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Functions of Asset Management Company

1. portfolio management-Portfolio Management Services


account is an investment portfolio in Stocks, Debt and fixed
income products managed by a professional money manager
that can potentially be tailored to meet specific investment
objectives. Investor hasthefreedomandflexibilitytotailorhisportfolio
to address personal preferences and financial goals. Although portfolio
managers may oversee hundreds of portfolios, investors account may be
unique.AsperSEBIguidelines,onlythoseentitieswhoareregisteredwith
SEBI for providing PMS services can offer PMS to clients. There is no
separatecertificationrequiredforsellinganyPMSproduct.AspertheSEBI
guidelines,theminimuminvestmentrequiredtoopenaPMSaccountisRs.5
Lacks.
Benefitsofportfoliomanagementservices

PMSgivesinvestorsaccesstoaninstitutionalprocessofmoneymanagement.
Provides a customized solution bymatching the unique circumstances and
objectivesofeachinvestor.
WealthcreationbasedondisciplinedinvestmentprocessisthecruxofPMS.
Effectivediversificationhelpsreduceportfoliovolatilityandenhancesrisk
adjustedreturnsoverlongterm.
PMS gives investor direct ownership of the individual securities in the
portfolio

PMSv/sMutualFund:

BothPMSandMutualFundsaretypesofmanagedFunds.
The difference to the investor in a Portfolio Management Services over a
MutualFundis:ConcentratedPortfolio.
Portfoliocanbetailoredtosuittheneedsofinvestor.Investorsdirectlyown
thestocks,ratherthanthefundowningthestocks.
Differenceintaxation
2. Advisory services -An asset management company gives recommendations
and suggestions regarding investments; where to invest, when to invest, how
to invest, when to sell securities, and so on. Advisory investment managers
may either provide asset management services on behalf of corporate
investment firms, or directly manage a clients assets. Hiring good advisory
investment managers ensures the efficient management of investor finances
and high returns on investments. The advisory role of Amc is utilized mainly
against offshore funds, pension, funds, provident funds , venture capital
funds , management of insurance funds and above are the main funds under
which Amc performs its advisory role and provide information on the basis of
research conducted in market and past experience. An financial consultancy
and research conducted by asset management company can be exchanged on
commercial basis but such activity should not be in conflict with the activities
of mutual fund1. the asset management company can only perform such
activity after satisfying the board that the key personnel i.e manager or
portfolio manager , office , bank and securities account are different or
segregated and the Amc have established a system to prohibit or restrict the
access of price sensitive information or insider information of such activity in
performing such activity2 . the Amc can perform such function by itself or
with the help of subsidiary established under it3.

1 Section24(2) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)


REGULATIONS, 1996- not undertake any other business activities except activities in the nature
of35[portfolio management services,] management and advisory services to offshore funds, pension
funds, provident funds, venture capital funds, management of insurance funds, financial consultancy
and exchange of research on commercial basis if any of such activities are not in conflict with the
activities of the mutual fund.
2 Section24(2) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996-Provided that the asset management company may itself or through its
subsidiaries undertake- such activities if it satisfies the Board that the key personnel of the asset
management company, the systems, back office, bank and securities accounts are segregated activity-
wise and there exist systems to prohibit access to inside information of various activities.
3 Section24(2) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996-Provided further that asset management company shall meet capital adequacy
requirements, if any, separately for each such activity and obtain separate approval, if necessary under
the relevant regulations.
3. Exercise due diligence- The asset management company should
take all the reasonable step to make sure that the investment
made or managed by such Amc not to be contradictory to the
provisions of these regulation and trust deed i.e. between the
Amc and trustee4.

4. Quarterly reports-It is required to submit to the trustees, quarterly reports of


each year on its activities and the compliance with these regulations. It should
file with the trustees, the details of transactions in securities by the key
personnel of the asset management company in their own name or on behalf of
the asset management company and shall also report to the SEBI as and when
required by the SEBI.5 The director shall also file details of all the transaction
of dealings with the trustees on the basis of guidelines issued by board6.

5. Compensation to affected investor- The AMC and the sponsor of the Mutual
Fund shall be liable to compensate the affected investors for any unfair
treatment to them as a result of inappropriate valuation

6. Arrangement of approval The asset management company shall


obtain all the all the approval from recognized stock exchange
before listing of security in such market and it is mandatory
for Amc to abide with the guidelines of board and accordingly
take approval regarding the listing of such security as
prescribed by the board7.

4 Section25(1) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)


REGULATIONS, 1996The asset management company shall take all reasonable steps and exercise due
diligence to ensure that the investment of funds pertaining to any scheme is not contrary to the
provisions of these regulations and the trust deed.

5 Section 25(4) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)


REGULATIONS, 1996- The asset management company shall submit to the trustees quarterly reports
of each year on its activities and the compliance with these regulations.
6 Section 25(13) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996-Eachdirectoroftheassetmanagementcompanyshallfilethedetailsofhis
transactionsofdealinginsecuritieswiththetrusteesonaquarterlybasisinaccordancewithguidelines
issuedbytheBoard.
7 Section 25(2A) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996- Theassetmanagementcompanyshallobtain,whereverrequiredunderthese
regulations,priorinprincipleapprovalfromtherecognizedtockexchange(s)whereunitsareproposed
7. It shall abide by the Code of Conduct specified by the SEBI8.

8. Treating the customers fairly -The AMCs must work solely keeping in mind
the investors interest. It is a huge responsibility on their shoulders as the
investors put tons of money in their hands expecting a good return on them. So
they are bound to follow the ethical principles and regulations of fair dealing.

9. A best-endeavors obligation- The AMC must have sufficient financial


resources (capital etc.), technical capabilities (accounting system, analytical
resources, performance monitoring, etc.) and personnel (adequate staffing
levels for the business type and volume) to provide the investment services
being offered.

10. capital adequacy requirement


11. disclosure of intention and information

tobelisted

8 Section 25(16) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)


REGULATIONS, 1996-The asset management company shall abide by the Code of Conduct as
specified in the Fifth Schedule