Regulations
Ignoring SEBI rule, PMS companies refuse to disclose data

As part of our continuing campaign on poor disclosure of PMS data, we find that many PMS companies, including some of the biggest, have failed to disclose their schemes and performance on their own websites, despite a clear direction by SEBI

The entire capital market regulation is based on disclosure, and yet, the Securities Exchange Board of India (SEBI) has made little effort to ensure that portfolio management services (PMS) companies disclose meaningful and easily accessible information about the schemes and their performance, and thus, comply with PMS regulations for disclosure. To enable greater transparency and to get up-to-date information on PMS, SEBI directed PMS companies to upload the disclosure document on their respective websites. The disclosure document not only contains performance data, assets under management (AUM) but also balance sheet information, details of the portfolio manager, etc.
 

In its continuing research on PMS performance and disclosure, Moneylife has found out that most PMS companies, including some of the biggest names in Indian finance— ICICI Prudential Asset Management Company (AMC), Motilal Oswal AMC, Kotak Mahindra AMC, UTI AMC, Reliance Securities and HDFC AMC— have not put up their disclosure document online This means, to make an informed decision, investors will have to approach each PMS entity and specifically ask for the disclosure document, which can be very frustrating and time consuming, and even fruitless. On the other hand, mutual funds are mandated to upload not only NAV data on their websites but even annual reports as well as valuation policy for greater transparency.
 

The SEBI circular IMD/DF/16/2010, dated 2 November 2010, clearly says, “To ensure compliance with Regulation 14(2)(b)(iv) of SEBI (Portfolio Managers) Regulations, 1993, portfolio managers shall disclose the performance of portfolios grouped by investment category for the past three years as per the enclosed prescribed tabular format. Portfolio Managers shall also ensure that the disclosure document is given to all clients along with the account opening form at least two days in advance of signing the agreement. In order to ensure that the clients have access to updated information about the portfolio manager, portfolio managers shall place the latest disclosure document on their website, wherever possible” (emphasis ours).
 

Why is SEBI not acting against those who have not uploaded their disclosure document, or those who have made it difficult for investors to locate it? Moneylife has not only been researching the PMS performance but also goading SEBI to reveal PMS information on its website. We have succeeded only partly. The data is not comparable and the site is extremely slow, even though the regulator has spent crores of rupees on top tech companies to get its site done.
 

Moneylife filtered only those PMS companies who have more than average of Rs10 crore of discretionary assets under management (AUM), over the last five months (since the SEBI website does not provide for information prior to January 2013), and found that only 46 companies fit the bill. We decided to look up the websites of all these 46 companies and here is what we came up with.
 

  • Out of the top 10 companies on the basis of AUM size—Quantum Advisors, HDFC AMC, Motilal Oswal AMC, Enam AMC, Alchemy Capital Management, ICICI Prudential AMC, ING Investment Management, Reliance Capital AMC, Parag Parikh Financial Advisory Services and Anand Rathi Financial Services—shockingly only four of these companies, Quantum Advisors and ING Investment Management, Reliance Capital AMC and Parag Parikh have uploaded their disclosure documents online. Moneylife could not find the disclosure document of the remaining six. Collectively, these 10 companies have nearly Rs10,000 crore of AUM.
     
  • Not only have some PMS companies not uploaded their disclosure document, some have not even updated their documents to reflect most recent figures; many are outdated and are more than six months old. According to SEBI (Portfolio Managers) Regulations, 1993, the disclosure document should be updated every six months. But it doesn’t stop here. As mentioned in our earlier story, in most cases accessing the disclosure document can be an annoying exercise, as many PMS companies neatly tuck it away in some corner of their website.
     
  • So, searching for the document can take quite a bit of time and effort, if you’re tech savvy! And if you do find it, there’s no guarantee that it will be up-to-date. For instance, it took us a while to locate the disclosure document of Prabhudas Lilladher PMS, only to find out that it is updated till October 2012.
     
  • Some PMS websites require the user to sign on with a username and password. For instance, Kotak Securities, which handles an average of Rs72.84 crore in its discretionary account, requires you to login because information relating to PMS could not be found otherwise. Similarly, Avendus requires you to log in to obtain their disclosure document. Anand Rathi has put a brochure of one of their PMS schemes, but we could not locate their disclosure document as per SEBI’s norms. Similarly, Alchemy Capital Management only disclosed their commission structure, but we could not find the disclosure document.
     
  • Surprisingly, we could not locate PMS information for ICICI AMC (average of Rs547.56 crore of AUM) and HDFC AMC (average of Rs1,592.58 crore of AUM), two big names in finance.
     

SEBI has consistently fallen woefully short of ensuring compliance. Many PMS companies have not even complied with the circular, even in spirit. Ironically, in the same circular, SEBI stated that it “has come across lack of uniformity in practice relating to following issues pertaining to portfolio managers” and also “many portfolio managers are not making adequate disclosure regarding portfolio performance in the disclosure document.” But, after November 2010 SEBI has been very casual and has done little to ensure PMS companies comply with the circular. Regulation 14(2)(b)(iv) of SEBI (Portfolio Managers) Regulations, 1993, Portfolio Managers states the following:
 

“The Disclosure Document, shall inter alia contain the following
 

(i) the quantum and manner of payment of fees payable by the client for each activity for which service is rendered by the portfolio manager directly or indirectly (where such service is out sourced);
 

(ii) Portfolio risks;
 

(iii) Complete disclosures in respect of transactions with related parties as per the accounting standards specified by the Institute of Chartered Accountants of India in this regard;
 

(iv) the performance of the portfolio manager: Provided that the performance of a discretionary portfolio manager shall be calculated using weighted average method taking each individual category of investments for the immediately preceding three years and in such cases performance indicators shall also be disclosed;
 

(v) The audited financial statements of the portfolio manager for the immediately preceding three years.
 

Moneylife has been pushing SEBI to disclose the PMS data in public interest through emails, RTI applications and appeals. But it has been frustrating to get the regulator, acting too mulish, to act in the interests of the public.
 

Reported by: Aditya Govindaraj, Khalid Memon and Vishrut Patel
 

Read out earlier articles as part of our campaign to ensure meaningful disclosure of PMS data:

Power of RTI: CIC directs SEBI to disclose all information related to PMS

SEBI’s system of reporting PMS data continues to be frustratingly anti-investor

Arrogant SEBI’s response to RTI is shocking

User

COMMENTS

Rajan Anand

1 year ago

HDFC AMC - PMS real estate portfolio 1 and Senior Fund Manager Vipul Roongta REAL CHEATS

Not aware that you are aware of this gross cheating but I wanted to let you know and think through what we can do along with other investors

As per the Transaction Statement from 1/10/2015 to 31/12/2015 - the left over portfolio value was Rs 419345

As per their recent communication they are going to do final payout in Feb 2016 as investment exits


I called up Sudha Biju 022-6631633 to ask by when this will be paid out

To my utter surprise and dismay I was told the value was 3,30,000 approx from which they will deduct 2,96,000 and will send cheque of JUST 36000. When I asked what is this deduction of 2,96,000 - she told performance bonus for fund manager as we grew that fund at overall more than 10 % - she said some clause allow us to do that. God only knows what clause and what calculation they are using to do this deduction.


All investors - let us come together and fight this out
I think we can put blog or write to some site in SEBI of this gross cheating

My name is Rajan Anand 9810573644


Suiketu Shah

4 years ago

These so called "wealth management companies" boast of the knowledge they have and how great they are(ie they are GOD!) etc to psyche out the retail investors.If indeed they are so great and knowledgable,how come they are shit scared of disclosing their PMS data.Reason si simple for every 10 stocks they wl make you buy,5 wl be Z grade stocks at a high price where they wl make 15% commission.(and they call themselves experts)I am talking of the fraud Rm's here,not necessarily the companies which have hired them.The Rm's in most wealth management conmpanies are crooks who cannot be employed elsewhere.The only way to sort these criminal RM's is to beat they up if they force themselves on you without appointment.

Great work by ml in exposing how holow PMS is of every company in India.

Michael Mason-Mahon

4 years ago

If SEBI is serious about companies complying with their rules and regulation, it is very easy to say the least.

Each company is given written notice of the following:

1) The named company have fourteen days to comply the rules and regulation.

2) For each rule and regulation a company fails to comply with there will be a fine.

3) The Fines will start at 1 Crore per day, for the first twenty one days, thereafter the fines will increase to two Crore per day for a maximum of twenty one days.

4) Should the company still ignore SEBI, then the company's licence will be suspended till the company comply's with the rules and regulation.

5) Any company whose licence is suspended, before having their licence reinstated they will deposit a sum of no less than 4,000 Crore.

6) This money will be retained by the RBI for a minimum of one year, any further breaches of the rules and regulation the company will forfeit twenty percent of the deposited sum.

SEBI may find these companies will be very fast in complying with their rules and regulation.

It just takes a bit of courage to show who is in charge, the companies or SEBI?

Michael Mason-Mahon

4 years ago

If SEBI is serious about companies complying with their rules and regulation, it is very easy to say the least.

Each company is given written notice of the following:

1) The named company have fourteen days to comply the rules and regulation.

2) For each rule and regulation a company fails to comply with there will be a fine.

3) The Fines will start at 1 Crore per day, for the first twenty one days, thereafter the fines will increase to two Crore per day for a maximum of twenty one days.

4) Should the company still ignore SEBI, then the company's licence will be suspended till the company comply's with the rules and regulation.

5) Any company whose licence is suspended, before having their licence reinstated they will deposit a sum of no less than 4,000 Crore.

6) This money will be retained by the RBI for a minimum of one year, any further breaches of the rules and regulation the company will forfeit twenty percent of the deposited sum.

SEBI may find these companies will be very fast in complying with their rules and regulation.

It just takes a bit of courage to show who is in charge, the companies or SEBI?

Mun Mohan Kale

4 years ago

Who are all these people to demand PMS data when Finance Minister, PM and Madam Sonia are trying to garner enough funds for 2014 & 2019 elections so that they are safely well settled in Parliament & rule the country ever after.

sathyacumaran

4 years ago

the stock broking house would not disclose the PMS because this is only place where money laudering and all the black money of various person would be circulated and converted into white and the broking house making bucks out it and they cheat the innocent indian investors and loot their money for which instituion like sebi nse bse are just puppets they donot have any voice even if the chairman wants to implement some reforms the down below are not interested because the chairman is normally an IAS person so they get after retirement this post and afterwards they are contended with their hefty pension but the down below is doing the favour to stock broking with vested interest either they get non fringe benfits after their retirement they get good placement in the stock broking firms which they were patronising for many years and as such indian investors would not get any justice for the fraudlent practice unless this matter goes to international platform of wikileaks or others then only govt india would wake and attempt to tighten the belts by that time indian investors would lost interest or would have even dead the justice and law is so slow that by the time the verdict comes to their favour either they are out of world so is ptheatic condition of indian investors but for all the misdeeds of the sebi nse bse officials the GOD is there where in his books of account he accounts and similarily good punishment is rewarded to these employees as disease for them or thier family and this sorrow would enough but they should repremind and do justice and as an affected investors earnestly pray for speedy justice and reward before my life

sathya cumaran

Central and state governments making continuous attempts to diffuse power of RTI
While a proposal to bring in an ordinance against political parties coming under the RTI is the latest controversy to hit the headlines, the Maharashtra government has recently excluded the Anti-Terrorist Squad (ATS) from its ambit. Well, Shirdi trips by VIPs too is a state secret
 
A few months back, Pune’s Police Commissioner Gulabrao Pol stated at a public meeting in the city that his policemen, particularly during weekends, are diverted for bandobast duty to serve the VIPs, mostly Supreme Court judges who come to Pune for a trip to Shirdi. He mentioned that at least 20 to 25 such VIPs land in Pune for the pilgrimage, thus denying policemen of their rightful weekly offs and citizens, of their rightful security.
 
This writer subsequently filed a RTI (Right to Information) application to find out details of these trips and the VIPs who used the privilege. The information asked under RTI, comprised details of VIP visits in Pune and Police security required for the same on the backdrop of Police Commissioner Mr Pol stating at the meeting of Nagarik Chetna Manch on 20th March at the Poona Club that at least 25 VIPS come to Pune to en route to Shirdi, which calls for appropriate security.
 
My queries included—period to which the information relates: 1 January 2011 to 31 March 2013 
 
Names of VIPs who come from different states of the country to Pune as the base for their Shirdi pilgrimage. 
Please give names along with designations, the city and the state they come from; 
dates of the above VIPs—when they landed in Pune, when they went to Shirdi and when they came back to Pune and when they caught the flight/train to their respective places; 
What arrangements were made for their security by the Pune Police? 
What kind of security category did each of these VIPs have? 
What are the rules of every such category of security? 
How many policemen were deployed for each of these visits? 
What kind of security was deployed for each of these visits? 
What kind of official vehicles and how many official vehicles of police or any other department were used for this purpose? 
How many policemen lost their weekly offs because of being delegated for security? And; 
All correspondence related to the above VIP visits to Shirdi.
 
The reply from the Special Branch of the Pune Police Commissionerate stated that the Special Branch has been excluded from the ambit of the RTI Act and hence no information can be provided. In fact, by an order of the Maharashtra government, the State Intelligence Department and its subsidiaries; the Special Branch of all Police Commissioners and District Special Branches of all District Special Branches have been excluded from the RTI Act.
 
When VIPs are using state machinery and vehicles for pilgrimages, doesn’t the citizen have the right to know the kind of expenditure made out of public money? I can understand that the public authority does not disclose the details of VIP security for obvious reasons, but why should it put a blanket ban? The writer will soon inspect files at the Protocol Officer’s office in the Pune Collector’s office for similar details.
 
Last week, Rakesh Maria, ATS Chief, Maharashtra, has succeeded in excluding the Anti-Terrorist-Squad office too from the RTI Act.  He has sent out a circular to that effect.
 
Leading activists from across the country have sent a joint statement to the central government protesting against a proposed Ordinance to amend the RTI Act so that political parties stay out of its ambit. The statement reads: “There are reports that the government is thinking of promulgating an ordinance to amend the Right to Information Act. This Act was passed by our Parliament and has now become part of the extremely valuable Citizen empowerment for our democracy. We appeal to the government and all political parties to drop any consideration of amending the RTI Act. We are not aware of any emergency requiring such an ordinance, and are confident no such move will be undertaken.” The letter was signed by Aruna Roy, Arvind Kejriwal, Prashant Bhushan, Anjali Bhardwaj, Trilochan Sastry, Jagdeep Chhokar, Subash Agrawal, Shekhar Singh, Harsh Mander, Nikhil Dey, Maja Daruwala, Venkatesh Nayak and Shailesh Gandhi.
 
Thus, the RTI Act is steadily being diluted. Once again, it is the citizens and citizen activists who have to make a noise as our elected representatives are the ones who keep weakening the law.
 
As per the RTI Act following institutions are out of its ambit:
 

User

COMMENTS

Sethi

4 years ago

The Time has now come when all these exclusions which the Central and State Governments are incorporating under the RTI Act needs to be challenged legally in the Supreme Court . Why does the Congress , keep shouting from the roof tops that they were the one's who brought in the RTI Act , Simultaneously when at the same time both the Central Government and the state Governments are doing their very best best to weaken the RTI Act . This is the credibility of the politicians .

Sensex, Nifty under pressure: Wednesday Closing Report
As we suggested yesterday, the upmove was terminated and the market headed lower. The Nifty will remain under pressure for the next two days
 
The market settled nearly 1.5% down as higher crude oil price, weak global cues and the decline in the rupee resulted in across-the-board selling. As we suggested yesterday, the upmove was terminated and the market headed lower. The Nifty will remain under pressure for the next two days. The National Stock Exchange (NSE) recorded a higher volume of 63.60 crore shares and very poor advance-decline ratio of 371:1039.
 
The market opened sharply lower tracking weak global cues. Political tensions in Egypt, which also serves as a transit hub for oil through the Suez Canal, saw global oil prices climbing to over $100 per barrel for the first time in nine months. The development led the US markets lower in overnight trade and resulted in the Asian pack trading in the red in morning deals. All this also pushed up dollar to a one-month high against a basket of currencies.
 
The Nifty opened 46 points lower at 5,812 and the Sensex resumed trade at 19,347, a cut of 117 points from its previous close. While the opening figure of the Sensex was also its intraday high, the Nifty’s high came in a short while with the index touching 5,815.
 
Meanwhile, the rupee fell by 37 paise to again slip below the 60 mark to 60.03 against the dollar in early trade on heavy dollar demand tracking strengthening of the US currency overseas. This is the first time since 27th June that the domestic currency has fallen below the 60 level. The rupee had touched an all-time low of 60.76 against the dollar on 26th June.
 
The declining rupee and rising oil prices led all sectoral indices, with the exception of healthcare and technology, in the negative in mid-morning trade. The market continued its slide in the noon session on news that the HSBC/Markit purchasing managers’ index for the services industry fell to 51.7 in June, from 53.6 in the previous month. A lower opening of the key European markets added to investors’ woes.
 
The benchmarks witnessed sideways movement in late trade in the absence of any favourable triggers. The indices touched their lows in the last half hour with the Nifty slipping to 5,760 and the Sensex going back to 19,147.
 
The market settled in the red for the second day in a row on weak global cues which led to all-round selling.  The Nifty declined 87 points (1.48%) to 5,771 and the Sensex ended the session at 19,178, a fall of 286 points (1.47%).
 
Among the broader indices, the BSE Mid-cap index dropped 1.69% and the BSE Small-cap index declined 1.44%.
 
BSE Fast Moving Consumer Goods (up 0.26%) and BSE Healthcare (up 0.23%) were the only sectoral gainers today. The top losers were BSE Realty (down 4.76%); BSE Metal (down 3.11%); BSE PSU (down 3.08%); BSE Consumer Durables (down 2.84%) and BSE Power (down 2.67%).
 
Out of the 30 stocks on the Sensex, only three stocks settled higher. The gainers were Sun Pharmaceutical Industries (up 1.25%); Jindal Steel & Power (up 0.98%) and ITC (up 0.42%). The main losers were Tata Power (down 4.90%); State Bank of India, Sterlite Industries (down 4.58% each); Tata Steel (down 4.54%) and Hindalco Industries (down 3.61%).
 
The top two A Group gainers on the BSE were—GlaxoSmithKline Pharmaceuticals (up 5.97%) and United Spirits (3.81%).
The top two A Group losers on the BSE were—Unitech (down 10.11%) and Jaiprakash Associates (down 8.71%).
 
The top two B Group gainers on the BSE were—Diana Tea Company (up 19.50%) and Gilanders Arbuthnot Company (up 18.33%).
The top two B Group losers on the BSE were—Empee Distilleries (down 19.98%) and Parrys Sugar & Industries (down 16.80%). 
 
Of the 50 stocks on the Nifty, nine ended in the in the green. The major gainers were Lupin (up 3.87%); JSPL (up 1.40%); Sun Pharma (up 1.21%); Ambuja Cement (up 0.80%) and ITC (up 0.55%). The key losers were JP Associates (down 8.38%); Bank of Baroda (down 7.95%); IDFC (down 6.06%); Punjab National Bank (down 4.94%) and Sesa Goa (down 4.70%).
 
Markets in Asia settled lower as China’s official services PMI reading was the weakest in the past nine months. This apart, major global agencies like the Goldman Sachs Group Inc, China International Capital Corp, Barclays Plc and HSBC Holdings Plc have pared their growth projections for China this year to 7.4%, below the government’s 7.5% target.
 
The Shanghai Composite declined 0.61%; the Hang Seng tanked 2.485; the Jakarta Composite tumbled 3.20%; the KLSE Composite fell 0.15%; the Nikkei 225 declined 0.31%; the Straits Times dropped 1.38%; the Seoul Composite contracted 1.64% and the Taiwan Weighted lost 1.30%.
 
At the time of writing, the CAC 40 of France was down 1.85%; the DAX of Germany declined 1.61% and UK’s FTSE 100 was trading 1.59% lower. At the same time, the US stock futures were in the red, indicating a lower opening for US stocks later in the day. The US markets will see a curtailed trading session today and will remain closed on Thursday for its Independence Day holiday.
 
Back home, institutional investors—foreign and domestic—were net sellers of stocks on Tuesday. While FIIs pulled out Rs43.20 crore from the equities segment, DIIs withdrew Rs125.33 crore from stocks.
 
Zensar Technologies, the IT services and solutions firm from the RPG group, said that it is in talks with two US-based firms for acquisition as part of its target of reaching $1 billion revenue by 2017-18. The stock declined 1.40% to close at Rs256.75 on the NSE.
 
Real estate firm Omaxe today said it will invest Rs200 crore to set up a five-star hotel in New Chandigarh, where it is developing an integrated township. The company has joined hands with the Intercontinental Hotel Group (IHG) to manage and set up the 150-room hotel, named as Holiday Inn, a statement from the company said. Omaxe declined 1.37% to Rs143.55 on the NSE.
 
Crompton Greaves has secured a contract order worth Euro 3.5 million (Rs27 crore) for supply and commissioning of a wind farm substation in France. The 75 MW wind project will produce electricity for over 55,000 households and is scheduled for completion by mid-2014. The stock tanked 3.92% to close at Rs90.60 on the NSE.
 

 

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