SEBI Expands PMS Investment Options, Introduces New MF Category
By Business Desk
SEBI proposes modernizing PMS regulations, expanding investment avenues to include foreign securities and introducing a new MF-only category to boost flexibility.
The Securities and Exchange Board of India (SEBI) has introduced a series of proposals aimed at modernizing the regulations governing Portfolio Management Services (PMS). These updates seek to enhance investment flexibility for portfolio managers while simultaneously streamlining the compliance framework.
As of May 31, 2026, the PMS sector managed a substantial asset base totaling ₹42.61 lakh crore. The regulator’s objective is to broaden the scope of investment options available to portfolio managers and simplify operational requirements.
Expanding Investment Horizons
A significant change within the proposed regulations involves expanding investment options for PMS managers, which are currently largely confined to domestic assets. The new draft permits investments in foreign securities, including global equities, debt instruments, and mutual funds, provided they comply with existing foreign exchange laws.
Discretionary portfolio managers may also gain authorization to allocate up to 10% of client portfolios to investment-grade, unlisted debt securities. SEBI is additionally considering allowing investments in securities undergoing the listing process, which could diversify available investment themes for clients.
Introducing MF-Only PMS
To widen access to professional wealth management, SEBI plans to establish a new category: the Mutual Fund-only PMS (MF-PMS). This specialized service would exclusively invest in direct plans of mutual funds, Exchange Traded Funds (ETFs), and other specialized funds.
A key feature of the MF-PMS proposal is a reduced minimum investment requirement of ₹25 lakh, a notable decrease from the standard ₹50 lakh for traditional PMS accounts. This initiative aims to cater to mass-affluent investors seeking professional management who might not meet the higher threshold for standard portfolio services.
Streamlining Operational Compliance
The regulator has also put forth several administrative modifications designed to ease the burden on portfolio managers. These include updating qualification standards for principal officers and transitioning toward digital-only disclosure documents for increased efficiency.
For smaller firms, SEBI is contemplating relaxing the requirement for a mandatory physical dealing room and simplifying the process for clients to transfer their demat accounts. Additionally, the draft proposes allowing PMS managers to increase their exposure to exchange-traded derivatives up to 1.25 times the total assets under management, offering more scope for hedging or strategy implementation.
Public Consultation Period
These comprehensive proposals are currently in a public consultation phase, inviting feedback from investors and industry stakeholders. Submissions to SEBI are open until August 13, 2026, after which the final regulations will be formulated to shape the future landscape for portfolio managers and their clients.