Dealing with Client Funds

77. (1) A FME shall not accept from the client, funds or securities worth less than USD 75,000 in case of a portfolio management agreement: Provided that the minimum investment threshold shall not apply to an accredited investor. (2) The funds of a client availing portfolio management services (other than those availing only advisory services) may be maintained in- (a) a specific bank account of the FME in a Banking Unit; (b) a specific bank account of the client in a Banking Unit, a bank in India or a Foreign Jurisdiction; (c) a specific account of the client maintained with a regulated broker dealer in IFSC, or an equivalent entity in India or foreign jurisdiction; or (d) any other manner as may be specified by the Authority. Provided that when the funds are maintained in the specific bank account of a client, the FME operating as portfolio manager shall ensure that it is duly authorised to operate the said bank account either by itself or through a custodian and it shall provide the details of all such bank accounts including transactions carried out thereunder, to the Authority, whenever directed to do so: Provided further that when the funds of the clients are in a specific account maintained with a regulated broker dealer, the FME operating as portfolio manager shall ensure that - (i) adequate controls are in place to ensure requirement specified under sub-regulation (1) is complied with; (ii) it is duly authorised to operate the said account, and (iii) it shall provide the details of all such accounts including transactions carried out thereunder, to the Authority, whenever directed to do so. (3) A FME shall segregate each portfolio management client's holding in securities in separate accounts: Provided that this sub-regulation shall not apply if the investments of the clients are in jurisdictions permitting omnibus account structure. In such cases, FME shall ensure that the investment using omnibus structure is pursuant to prior consent of the clients; and adequate checks are in place to ensure that the clients' securities are earmarked separately. (4) The funds received from the clients, investments or disinvestments, all the credits to the account of the client including interest, dividend, bonus or any other beneficial interest received on the investment and debit for expenses, if any, shall be properly reflected in the client's accounts. (5) The FME shall act in a fiduciary capacity in respect of the client's funds and securities, and shall not derive any direct or indirect benefit out of the client's funds or securities. (6) The FME shall not borrow funds or securities on behalf of the client.