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SEBI issues Performance Benchmarking Guidelines for PMS industry; Issues Guidelines for Winding Down of CCs

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Sebi issues performance benchmarking guidelines for PMS industryThe Securities and Exchange Board of India (SEBI) has introduced performance benchmarking and categorization for the Portfolio Management Services (PMS) industry w.e.f. April 1, 2023.

  • These norms are similar to the current norms in mutual funds.
  • It will help investors assess and compare the performance of service providers.

SEBI has provided this information in exercise of its power conferred under Section 11 (1) of SEBI Act, 1992, read with the provisions of Regulation 43of SEBI (Portfolio Managers) Regulations, 2020, to protect the interest of investors and to promote the development of securities market.

Key Highlights of Norms:

i.The portfolio managers should adopt an additional layer of broadly defined investment strategies while managing clients’ funds.

  • These broad strategies will be Equity, Debt, Hybrid, and Multi Asset.

ii.Each Investment approach (IA) will be tagged to only one strategy from the specified strategies.

  • IA is the documented investment philosophy that is adopted by portfolio managers while managing the client funds in order to achieve investment objectives.

iii.The Association of Portfolio Managers in India (APMI) will prescribe a maximum of three benchmarks for each strategy.

iv.The valuation of the portfolio debt and money market securities by portfolio managers would be carried out in accordance with the standardised valuation norms prescribed by APMI.

v.APMI will empanel valuation agencies for the purpose of providing security level prices to portfolio managers.

vi.Portfolio managers will submit the monthly reports to APMI within 7 working days from the end of each month. APMI would make available the monthly reports of the portfolio managers on its website in a user-friendly manner.

Click Here for official circular

SEBI issues Guidelines for Winding Down of CCs

SEBI also laid down guidelines for orderly winding down of critical operations and services offered by clearing corporations (CCs).

  • To enable the framework, SEBI had amended the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations (SECC Regulations 2018) through a notification issued on November 15, 2022.

Key Points:

i.Under the framework, CCs will have to draw up a Standard Operating Procedure (SOP) stating the manner in which their critical services would be carried out so as to not cause any disruption to the financial system.

ii.CCs will be allowed to wind down operations if they have taken a strategic decision to do so or if there are losses due to defaults on the part of clearing members, or other factors. They will also be allowed to wind down in case of regulatory action.

iii.The reasons for winding down of CC can be voluntary or involuntary.

  • Involuntary winding down would depend on factors such as regulatory action, losses due to default by clearing member and losses due to other factors like some large operational expenses, legal expense or investment losses.
  • Notably, CC would be required to continuously meet the annual clearing turnover of atleast Rs 1,000 crore per annum.

This  circular  for the same is issued by SEBI in  exercise  of  the  powers  conferred  under  Section  11(1)  of  the SEBI  Act  1992,  read  with  Section  10  of  the Securities  Contracts  (Regulation)  Act,  1956 .

Recent Related News:

i.On October 31, 2022, the Securities and Exchange Board of India (SEBI) issued norms regarding the standardization of rating scales used by Credit Rating Agencies (CRAs) which will be applicable from January 1, 2023.

ii.SEBI introduced a flexible option for appointment and removal of independent directors from the boards of companies. In this regard, SEBI has amended LODR (Listing Obligations and Disclosure Requirements) rules and the new rules will be called as SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2022.

About Securities and Exchange Board of India (SEBI):

Chairperson– Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra
Establishment– 1992