Archive / Investment Adviser (Level 1) / Portfolio Manager

nism-series-xa-pms-compliance-officer-appointment-requirement[ INVESTMENT ADVISER (LEVEL 1) ]

Under SEBI (Portfolio Managers) Regulations, 2020, what is the requirement regarding the appointment of a Compliance Officer by a non-individual portfolio manager?

[ A ]The portfolio manager is exempt from appointing any compliance personnel if AUM is below Rs. 100 crore.

[ B ]The compliance officer must be a full-time sitting Judge of the High Court.

[ C ]Compliance monitoring can only be outsourced to foreign rating agencies.

[ D ]The portfolio manager must appoint a designated Compliance Officer or an independent professional (CA/CS/Cost Accountant) holding relevant NISM certification, responsible for monitoring compliance with SEBI Acts, regulations, and guidelines.[ CORRECT ]

Takeaway

A non-individual portfolio manager must appoint either a designated Compliance Officer or an independent qualified professional (CA/CS/Cost Accountant holding relevant NISM certification) responsible for monitoring adherence to SEBI's Acts, regulations, and guidelines.

Derivation

SEBI requires a dedicated, accountable compliance function within every non-individual portfolio management entity because self-monitoring by the same team executing investment decisions creates an obvious conflict of interest — a separate compliance role ensures ongoing, independent checks on adherence to disclosure norms, expense caps, client segregation rules, and other regulatory obligations. The rule specifically allows flexibility in who fills this role (an in-house designated officer, or an outsourced independent professional from a recognized institute holding the relevant NISM certification), but does not permit skipping the function entirely regardless of the manager's AUM size, which is the specific misconception the exam is testing against.

Why the others fail

A — The portfolio manager is exempt from appointing any compliance personnel if AUM is below Rs. 100 crore.

There is no AUM-based exemption from appointing compliance personnel under SEBI's Portfolio Managers Regulations — the compliance officer requirement applies to non-individual portfolio managers.

B — The compliance officer must be a full-time sitting Judge of the High Court.

A judicial appointment such as a sitting High Court Judge is unrelated to SEBI's compliance officer requirement.

C — Compliance monitoring can only be outsourced to foreign rating agencies.

Compliance monitoring is not restricted to outsourcing exclusively to foreign credit rating agencies; SEBI's rule permits either an internal designated officer or a domestically qualified independent.