The Crucial Role of Custodians in PMS
In the world of Portfolio Management Services (PMS), your investments are like priceless works of art. Just as you wouldn't leave a masterpiece unprotected, your financial assets require expert care and protection. This is where custodians come into play – the unsung heroes of the investment world who work tirelessly to ensure the safety and integrity of your portfolio.
What is a Custodian in PMS?
A custodian in PMS acts as a guardian for your investments. Their primary role is to hold and safeguard your assets, ensuring they are protected and correctly recorded. The Power of attorney of the Bank account and demat account are held with the custodian. While Dezerv makes investment decisions, the custodian handles all administrative tasks viz., tracking transactions, managing paperwork, and ensuring timely income from dividends and interest. This partnership ensures your investments receive meticulous care and protection.
We have partnered with ICICI Bank, one of India's most trusted financial institutions, as our custodian. This partnership adds an extra layer of security and credibility to our services.
Key Responsibilities of Custodians
1. Safekeeping of Assets
At Dezerv, we take the security of your investments seriously. Through our custodian, ICICI Bank, we employ state-of-the-art security measures to protect your investments. These include advanced digital safeguards for online transactions and data, as well as robust physical security for important documents and assets. This comprehensive approach ensures the safety and integrity of your portfolio at all times.
2. Asset Verification and Record-Keeping
We believe in complete transparency. Our custodian maintains detailed records of your investments:
- Verification of all buy and sell transactions
- Regular reconciliation of records with actual holdings
- Maintenance of detailed transaction documentation
- Periodic audits to ensure compliance
- Clear reporting to keep you informed about your portfolio
3. Settlement of Trades
With India's move to a T+1 settlement cycle on March 28, 2024, custodians play a crucial role in ensuring smooth and timely trade settlements. They manage the transfer of ownership and funds, making sure that securities go to the buyer and money goes to the seller swiftly.
4. Compliance and Regulatory Oversight
Custodians operate under strict regulations to protect your investments:
- Supervised by the Securities and Exchange Board of India (SEBI)
- Must comply with SEBI (Custodian of Securities) Regulations, 1996
- Subject to inspection and supervision under Section 11(2)(ba) of the SEBI Act
- Required to follow the Prevention of Money Laundering Act, 2002
- Operate under SEBI (Portfolio Managers) Regulations, 2020
The Importance of Regulatory Compliance
The regulatory framework surrounding PMS and custodians is designed to protect investor interests. Here are some key points:
- Segregation of Assets: Portfolio managers must keep client securities in separate, segregated accounts and client funds in distinct bank accounts held with a Scheduled Commercial Bank.
- Third-Party Custodian: An SEBI-registered custodian is required to safeguard client securities and funds and hold a power of attorney for related bank and demat accounts.
- Ownership Rights: While the portfolio manager may have power of attorney over the client's demat account, the securities remain legally owned by the client.
- Same-Day Transfer: Portfolio managers must ensure that all client securities are transferred to the client's demat account on the same day of acquisition.
- Regular Reporting: Clients receive quarterly statements reflecting their holdings and transactions and annual certified financials of their PMS account.
Why This Matters to You
- Enhanced Security: The multi-layered security measures employed by custodians protect your investments from theft, loss, or fraud.
- Transparency: Detailed record-keeping and regular reporting keep you informed about your portfolio's status and performance.
- Regulatory Protection: Strict oversight by SEBI ensures that custodians and portfolio managers operate in your best interests.
- Efficient Transactions: Timely settlement of trades helps maintain market integrity and reduces risks associated with financial transactions.
- Peace of Mind: Knowing that your assets are safeguarded by a regulated third party allows you to focus on your investment strategy rather than worrying about the safety of your holdings.
Choosing a PMS Provider
When selecting a PMS provider, it's crucial to consider their chosen custodian. A reliable custodian can significantly impact the safety and efficiency of your investments. Look for providers who partner with reputable custodians and maintain transparent practices.
For example, Dezerv offers Portfolio Management Services with 0% management fees, making professional management accessible to a wider range of investors. They have appointed ICICI Bank as their custodian, ensuring an independent and trusted entity for safekeeping client funds and securities.
Conclusion
Custodians play a vital role in the PMS ecosystem, acting as the guardians of your financial assets. Their responsibilities extend far beyond mere safekeeping, encompassing meticulous record-keeping, efficient trade settlements, and strict regulatory compliance.
Remember, while the world of investments can be complex, with Dezerv, you can have peace of mind knowing that your portfolio is in capable hands. Our expert management, robust security measures, and cost-effective services make us the ideal partner for your investment journey.
Ready to experience the Dezerv difference? Contact us today to learn more about how we can help you achieve your financial goals with confidence and security.
FAQs
What is the role of a custodian in PMS?
A custodian in PMS is responsible for the safekeeping of clients' funds and securities. They ensure that client assets are segregated from the portfolio manager's own assets, manage demat accounts, and oversee transactions to comply with regulatory guidelines.
How does Dezerv ensure the safety of client investments through its PMS structure?
Dezerv appoints ICICI Bank as its custodian, ensuring independent oversight and safekeeping of client funds and securities. This setup follows SEBI regulations mandating the segregation of client assets and strict compliance with regulatory requirements.
What happens to client funds and securities if Dezerv were to cease operations?
In the event of Dezerv ceasing to exist, both the Depository Participant and the Custodian are legally bound to provide full disclosure and honour client instructions. This ensures the continuity and protection of client investments under regulatory oversight.
What are the reporting requirements for clients invested in Dezerv's PMS?
Dezerv provides quarterly statements to clients detailing their holdings and transactions. Additionally, annual certified financials of the PMS account are furnished to ensure transparency and compliance with regulatory standards.
How are client securities managed in Dezerv's PMS structure?
Client securities are transferred to individual Demat accounts in the client's name on the same day of the transaction. While Dezerv holds the Power of Attorney over these accounts for operational purposes, the ultimate ownership of securities remains with the client, ensuring transparency and accountability.
Do we need to open a separate bank account for the PMS?
No, you do not need to open a separate bank account for the PMS. The process is similar to transferring money into a mutual fund's bank account. You will transfer money into the PMS account, which is held in the name of Dezerv Investments Pvt Ltd, as the PMS license is in Dezerv's name. This bank account is used exclusively for PMS transactions and is maintained with a scheduled commercial bank, as required by regulations.
It's important to note that while the bank account is in Dezerv's name, all investments are made in the client's name and are held in a demat account which is also in the client's name. This structure ensures the safety and proper management of your investments while simplifying the process for you as an investor.
Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always consult a qualified financial advisor before making investment decisions.
Dezerv Investments Private Limited:
- Portfolio Manager (SEBI Registration no. INP000007377)
- Investment Manager to Category I AIF-VCF-Angel Fund (SEBI Registration no. IN/AIF1/22-23/1066) and Category II AIF - Dezerv Alternatives Trust (SEBI Registration no. IN/AIF2/23-24/1345)
Mutual Fund distribution services are offered through Dezerv Distribution Services Pvt. Limited (AMFI Registration No.: ARN-248439).
All investments, including Portfolio Management Services (PMS) and Mutual Funds, are subject to market risks. Read all scheme-related documents carefully before
