Increased transparency in PMS augurs well

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: The Portfolio Management Services (PMS), which has mushroomed in the last few years and their customised products, which sold like hot cakes on the backdrop of buoyant capital markets, has come under the scanner of the market regulators. The capital market regulator, Securities and Exchange Board of India (Sebi) has come out with mandates for the PMS industry and as any other mandate made by the apex body, even this one couldn’t go undebated.

In the first move, Sebi has decided to enhance the minimum net worth requirement for registration as a portfolio manager from the existing Rs 50 lakh to Rs 2 crore and to give effect to the requirement of maintaining continuous net worth separately for portfolio management activities. Experts believe that the measure taken is going to be skewed towards the bigger players but at the same time will leave quality players space.

K Venkitesh, national head-distribution, Geogit Financial Services Ltd, which handles more than 500 clients, is of the opinion that, “The step is an entry barrier keeping the smaller players at the receiving end. The mandate will make sure that only the big players will be in the market.”

A segment of the portfolio management industry also believes that the measure taken will ensure more professional handling of the business. They further recon that, customisation and personalisation, which lies at the heart of the PMS industry, went for a toss, as the industry witnessed a sudden surge due to a vibrant capital market in recent times. The reporting standard to the clients had hit its nadir due to an unprofessional approach by some smaller players that allowed smaller ticket size to investors.

"The step will ensure space for quality players. Technology and administrative work are going to stack up, which smaller players would find difficult to cope with,” added Venkitesh. Also, existing portfolio managers, whose net worth is less than Rs 2 crore, will has to increase it to at least Rs 1 crore within a period of six months and thereafter to the prescribed net worth of Rs 2 crore in the next six months from the date of notification of amendment to Sebi (Portfolio Managers) Regulations, 1993.

The unique selling proposition for PMS is that these services offer specific customised and personalised service. Post this mandate, providing a high level of personalisation to small ticket investors will not make economic sense.