Jayanta Roy (left), senior vice-president of ICC, with Sebi executive director R.K. Nair in Calcutta on Friday. Picture by Kishor Roy Chowdhury

Calcutta, Nov. 20: Portfolio managers, who handle the wealth of rich individuals, may be allowed to invest in derivatives.

Addressing a seminar on portfolio management services organised by the Indian Chamber of Commerce here today, Sebi executive director, R.K. Nair said, “We are currently examining the proposal whether portfolio managers could be allowed to invest and trade in instruments such as exchange-traded derivatives.”

At present, Sebi permits investment in derivatives as a hedging strategy, and only to the extent of the value of the portfolio. However, they are not allowed to invest in derivatives such as interest rate futures and currency futures.

Till the end of October, there were 247 Sebi-registered portfolio managers handling assets worth Rs 2,71,448 crore of 57,134 clients.

Individuals must keep a minimum of Rs 5 lakh with a portfolio manager; even foreigners can avail themselves of the services.

Nair said Sebi had recently amended its regulations to ensure smooth funds inflows. A portfolio manager has to maintain a capital adequacy of Rs 2 crore compared with Rs 50 lakh earlier. Last year, the market regulator asked portfolio managers to separate each client’s account from their pool account.

“This has created a lot of operational problems with the portfolio managers. Now, each client will need to open individual depository accounts and provide the KYC (Know Your Client) documents,” said an official of a portfolio management firm.

Nair said the changes were meant to protect investors. “Portfolio management is a specialised service provided to high net worth clients. Besides, this is a very highly concentrated business.” Though there are 247 companies registered with Sebi, the top 15 manage 97 per cent of the assets.