The Securities and Exchange Board of India (Sebi) has approved a comprehensive overhaul of the (portfolio management services) PMS framework, expanding investment avenues for clients while easing several compliance requirements for portfolio managers.
Key Highlights
- Sebi approves new PMS rules, expanding investment options across IPOs, debt, overseas securities and mutual funds.
- New PMS framework lowers PRIM entry threshold to Rs 25 lakh and eases several compliance requirements.
At its board meeting on Thursday, Sebi approved the Sebi (Portfolio Managers) Regulations, 2026, replacing the existing 2020 regulations. The new PMS framework allows portfolio managers to invest in initial public offerings (IPOs), primary debt issuances and a broader range of overseas securities. It also introduces a dedicated route for professionally managed portfolios of mutual fund investments.
Sebi Expands Investment Options Under PMS
On the new PMS framework, the portfolio managers will be allowed to invest in primary issuance of debt securities and IPOs on behalf of clients.
The framework also provides for portfolio managers to invest up to 10% of their portfolio clients' assets under management (AUM) in non-convertible debt securities of investment grade that are not listed on the exchange.
Non-discretionary portfolio management and advisory services currently allow up to 25% of client AUM investing in unlisted securities.
In addition, Sebi has broadened the ‘overseas investment universe’ for PMs of discretionary and non-discretionary funds. Portfolio managers can invest in listed foreign equity and debt, REIT's, overseas mutual funds, ETFs/Index funds and foreign government securities under the RBI's Liberalised Remittance Scheme and subject to the Foreign Exchange Management Act.
New PRIM Route for Mutual Fund Investments
A key change is the introduction of the Portfolio Managers Route for Investing in Mutual Fund Units (PRIM).
Under PRIM, portfolio managers can invest in direct plans of Indian mutual fund schemes, including ETFs, index funds and Specialised Investment Funds (SIFs).
The minimum investment threshold under PRIM has been set at Rs 25 lakh, compared with Rs 50 lakh for conventional PMS. Portfolio managers offering PRIM will need a minimum net worth of Rs 2 crore, while the fixed management fee will be capped at 1% of client AUM.
Aditya Agarwal, Co-Founder of Wealthy.in, said the PRIM framework could enable more affluent investors to access professionally managed mutual fund portfolios. He noted that registered portfolio managers would be able to build customised portfolios using direct mutual fund plans, including ETFs, index funds and SIFs.
Sebi Introduces Independent Fund Manager Framework
The revised regulations also seek to simplify compliance and provide greater flexibility for PMS businesses through the introduction of Independent Fund Managers (IFMs).
IFMs will be allowed to manage and operate client portfolios in association with registered portfolio managers. However, the registered portfolio manager will continue to bear full responsibility and liability for the IFM's activities.
IFMs must meet the same qualification, experience and certification requirements applicable to a principal officer. Their fees will be paid directly to the registered portfolio manager, while orders generated by IFMs will be routed through the portfolio manager's infrastructure.
A portfolio manager can associate with multiple IFMs, while an IFM can work with only one portfolio manager at a time. Clients will also have to be provided with a mandatory exit option if an IFM leaves or is terminated.
PMS Compliance Requirements Eased
Sebi has also relaxed the educational qualification requirement for principal officers, allowing graduates to take up the role.
Portfolio managers with AUM below Rs 100 crore will be exempt from the dealing-room requirement, provided they maintain adequate audit trails and internal controls. Sebi said this relaxation will cover around 48% of registered portfolio managers.
The regulator will also introduce a standardised Investment Management Agreement (IMA). The agreement will incorporate the authority to operate demat and trading accounts, while the existing RBI requirement for a power of attorney for bank accounts will continue.
Sebi will further harmonise reporting timelines, promote digital disclosure documents and clarify that statutory levies will be excluded from the existing 0.5% annual operating expense cap.
Also Read: SEBI Introduces a Single Certification Exam for MF & SIF Distribution
PMS Industry AUM Rises Sharply
The regulatory overhaul comes as the PMS industry has recorded significant growth in recent years.
According to Sebi data, the industry's AUM stood at Rs 42.61 lakh crore as of May 31, 2026, compared with Rs 18.07 lakh crore in April 2019. The number of clients increased to 2.19 lakh from 1.5 lakh during the period, while the number of portfolio managers rose to 515 from 226.
The regulator has also simplified the structure of the PMS regulations. The revised PMS framework consolidates provisions and removes redundant and transitional clauses, reducing the regulations from 70 pages to 33 pages, a 53% reduction. The word count has also declined by around 42%.
What the New PMS Rules Mean
The revised PMS framework combines expanded investment opportunities with changes aimed at simplifying regulatory and operational requirements for portfolio managers.
For clients, the framework introduces access to IPOs, primary debt issuances, a wider overseas investment universe and professionally managed equity mutual fund portfolios through PRIM. For portfolio managers, changes such as the IFM framework, relaxed dealing-room requirements and standardised documentation are intended to simplify operations and compliance.
