SEBI to ease compliance, enable innovation for portfolio managers

SEBI Chairman Tuhin Kanta Pandey stated that regulations for portfolio managers must evolve. The regulator is reviewing rules to enable innovation, reduce compliance friction, and introduce new investment routes, while ensuring investor protection.

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Wednesday said regulation for portfolio managers must evolve with the industry's growth, with the market regulator seeking to reduce unnecessary compliance friction while enabling innovation without compromising investor protection.

Regulation Must Evolve with Industry Growth

“As an industry matures, regulation too must mature,” Pandey said at the APMI Annual Conference 2026 in Mumbai. “Regulation cannot remain focused only on prescribing safeguards, it must also enable innovation, remove unnecessary friction, and make compliance easier without compromising investor protection,” he added.

Pandey said this approach had guided SEBI's comprehensive review of portfolio managers' regulations, which was approved by the SEBI board last week. He said the exercise was not about making limited amendments but involved looking at the regulatory framework afresh after seeking feedback from stakeholders.

Revised Framework for Portfolio Managers

The revised framework has four broad objectives -- development of the PMS industry, ease of compliance, consolidation and simplification of the regulatory framework, and removal of redundant provisions. The framework will also widen the investment possibilities available to portfolio managers as investor needs become more diverse.

Under a new route, “portfolio managers can construct portfolios using direct plans of mutual funds, including ETFs, index funds, and specialized investment funds. The minimum ticket size will be rupees 25 lakh,” he said.

Introducing Independent Fund Managers (IFMs)

SEBI is also introducing Independent Fund Managers (IFMs), allowing investment professionals and entrepreneurial talent to operate in association with an established portfolio manager. Registered portfolio managers will, however, continue to remain responsible for the activities of the independent fund manager.

PMS Industry Sees Significant Expansion

Pandey said the PMS industry had expanded significantly, with assets under management reaching about Rs 9.2 lakh crore by August 2026, from around Rs 1.4 lakh crore at the end of FY16, suggesting a growth of 20 per cent annually. The number of registered portfolio managers has risen from around 200 a decade ago to more than 530, while discretionary PMS clients have grown nearly fivefold to around 2.2 lakh.

“Technology can augment investment judgment, it cannot outsource accountability,” Pandey said, stressing that accountability for portfolios must ultimately remain human and identifiable.

Future Focus: Coordination and Risk Management

During the Q&A, Pandey said inter-regulatory coordination would be critical as the financial ecosystem expands. “Inter-regulatory coordination is not merely something that can take place on the side—it is essential,” he said.

He also noted that 9.5 per cent of Indian households are currently invested in the stock market, while 20 to 30 per cent are looking forward to it. However, cautioning against trying to predict every risk, he said, “Risk is that for which you are never prepared... don't try to predict it, because eventually every prediction fails”. (ANI)

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