolio manager.

• Can a Portfolio Manager impose a lock-in on the investor?

 Portfolio managers cannot impose a lock-in on the investment of their clients. However, a portfolio manager can charge exit fees from the client for early exit, as laid down in the agreement.

• Can a Portfolio Manager offer indicative or guaranteed returns?

 Portfolio manager cannot offer/ promise indicative or guaranteed returns to clients.

• On what basis is the performance of the portfolio manager calculated?

The performance of a discretionary portfolio manager is calculated using weighted average method taking each individual category of investments for the immediately preceding three years and in such cases performance indicator is also disclosed.

• Where can an investor look out for information on portfolio managers?

Investors can log on to the website of SEBI www.sebi.gov.in for information on SEBI regulations and circulars pertaining to portfolio managers. Addresses of the registered portfolio managers are also available on the website.

• How can the investors redress their complaints?

Investors would find in the Disclosure Document the name, address and telephone number of the investor relation officer of the portfolio manager who attends to the investor queries and complaints. The grievance redressal and dispute mechanism is also mentioned in the Disclosure Document. Investors can approach SEBI for redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned portfolio manager and follows up with them.

• What is an Alternate Investment Fund (AIF)?

An Alternative Investment Fund (AIF) means any fund established or incorporated in India, which is a privately pooled investment vehicle that collects funds from sophisticated investors (whether Indian or foreign) for investing in accordance with a defined investment policy for the benefit of its investors.

An AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999, or any other regulations of the Board to regulate fund management activities.

Further, certain exemptions from registration are provided under the AIF Regulations for family trusts set up for the benefit of 'relatives' as defined under the Companies Act, 1956, employee welfare trusts, or gratuity trusts set up for the benefit of employees, 'holding companies' within the meaning of Section 4 of the Companies Act, 1956, etc. [Ref. Regulation 2(1)(b)]

• In what categories can an applicant seek registration as an AIF?

Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable:
[Ref. Regulation 3(4)]

• Category I AIF:
  • Venture capital funds (Including Angel Funds)
  • SME Funds
  • Social Venture Funds
  • Infrastructure funds
• Category II AIF
• Category III AIF
• What are Category I AIFs?

AIFs that invest in start-up or early-stage ventures, social ventures, SMEs, infrastructure, or other sectors or areas considered socially or economically desirable by the government or regulators. This includes venture capital funds, SME Funds, social venture funds, infrastructure funds, and other AIFs as specified.
[Ref. Regulation 3(4)(a)]

• What are Category II AIFs?

AIFs that do not fall under Category I or III and do not undertake leverage or borrowing other than to meet day-to-day operational requirements, as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012.
[Ref. Regulation 3(4)(b)]

Various types of funds such as real estate funds, private equity funds (PE funds), and funds for distressed assets are registered as Category II AIFs.

• What are Category III AIFs?

AIFs that employ diverse or complex trading strategies and may use leverage, including through investment in listed or unlisted derivatives.
[Ref. Regulation 3(4)(c)]

Examples include hedge funds, PIPE Funds, etc., which are registered as Category III AIFs.

• What is an 'Angel Fund'?

An Angel Fund is a sub-category of Venture Capital Fund under Category I AIF. It raises funds from angel investors and invests according to the provisions of Chapter III-A of AIF Regulations.

An angel fund can raise funds by issuing units to angel investors. An "Angel Investor" is defined as:

• An individual investor who has net tangible assets of at least two crore rupees (excluding the value of the principal residence) and:
  • Has early-stage investment experience, or
  • Has experience as a serial entrepreneur, or
  • Is a senior management professional with at least ten years of experience.
• A body corporate with a net worth of at least ten crore rupees.
• An AIF registered under these regulations or a VCF registered under SEBI (Venture Capital Funds) Regulations, 1996.

Angel funds can accept an investment of at least 25 lakh from an angel investor for up to 3 years.

• What is a 'Debt Fund'?

A Debt Fund is an AIF that invests primarily in debt or debt securities of listed or unlisted investee companies, in accordance with the stated objectives of the fund.
[Ref. Regulation 2(1)(i)]

These funds are typically registered under Category II. However, the amount contributed by investors cannot be used for giving loans.

• What is a Fund of Funds?

A Fund of Funds is an investment strategy where a fund holds a portfolio of other investment funds rather than directly investing in stocks, bonds, or other securities. In the context of AIFs, a Fund of Funds is an AIF that invests in another AIF.

• In which legal forms can an AIF be set up?

An AIF can be established or incorporated in the form of a trust, a company, a limited liability partnership, or a body corporate under the SEBI (Alternative Investment Funds) Regulations, 2012. Most AIFs are registered with SEBI in trust form.
[Ref. Regulation 2(1)(b)]

• What is the corpus of the AIF?

“Corpus” refers to the total amount of funds committed by investors to the AIF by way of a written contract or any such document as of a particular date.
[Ref. Regulation 2(1)(h)]

• What is the limit specified under AIF regulations for the number of investors?
• No scheme of an AIF (other than an angel fund) shall have more than 1,000 investors.
  (Note: Provisions of the Companies Act, 1956 apply if the AIF is formed as a company.)
• For an angel fund, no scheme shall have more than 49 angel investors.

An AIF cannot make an invitation to the public at large to subscribe to its units and can raise funds only from sophisticated investors through private placement.

• Who is the Sponsor of the AIF?

The Sponsor is any person(s) who set up the AIF and includes the promoter in the case of a company and the designated partner in the case of a limited liability partnership.
[Ref. Regulation 2(1)(w)]

• Can an AIF launch schemes?

Yes, an AIF may launch schemes, subject to filing a placement memorandum with SEBI.

An AIF must pay a scheme fee of Rs. 1 lakh to SEBI at least 30 days prior to launching a scheme, except in the case of the launch of its first scheme (other than angel funds).

• What is the validity of the certificate of registration of an AIF?

The certificate of registration of an AIF is valid until the AIF is wound up.
[Ref. Regulation 3(7)]

• Can Venture Capital Funds registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996 seek re-registration under SEBI (AIF) Regulations?

Yes, Venture Capital Funds (VCFs) registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996, may seek re-registration under SEBI (AIF) Regulations, 2012, subject to the approval of two-thirds of their investors by the value of their investment.

• What will be the status of the Venture Capital Funds registered under SEBI (Venture Capital Funds) Regulations, 1996 after the notification of AIF Regulations?

VCFs registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996, will continue to be regulated by those regulations until the existing fund or scheme is wound up. The VCFs cannot launch new schemes after the notification of AIF Regulations. However, VCFs can seek re-registration under the new regulations.

• Is an AIF permitted to make an invitation to the public to subscribe to its securities?

No. AIFs are privately pooled investment vehicles and can only raise funds through private placement. The AIF's memorandum and articles of association/trust deed/partnership deed must prohibit the solicitation of public subscription to its securities.
[Ref. Regulation 4(b)]

• Can an AIF change its category after registration?

Yes, an AIF can change its category, but only if it has not made any investments in its previous category. The AIF must apply for the change and pay an application fee of Rs. 1,00,000.

If the AIF has raised funds or received commitments, it must offer investors the option to withdraw their commitments/funds without penalties. After approval from SEBI, the AIF must send a revised placement memorandum to all its investors.
[Ref. Circular No. CIR/IMD/DF/12/2013 dated 07th August, 2013]

• Can an AIF launch a fund/scheme of any size?

No. Each scheme of the AIF (other than an angel fund) must have a corpus of at least twenty crore rupees. For an angel fund, the corpus must be at least ten crore rupees.

• Can an AIF raise any amount of funds from any investor?

An AIF may raise funds from sophisticated investors, whether Indian, foreign, or non-resident Indians, who are willing to undertake the risk of investing in primarily unlisted or illiquid securities. However:

• The minimum investment amount for an AIF (other than an angel fund) is one crore rupees.
• For investors who are employees or directors of the AIF, the minimum investment amount is twenty-five lakh rupees.
  [Ref. Regulation 10 (c)]
• Is the sponsor/management mandated to have an interest in AIF?

To ensure that the interests of the Manager/Sponsor are aligned with the interests of the investors in the AIF, the AIF Regulations require that the sponsor/manager shall have a certain continuing interest in the AIF, which shall not be through the waiver of management fees.

• For Category I and II AIFs: The interest must be not less than 2.5% of the corpus or ₹5 crore, whichever is lesser.
• For Category III AIFs: The interest must be not less than 5% of the corpus or ₹10 crore, whichever is lesser.
• For Angel Funds: The interest must be not less than 2.5% of the corpus or ₹50 lakh, whichever is lesser.

Reference: Regulation 10 (d)

• Can an AIF opt to be close-ended or open-ended, as it desires?

No, the following conditions apply:

• Category I and II AIFs are required to be close-ended, with a minimum tenure of 3 years.
• Category III AIFs may be open-ended or close-ended.

Reference: Regulation 13(1) and 13(3)

• What are the investment conditions for AIFs?

The AIF Regulations provide certain general investment conditions applicable to all AIFs, as well as specific investment conditions applicable to each category/sub-category. For detailed investment conditions, refer to Chapter III and III-A of the AIF Regulations.

• What are the reporting requirements to SEBI for AIFs registered with SEBI?
• Category I and II AIFs and Category III AIFs (which do not undertake leverage) must submit reports to SEBI on a quarterly basis.
• Category III AIFs (which undertake leverage) must submit reports on a monthly basis.
• Reports must be submitted within 7 calendar days from the end of the quarter/month.
• Reporting Email: aifreporting@sebi.gov.in
• No physical reports are required.

Reference: Circular No. CIR/IMD/DF/10/2013, dated 29th July 2013

• Is there a limit on the amount of leverage that can be undertaken by a Category III AIF?

Yes, the leverage of a Category III AIF shall not exceed 2 times the NAV of the fund.

Reference: Circular No. CIR/IMD/DF/10/2013, dated 29th July 2013

• Where can an investor look for information on AIF?

Investors can refer to the SEBI (Alternative Investment Funds) Regulations, 2012, and related circulars available on the SEBI website. The list of registered AIFs is also available on the SEBI website.

SEBI Website: www.sebi.gov.in

• What kind of reports can an investor expect from an AIF?
• Chapter IV of the AIF Regulations outlines the obligations, responsibilities, and transparency requirements for all AIFs.
• The AIF must disclose information about conflicts of interest, fund investments, fees, risks, valuation, etc.
• In addition, AIFs may provide additional disclosures to investors in the placement memorandum.
• What is the information to be disclosed in placement memorandum regarding fees and charges?
• Every AIF shall include in the placement memorandum, by way of an annexure, a detailed tabular example of how the fees and charges apply to the investor, including the distribution waterfall.

Reference: Circular No. CIR/IMD/DF/14/2014, dated 19th June 2014

• What is the information to be disclosed in placement memorandum regarding litigations/cases?

The placement memorandum must include the following disciplinary history:

1. AIF, Sponsor, Manager, Directors/Partners/Promoters/Associates
2. If AIF is a trust: Trustees or trustee company and its directors

This includes:

• Details of outstanding/pending and past litigations, criminal or civil prosecutions, disputes, non-payment of dues, defaults against banks, contingent liabilities, economic offences, penalties, disputed tax liabilities, etc.
• Any disciplinary action taken by SEBI or other regulatory authorities.

Reference: Circular No. CIR/IMD/DF/14/2014, dated 19th June 2014
Clarification: Circular No. CIR/IMD/DF/16/2014, dated 18th July 2014

• What is the procedure for making changes to the placement memorandum?
• The AIF must clearly list and highlight changes in the final placement memorandum as compared to the draft submitted to SEBI.
• Changes must be intimated to all unit holders (including investors who have committed to the AIF) and SEBI every six months on a consolidated basis.

Reference: Circular No. CIR/IMD/DF/14/2014, dated 19th June 2014

• Can an AIF accept investments from joint investors?

Yes, an AIF may accept joint investments for amounts of not less than ₹1 crore, as follows:

• An investor and their spouse
• An investor and their parent
• An investor and their child (daughter/son)

Reference: Circular No. CIR/IMD/DF/14/2014, dated 19th June 2014

• What are the requirements for the Compliance Test Report (CTR)?
• The manager of an AIF must prepare a compliance test report at the end of the financial year.
• The CTR must be submitted to the trustee/sponsor within 30 days of the financial year-end.
• Any observations/comments on the CTR must be addressed within 15 days by the manager.

Reference: Circular No. CIR/IMD/DF/14/2014, dated 19th June 2014

• How is the tenure of a scheme of AIF calculated?

The tenure of any scheme of the AIF is calculated from the date of the final closing of the scheme.

Reference: Circular No. CIR/IMD/DF/7/2015, dated 1st October 2015

• What is the maximum limit for overseas investments by AIFs?
• Overseas investments by AIFs cannot exceed 25% of the investible funds of the scheme.
• The combined limit for AIFs and Venture Capital Funds registered under SEBI (Venture Capital Funds) Regulations, 1996, is USD 500 million.

Reference: RBI Circulars No. 49 and 50, dated April 30, 2007, and May 4, 2007
SEBI Circular: CIR/IMD/DF/7/2015, dated 1st October 2015

• What is the time limit for AIFs to make overseas investments?

An AIF must make allocated investments in offshore ventures within 6 months from the date of SEBI approval. If unutilized limits remain, SEBI may allocate them to other applicants.

Reference: SEBI Circular No. CIR/IMD/DF/7/2015, dated 1st October 2015

• What is the procedure for obtaining registration as an AIF from SEBI?
• The application must be submitted in Form A to SEBI, along with necessary supporting documents and an application fee of ₹1,00,000.
• Upon SEBI approval, the registration/re-registration fee may be paid.

Submission Address: Investment Management Department
Division of Funds-1
Securities and Exchange Board of India
SEBI Bhavan, 3rd Floor A Wing
Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051

• What is the registration fee to be paid by an AIF?
• Category I AIFs: ₹5,00,000
• Category II AIFs: ₹10,00,000
• Category III AIFs: ₹15,00,000
• Angel Funds: ₹2,00,000

Reference: SEBI (Payment of Fees) (Amendment) Regulations, 2014

• What is the procedure for winding up an AIF?

An AIF may be wound up:

1. When the tenure of the AIF or its schemes is over.
2. If 75% of investors by value pass a resolution to wind up.
3. If trustees or the trustee company believes winding up is in the best interest of investors.
4. If the SEBI Board directs winding up in the interests of investors.

• How can investors redress their complaints against AIFs?

Investors can lodge complaints through the SEBI Complaint Redress System (SCORES):
http://scores.gov.in

Additionally, AIFs must establish a dispute resolution mechanism, such as arbitration, to resolve issues between investors and the AIF.

Source: https://www.sebi.gov.in/sebi_data/attachdocs/1471519155273.pdf

• What is Gift City?

Gift City (Gujarat International Finance Tec-City) is India's first International Financial Services Centre (IFSC), designed to be a global financial hub that attracts international businesses and investments.

• What are Gift City funds?

Gift City funds are mutual funds launched by asset management companies (AMCs) operating in Gift City under the regulations of the International Financial Services Centre Authority (IFSCA). These funds provide exposure to international equities, bonds, and alternative assets while allowing investments in multiple currencies.

• What are the key features of Gift City funds?
• Offshore investment opportunities with access to global markets.
• Regulated by IFSCA to ensure investor protection.
• Professional fund management with expert portfolio allocation.
• Multi-currency denomination, making investment seamless for NRIs and OCIs.
• What investment opportunities does Gift City offer for NRIs?
• Offshore banking and deposits with competitive interest rates.
• Global equities and bonds traded on the Gift City IFSC exchange.
• Alternative Investment Funds (AIFs) with exposure to equities, private equity, real estate, and venture capital.
• Real Estate Investment Trusts (REITs) for easy and affordable access to the Indian real estate market.
• Can NRIs and OCIs invest in Gift City funds?

Yes, after SEBI relaxed investment norms, NRIs and OCIs can invest in Gift City funds.

• How can NRIs and OCIs invest in Gift City funds?
• Directly with the fund house via AMC websites.
• Through banks, which offer investment services.
• With a financial advisor, who can help with portfolio selection and investment planning.
• What are the benefits of investing in Gift City funds for NRIs?
• Ease of investment with multi-currency options and repatriability.
• Global diversification through international securities.
• Tax advantages, including exemption from TDS and tax-friendly jurisdictions.
• Strong investor protection due to international financial regulations.
• Professional fund management by experienced financial experts.
• What are the risks associated with investing in Gift City funds?
• High minimum investment of USD 150,000.
• Lower liquidity compared to regular mutual funds.
• Market risk due to exposure to financial markets.
• Currency risk from fluctuations in foreign exchange rates.
• What tax incentives does Gift City offer to NRIs and OCIs?
• Lower TDS on dividends compared to regular investments.
• Tax-free interest income from funds lent to IFSC units.
• Reduced tax rates on long-term bonds and listed securities.
• Tax exemption on income from financial securities managed by fund managers.
• No GST or additional indirect taxes such as STT, CTT, and stamp duty on transactions.
• Who can invest in Gift City?

Both domestic (Indian individuals and institutions) and international investors (NRIs, FPIs, FIIs, and global financial institutions) can invest in Gift City.

1. Is Gift City tax-free?

Gift City provides tax benefits such as a 100% tax holiday for 10 out of 15 years for companies, no GST on transactions, and concessional tax rates for investors.

• Can foreign investors invest in Gift City funds?

Yes, Gift City is designed to attract foreign investors, and they are allowed to invest in Gift City funds.

1. Can NRIs own 100% of global funds in Gift City?

Yes, after SEBI relaxed the regulations, NRIs and OCIs can own up to 100% of global funds in Gift City.

• What is the minimum investment amount for Gift City funds?

The minimum investment required for Gift City funds is USD 150,000.