SEBI has proposed a review of portfolio management regulations to introduce a mutual fund-only PMS category. The move aims to simplify the framework, ease compliance, and lower entry barriers for investors and portfolio managers.
The Securities and Exchange Board of India (SEBI) has proposed a revision of portfolio management regulations to create a mutual fund-only portfolio management service (PMS) category, as per a statement by the markets regulator.
SEBI issued a consultation paper on Thursday, proposing a comprehensive review of the Portfolio Managers Regulations, 2020 to expand the investment opportunities, ease compliance requirements and simplify the regulatory framework for the portfolio management industry.
"The objective of this consultation paper is to seek comments and views from the public on the proposed amendments to the SEBI (Portfolio Managers) Regulations, 2020 ("PM Regulations") and circulars issued thereunder, carried out pursuant to a comprehensive Review," it said.
The markets regulator noted that the Assets Under Management (AUM) of the Portfolio Management Services (PMS) industry had risen to Rs 42.61 lakh crore as of May 31, 2026, from Rs 18.07 lakh crore in April 2019. The number of PMS clients also increased to 2.19 lakh from 1.5 lakh during the same period.
Meanwhile, the number of portfolio managers more than doubled to 515 as of May 31, 2026, from 226 in 2020, when the PMS Regulations were revamped.
Noting the significant growth and increasing adoption of technology in the Portfolio Management Services industry, SEBI said it undertook a comprehensive review of the PMS Regulations to align them with evolving industry dynamics, rising investor sophistication, growing demand for personalised solutions and diversified portfolios.
Dedicated Mutual Fund-Only PMS Framework
SEBI has recommended introduction of a dedicated mutual fund-only PMS framework which will enable portfolio managers to manage client funds exclusively through direct plans of mutual fund schemes, including exchange-traded funds and specialised investment funds, under a separate MF-PMS registration.
"Under the PM Regulations, portfolio managers are permitted to invest client's funds in units of Mutual Funds along with other permissible securities. Based on representation and requests received from industry stakeholders, there is a recognized demand for a simplified "Mutual Fund-only" PMS framework with lowered entry barriers," it said.
Easing Entry Requirements
The markets regulator has proposed easing entry requirements for the portfolio management industry by reducing the minimum client investment threshold from Rs 50 lakh to Rs 25 lakh and the minimum net worth requirement for applicants from Rs 5 crore to Rs 2 crore.
Existing portfolio managers would also be allowed to offer MF-PMS through a separate investment approach as per the release.
Capping Management Fees
The regulator has proposed capping fixed management fees under the revised framework.
"Portfolio managers operating under this framework shall be permitted to charge a fixed management fee, capped at a maximum of 2.5% of the client's AUM," SEBI noted.
(ANI)
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