The proposals have been released through a consultation paper, with public comments invited until August 13.
The regulator noted that the PMS industry has expanded significantly over the past few years. Assets under management have grown to ₹42.61 lakh crore as of May 31, 2026, from ₹18.07 lakh crore in April 2019, while the number of portfolio managers has more than doubled to 515 from 226 in 2020. The number of clients has also increased to 2.19 lakh.
SEBI said this growth, coupled with increasing investor sophistication and demand for personalised investment solutions, has prompted a comprehensive review of the regulations.
Among the most significant proposals is expanding the investment universe available to portfolio managers. SEBI has proposed allowing PMS managers to invest in “to be listed” securities, a category that is currently not explicitly permitted. The regulator has also proposed allowing discretionary portfolio managers to invest up to 10% of a client’s assets under management in investment-grade unlisted debt securities, a flexibility that is currently unavailable under discretionary PMS.
In another major proposal, SEBI has suggested allowing portfolio managers to invest client funds in foreign securities, including overseas listed equities, listed debt securities, overseas mutual funds, unit trusts and listed REITs, subject to the Foreign Exchange Management Act (FEMA) regulations and the Liberalised Remittance Scheme. Portfolio managers would also be required to obtain explicit client consent before making such investments.
According to SEBI, this would bring regulatory parity with mutual funds, Alternative Investment Funds and IFSC-based portfolio managers that already have access to overseas markets.
The consultation paper also proposes the introduction of a new Mutual Fund-only PMS (MF-PMS) category aimed at making professionally managed portfolios more accessible to mass-affluent investors.
Under the proposed framework, investments would be restricted to direct plans of mutual funds, ETFs and Specialised Investment Funds. SEBI has proposed lowering the minimum investment threshold for this category to ₹25 lakh from the existing ₹50 lakh applicable to traditional PMS.
The regulator has also proposed lower net worth requirements for such entities, simplified qualification norms for principal officers, optional dealing room requirements, simplified disclosures and a management fee cap of 2.5% of client assets, while also seeking comments on allowing performance-linked fees.
SEBI has also proposed providing portfolio managers with greater flexibility in using exchange-traded derivatives. Under the proposal, overall derivative exposure could go up to 1.25 times the client’s assets under management, with unhedged short exposure through equity derivatives permitted up to 50% of AUM and option premium exposure capped at 10% of AUM. These strategies would require explicit client approval.
Apart from expanding investment avenues, the regulator has proposed a wide-ranging set of ease-of-compliance measures. These include rationalising qualification norms for principal officers, permitting digital disclosure documents, extending certain filing timelines, simplifying reporting formats, clarifying the definition of related parties and introducing clearer net worth deployment requirements. Existing portfolio managers would also be required to maintain at least 10% of their net worth in unencumbered liquid assets.
The consultation paper also seeks market feedback on several structural reforms beyond the draft regulations. These include relaxing the mandatory dealing room requirement for smaller portfolio managers with less than 10 clients or ₹100 crore of AUM, allowing Eligible Fund Managers to manage overseas clients investing in foreign securities, introducing a framework for independent fund managers operating under a registered portfolio manager, enabling demat account portability when investors switch PMS providers and removing the operational requirement of obtaining a Power of Attorney from clients, subject to adequate safeguards.
SEBI has invited comments from stakeholders on all the proposals before finalising the revised Portfolio Managers Regulations. The consultation paper represents one of the most comprehensive reviews of the PMS framework since the regulations were revamped in 2020 and is aimed at aligning the regulatory framework with the evolving needs of investors and the rapidly expanding wealth management industry.
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