Sebi Comes Out with Simplified 'Disclosure Document' Format for Portfolio Managers

To facilitate ease of doing business, markets regulator Sebi on Tuesday came out with a simplified format for disclosure documents for portfolio managers.

The 'disclosure document' has been divided into two sections -- static and dynamic -- the Securities and Exchange Board of India (Sebi) said in its circular.

The dynamic section includes the content that undergoes frequent changes, whereas the static section includes disclosures that do not change frequently.

Under the static section, portfolio managers need to disclose on disclaimer clauses, definitions, description, penalties, pending litigation or proceedings, findings of inspection for which action may have been taken or initiated by any regulatory authority, services offered, risk factors, nature of expenses, taxation, accounting policies, investors services and details of the diversification policy of the portfolio manager.

In the dynamic section, portfolio managers need to disclose client representation, financial performance, their performance, audit observations of the preceding three years and details of investments in the securities of related parties.

The disclosure document is issued by every portfolio manager as a compendium of essential information, which enables investors to take well-informed investment decisions.

While this will not result in any change in the content of the disclosure document, it will provide operational convenience to the portfolio managers, as only the updated section of the disclosure document will need to be circulated to clients. Also, it will provide ease of understanding for investors to identify any material changes clearly highlighted in the communication.

Portfolio Management Services providers will have to ensure that each parameter of the 'disclosure document' begins on a fresh page. Only the page containing a change in any parameter would need to be certified by an independent Chartered Accountant and Principal Officer of the PMS. The same would also be highlighted in the communication to clients, Sebi said.

The updated disclosure document pages in which changes are carried out will be simultaneously communicated to the clients, updated on the website of the portfolio manager and filed with Sebi within seven working days from the date of change.

Last week, Sebi amended portfolio managers' rules to simplify the format for disclosure documents.