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 has the freedom and flexibility to
tailor his portfolio to address personal preferences and financial goals.
Although portfolio managers may oversee hundreds of portfolios, investor‘s
account may be unique. As per SEBI guidelines, only those entities who are
registered with SEBI for providing PMS services can offer PMS to clients.
There is no separate certification required for selling any PMS product. As per
the SEBI guidelines, the minimum investment required to open a PMS
account is Rs.5 Lacks.
Benefits of portfolio management services-

 PMS gives investors access to an institutional process of money management.

Provides a customized solution by matching the unique circumstances and
objectives of each investor.
 Wealth creation based on disciplined investment process is the crux of PMS.
 Effective diversification helps reduce portfolio volatility and enhances risk-
adjusted returns over long term.
 PMS gives investor direct ownership of the individual securities in the
portfolio

PMS v/s Mutual Fund:

 Both PMS and Mutual Funds are types of managed Funds.
 The difference to the investor in a Portfolio Management Services over a
Mutual Fund is: Concentrated Portfolio.
 Portfolio can be tailored to suit the needs of investor. Investors directly own
the stocks, rather than the fund owning the stocks.
 Difference in taxation
 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 client’s 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 fund 1 .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 . theAmc can perform such function by itself or with
the help of subsidiary established under it3.

1Section24(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 suchactivities are not in conflict with the
activities of the mutual fund.
2Section24(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.
3Section24(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.

4Section25(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.

5Section 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.
6Section 25(13) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996-Each director of the asset management company shall file the details of his
transactions of dealing in securities with the trustees on a quarterly basis in accordance with guidelines
issued by the Board.
7Section 25(2A) SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996-The asset management company shall obtain, wherever required under these
 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 investorsinterest. 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,
analyticalresources, 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

regulations, prior in-principle approval from the recognized tock exchange(s) where units are proposed
to be listed

8Section 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