SEBI allows transfer of PMS business between registered managers

SEBI allows transfer of PMS business between registered managers

Market regulator Securities and Exchange Board of India (SEBI) has allowed portfolio managers to transfer their Portfolio Management Services (PMS) business, either fully or partially, to another registered portfolio manager, subject to prior approval from the regulator. The move aims to simplify processes and promote ease of doing business in the PMS sector.

Under the new framework, SEBI has laid out two transfer routes, transfer within the same group and transfer outside the group. Under the transfer within the group route, portfolio managers belonging to the same group and holding SEBI registration can transfer either their entire PMS business or select investment approaches to another entity within the group.

In case the entire business is transferred, the transferor must surrender its registration certificate within 45 working days of the completion of the transfer. If only specific investment approaches are transferred, the original manager may continue holding its registration.

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In the scenario of transfer outside the group, when transferring to an unrelated portfolio manager, both entities must make a joint application to SEBI. In such cases, only a complete business transfer is allowed and partial transfers are not permitted. The transferee must assume all responsibilities, including pending litigations, obligations, and actions of the transferor, and must submit a formal undertaking in a prescribed format. The entire process must be completed within two months of SEBI’s approval, after which the transferor must surrender its registration certificate.

SEBI circular stated, “The entire process of transfer shall be completed as expeditiously as possible but not later than two months from the date of approval. Until the transfer process is complete, the transferor shall continue to act as Portfolio Manager but shall not onboard any new client(s)”.

Both the transferor and transferee must provide undertakings confirming the transfer details, client communication, regulatory compliance, and completion of all formalities. Supporting documents such as board resolutions, transfer agreements, client lists, and fit-and-proper declarations must also be submitted. The SEBI circular will be effective from immediate effect.

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