Asset Management

SEBI Order Penalises Outsourcing of Core Functions: Structuring Lessons for Asset Management Industry

Summary: This blog analyses a recent SEBI order dated May 26, 2026, which penalised a portfolio manager for outsourcing core investment functions to a technology company under the guise of “technology consulting”. SEBI held that the prohibition on outsourcing core activities under the Outsourcing Circular and Applicable Laws is absolute, and that “investment decisions” extend beyond model portfolio approval to include all downstream steps such as quantities, timing, and client-level trade execution. The portfolio manager and its key personnel were restricted from onboarding new clients for 21 days and were collectively penalised Rs 42,00,000. The article draws broader structuring lessons for the asset management industry, cautioning that SEBI will look at substance over form, that fee structures linked to performance fees signal participation in the investment process, and that individuals in control will face personal liability.

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Asset Classification - Be-hold

With the outbreak of the COVID-19 pandemic and the consequential countrywide lockdown, economic activities of almost all corporates, except those falling under essential services, have witnessed an unprecedented slowdown. As a result, cashflows and debt servicing capabilities of most borrowers have been seriously impacted, necessitating the Reserve Bank of India (“RBI”) to intervene and introduce a regulatory framework, enabling lenders to provide much needed relief to their borrowers.

This blog analyses the relaxation of the asset classification norms to be followed by a bank, with respect to a term loan[1] on account of the measures introduced by the RBI on March 27 and April 17, 2020 and related judicial pronouncements.
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Mutual Funds and Alternative Investments - Stewardship Code

Introduction

On December 24, 2019, Securities and Exchange Board of India (“SEBI”) released a circular setting up a stewardship code for Asset Management Companies (“AMCs”), Mutual Funds (“MFs”) and all the categories of Alternative Investment Funds (“AIFs”) investing in listed Indian companies (“Stewardship Code” or “Code”). In keeping with global trends, SEBI has made it necessary for the power wielding cash-rich institutional investors, to act in accordance with the responsibilities that invariably accompany and behoove such powers and formulate a policy adopting the principles enshrined in the Code.

The Stewardship Code prescribes certain principles which, aim at enhancing the responsibilities of the AMCs/ AIFs to protect the interests of their investors/beneficiaries. The requirements pertaining to the Stewardship Code shall come into effect on April 1, 2020.
Continue Reading Being Responsible Corporate Citizens – How Mutual Funds and Alternative Investment Funds will Rise Up to the Stewardship code