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The International Financial Services Centres Authority permits Banking Units to offer Portfolio Management services and Investment Advisory services to residents and non-residents. Banking Units must apply for registration to the Authority under the operating guidelines for portfolio managers. Permitted Banking Units must maintain a Clients Portfolio Account in the general ledger for portfolio management funds. Undeployed funds are treated as outside borrowings of the Banking Unit. Banking Units must ensure a clear functional separation of trading and back-office processes. Separate guidelines will apply to Banking Units offering Investment Advisory services as a standalone service.
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F.No.110/IFSCA/Banking Regulation/2021-22/1
April 26, 2021
To All Banking Units
Dear Sir/Madam,
Subject: Offering of Portfolio Management Service (PMS) and Investment Advisory Service (IAS) by BUs - Guidelines
Banking Units (BUs) may please refer to the IFSC (Banking) (Amendment) Regulation, 2021 which was notified by the Authority on March 25, 2021. The said regulation permits BUs to undertake the following additional activities:
The Operating Guidelines for Portfolio Managers in International Financial Services Centre dated September 9, 2020$^1$ (issued by SEBI) shall be applicable mutatis mutandis to BUs. BUs desirous of offering PMS in IFSC may apply for registration to the Authority under the provision of para 2(a) of the abovementioned operating guidelines.
The BUs that are permitted to offer PMS by the Authority shall maintain a 'Clients' Portfolio Account' in its general ledger, reflecting the funds received by it for portfolio management on a day-to-day basis. The balance lying in this account (i.e., undeployed funds, if any, from this account) shall be treated as outside borrowings of the BU. The BU's liability to its clients in respect of funds accepted by it for portfolio management shall be properly reflected in the BU's accounts.
The BUs shall maintain a clear functional separation of trading and back-office processes relating to its own investment accounts and PMS clients' accounts.
$^1$ Circular no. SEBI/HO/IMD/DF1/CIR/P/2020/169 dated September 9, 2020
The BUs that are permitted to offer PMS are also permitted to provide incidental investment advice to their PMS clients, provided that BUs shall comply with the general obligations and responsibilities specified for Investment Advisers as specified in the "Operating Guidelines for Investment Advisers in International Financial Services Centre" dated January 9, 2020 (as amended) $^2$
Guidelines for BUs desirous of offering IAS as a standalone service shall be issued separately.
BUs are directed to ensure compliance with the provisions of this circular.
Yours faithfully
(Supriyo Bhattacharjee) General Manager supriyo.b@ifsca.gov.in
$^2$ SEBI/HO/IMD/DF1/CIR/P/2020/04 dated January 09, 2020 (subsequently amended on February 28, 2020 and September 28, 2020)
