Overhaul of portfolio management services: What SEBI has proposed and what it means for investors
The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a comprehensive overhaul of the regulatory framework governing Portfolio Management Services (PMS).
Key proposals include a new, lower-entry-barrier Mutual Fund-only Portfolio Management Services (MF-PMS) framework, with a proposed minimum investment of ₹25 lakh — half the current ₹50 lakh threshold for standard PMS.
SEBI has also proposed allowing portfolio managers to invest client funds in overseas securities and "to-be-listed" securities, and to make limited investments in unlisted debt securities under discretionary PMS mandates.
Other proposals include relaxing the mandatory dedicated dealing-room requirement for smaller portfolio managers (fewer than 10 clients or Assets Under Management below ₹100 crore), enabling portability of demat accounts when investors switch portfolio managers, and reducing reliance on Power of Attorney (PoA)-based operational processes.
Public comments on the consultation paper have been invited until August 13, 2026.
Portfolio Management Services (PMS) and the SEBI (Portfolio Managers) Regulations, 2020
PMS is an investment product where a SEBI-registered portfolio manager manages a client's securities portfolio (discretionary, non-discretionary, or advisory) on an individual, segregated basis — unlike mutual funds, which pool money from many investors into a common scheme. PMS is currently governed by the SEBI (Portfolio Managers) Regulations, 2020, notified under the SEBI Act, 1992, which replaced the earlier 1993 regulations effective January 16, 2020.
Key Details
- Current minimum investment per client under standard PMS: ₹50 lakh (raised from ₹25 lakh under the 2020 regulations).
- Portfolio managers must maintain a minimum net worth of ₹5 crore to remain SEBI-registered.
- PMS caters mainly to High Net-worth Individuals (HNIs), given the high entry threshold, unlike mutual funds which have no minimum investment floor.
The proposed MF-PMS framework — with entry lowered to ₹25 lakh and restricted to investing only in mutual fund units — is designed as a simpler, lower-risk, lower-threshold PMS variant, effectively bridging the gap between mutual funds and full-scale discretionary PMS.
Investor Protection Rationale Behind the Proposed Changes
SEBI's mandate under the SEBI Act, 1992 is to protect investor interests and regulate the securities market. The current overhaul responds to two pressures: (a) demand from smaller investors for professionally managed, PMS-style products without the ₹50 lakh entry barrier, and (b) operational frictions — such as mandatory dedicated dealing rooms and PoA-heavy processes — that raise compliance costs disproportionately for smaller portfolio managers without corresponding investor-protection benefit.
Key Details
- Relaxation of the dedicated dealing-room requirement is proposed only for portfolio managers below defined size thresholds (fewer than 10 clients or AUM under ₹100 crore), subject to audit trails and internal controls — a proportionate, risk-based regulatory approach.
- Demat account portability would let investors switch portfolio managers without the friction of closing and reopening securities accounts, improving competition and investor exit options.
- Allowing exposure to overseas and "to-be-listed" securities widens the investable universe for PMS clients, aligning it closer to sophisticated fund structures like Alternative Investment Funds (AIFs).
These are the specific mechanisms through which SEBI aims to expand access to professionally managed portfolios while retaining investor safeguards — a recurring SEBI regulatory pattern of easing product access paired with proportionate compliance relief.
- Governing framework: SEBI (Portfolio Managers) Regulations, 2020 (superseded the 1993 regulations, effective January 16, 2020), under the SEBI Act, 1992.
- Current PMS minimum investment: ₹50 lakh; proposed MF-PMS minimum investment: ₹25 lakh.
- Minimum net worth requirement for portfolio managers: ₹5 crore.
- Dealing-room relaxation proposed for portfolio managers with fewer than 10 clients or AUM below ₹100 crore.
- Public comment window on the consultation paper: open until August 13, 2026.