The PMS Disclosure Document
The client gets the Disclosure Document before signing, and SEBI files it but never approves it.
The Disclosure Document (DD) is the portfolio manager's statutory account of itself: who runs it, what it offers, what it charges, what can go wrong, how it has performed and what regulators have found. Regulation 22(3) requires the PM to give it to every prospective client, with a chartered accountant's certificate in Form C, before the agreement is signed.
A distributor should treat the DD as the document the client relies on. If your pitch says something the DD does not, the DD wins, and you have a mis-selling problem.
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What the regulations require
- check_circleGiven to the client before the agreement, and kept on the PM's website at all times (Reg 22(3), 22(6)).
- check_circleContents certified by an independent chartered accountant (Reg 22(5)).
- check_circleFiled with SEBI before it is circulated to any client, and refiled within 7 working days of any material change, including a change in investment approach (Reg 22(7)).
- check_circleRange of fees under each head disclosed (Reg 22(12)).
- check_circlePerformance of a discretionary PM calculated on Time Weighted Rate of Return for the preceding three years, with audited financial statements of the PM for the preceding three years (Reg 22(4)(e)-(f)).
- check_circleThe direct onboarding option disclosed prominently (Master Circular 2.3.2).
The 16 parameters in SEBI's current format
SEBI's circular of September 9, 2025 split the DD into a static section and a dynamic section. Each parameter starts on a fresh page.
| Part | Parameters |
|---|---|
| Part I: Static | 1 Disclaimer clause; 2 Definitions; 3 Description (history, promoters and directors, top 10 group companies by turnover, services offered); 4 Penalties, pending litigation and regulatory findings; 5 Services offered and investment approaches, including the policy on investing in associates; 6 Risk factors; 7 Nature of expenses; 8 Taxation; 9 Accounting policies; 10 Investor services (investor relations officer, grievance and dispute mechanism); 11 Diversification policy |
| Part II: Dynamic | 12 Client representation (clients and funds managed, associates versus others, related-party transactions); 13 Financial performance; 14 Performance of the portfolio manager (TWRR for discretionary); 15 Audit observations of the preceding 3 years; 16 Investments in securities of related parties |
When the DD must change
- Material change
- Includes a change in control of the PM, its Principal Officer, fees, charges, or the investment approaches offered, with the impact of the change (Master Circular 4.1).
- How an update is made
- Only the changed pages are certified by an independent chartered accountant and the Principal Officer. They are sent to clients, put on the website and filed with SEBI within 7 working days of the change, with the change highlighted (Sept 9, 2025 circular).
- Related-party details
- A material change in the related-party investment table must reach the DD and the website within 7 calendar days (Master Circular 4.7.3).
- Principal Officer change
- Disclosed to SEBI and to clients within 7 working days (Reg 22(9)).
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Older material says Schedule V
The DD format used to sit in Schedule V of the 2020 regulations. SEBI omitted Schedule V with effect from September 3, 2025 and now prescribes the format by circular. The required contents in Regulation 22(4) and the CA certification did not change, so workbook lists of DD contents remain broadly right; only the home of the format moved.
How XXI-A tests this
Typical questions: when the DD must be given (before the agreement), who certifies it (an independent chartered accountant), the refiling deadline after a material change (7 working days), and which return method the performance section uses (TWRR). Scenario questions describe a PM inventing its own marketing labels in the DD; the correct answer is to use the terms as defined in SEBI's regulations and format.
The trap answer is 'SEBI approves the DD'. It does not: the DD's own disclaimer clause says SEBI has neither approved nor disapproved it.
FAQs
What is a disclosure document in PMS?expand_more
It is the document a portfolio manager must give every prospective client before signing the agreement, covering its background, services, fees, risks, performance, regulatory actions and related-party investments.
Is the PMS disclosure document approved by SEBI?expand_more
No. It is filed with SEBI and certified by an independent chartered accountant, but SEBI neither approves nor certifies its accuracy.
How often is the PMS disclosure document updated?expand_more
Whenever there is a material change. The changed pages go to clients, the website and SEBI within 7 working days.
Where can I find a PMS disclosure document?expand_more
On the portfolio manager's website, where SEBI requires it to be available at all times.