Sebi’s big PMS overhaul explained: What changes for investors and portfolio managers?

The Securities and Exchange Board of India (Sebi) has approved a comprehensive overhaul of the portfolio management services (PMS) framework, opening new investment avenues for clients while easing several compliance requirements for portfolio managers.

The Sebi board on Thursday approved the Sebi (Portfolio Managers) Regulations, 2026, replacing the existing 2020 regulations. The revamped framework allows portfolio managers to invest in initial public offerings (IPOs), primary market debt issuances, and a wider range of overseas securities. It also introduces a new route for professionally managed portfolios of mutual fund investments.

What new investment avenues will PMS clients get?

Under the new framework, portfolio managers will be allowed to invest in IPOs and primary issuances of debt securities for their clients. They can also invest up to 10% of a client's assets under management (AUM) in investment-grade, unlisted non-convertible debt securities, subject to the client's consent.

Currently, non-discretionary portfolio management and advisory services can invest up to 25% of client AUM in unlisted securities.

Sebi has also widened the overseas investment universe for portfolio managers offering discretionary and non-discretionary services. They can invest client funds in listed overseas equity and debt, REITs, overseas mutual funds, exchange-traded funds (ETFs), index funds and foreign government securities, subject to the Foreign Exchange Management Act and the Reserve Bank of India's Liberalised Remittance Scheme (LRS).

The regulator has also introduced the Portfolio Managers Route for Investing in Mutual Fund Units (PRIM). Under this route, 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 will be ₹25 lakh, compared with ₹50 lakh for conventional PMS. Portfolio managers offering the service will require a minimum net worth of ₹2 crore, while the fixed management fee will be capped at 1% of client AUM.

Aditya Agarwal, Co-Founder, Wealthy.in, said the PRIM framework could allow more affluent investors to access professionally managed mutual fund portfolios. “Registered portfolio managers will be able to construct customised portfolios using direct plans of mutual funds, including ETFs, index funds and Specialized Investment Funds,” he said.

How will Sebi make it easier to run PMS businesses?

The revamped regulations also seek to reduce compliance requirements and make the PMS framework more flexible. Sebi has introduced the concept of Independent Fund Managers (IFMs), who can manage and operate client portfolios in association with a registered portfolio manager. However, the registered portfolio manager will retain full responsibility and liability for the IFM's activities.

IFMs will have to meet the same qualification, experience and certification requirements as a principal officer. 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, but an IFM can work with only one portfolio manager at a time. Clients will also have to be given a mandatory exit option if an IFM leaves or is terminated.

Sebi has also relaxed the educational qualification for principal officers, with graduates now eligible for the role. Portfolio managers with AUM below ₹100 crore will be exempt from the dealing-room requirement, provided they maintain adequate audit trails and internal controls.

According to Sebi, the relaxation will cover around 48% of registered portfolio managers. The regulator will also introduce a standardised Investment Management Agreement (IMA), with the authority to operate demat and trading accounts incorporated into the agreement. The existing RBI requirement for a power of attorney for bank accounts will continue.

Why does the new framework matter for the PMS industry?

The overhaul comes as the PMS industry has expanded sharply in recent years. According to Sebi data, industry AUM stood at ₹42.61 lakh crore as of May 31, 2026, up from ₹18.07 lakh crore in April 2019. The number of clients rose to 2.19 lakh from 1.5 lakh during the period, while the number of portfolio managers increased to 515 from 226.

Sebi has also sought to simplify the regulatory framework itself. The revised regulations consolidate provisions and remove redundant and transitional clauses, reducing the document's size by 53%, from 70 pages to 33 pages. The word count has fallen by around 42%.

The regulator will harmonise reporting timelines, promote digital disclosure documents and clarify that statutory levies will be excluded from the existing 0.5% annual operating expense cap.