Mumbai: Markets regulator Sebi board on Thursday approved a comprehensive overhaul of the portfolio management services framework, allowing portfolio managers to invest in initial public offerings, primary market debt issuances and a wider range of overseas securities.
The Sebi board approved the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, replacing the existing 2020 regulations to simplify compliance, remove redundant provisions and widen investment opportunities for portfolio management services (PMS) clients.
Under the new framework approved by Sebi, portfolio managers will be permitted to invest in IPOs and primary market issuances of debt securities. They can also invest up to 10 per cent of a client’s assets under management (AUM) in investment-grade, unlisted non-convertible debt securities, subject to the client’s consent, the regulator said in a statement after the board meeting here.
Under the new framework approved by Sebi, portfolio managers will be permitted to invest in IPOs and primary market issuances of debt securities. They can also invest up to 10 per cent of a client’s assets under management (AUM) in investment-grade, unlisted non-convertible debt securities, subject to the client’s consent, the regulator said in a statement after the board meeting here.
Currently, non-discretionary portfolio management and advisory services can invest up to 25 per cent of client AUM in unlisted securities.
Sebi will also allow portfolio managers offering discretionary and non-discretionary services to invest client funds in overseas securities, including listed 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 RBI’s Liberalised Remittance Scheme (LRS).
Additionally, the regulator has also introduced a new route for portfolio managers to invest in direct plans of Indian mutual fund schemes, including ETFs, index funds and Specialised Investment Funds (SIFs).
Under the portfolio managers route for investing in mutual fund units (PRIM), the minimum investment threshold will be Rs 25 lakh. The portfolio manager will require a minimum net worth of Rs 2 crore, and the fixed management fee will be capped at 1 per cent of client AUM, among others.
Sebi has also introduced the concept of Independent Fund Managers (IFMs), who can manage and operate client portfolios in association with a registered portfolio manager.
It further said the registered portfolio manager will retain full responsibility and liability for the activities of the IFM. The IFM 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 flow through the portfolio manager’s infrastructure.
A portfolio manager can associate with multiple IFMs, while an IFM can operate under only one portfolio manager at a time. Clients will also have a mandatory exit option if an IFM leaves or is terminated, Sebi said.
To ease compliance, Sebi has relaxed the educational qualification for principal officers, making graduates eligible for the role. Portfolio managers with AUM of less than Rs 100 crore will also be exempted from the dealing-room requirement, subject to adequate audit trails and internal controls.
Sebi said the relaxation would cover around 48 per cent of registered portfolio managers. The regulator will introduce a standardised Investment Management Agreement (IMA), with authority to operate demat and trading accounts embedded in the agreement. The existing RBI requirement for a power of attorney for bank accounts will continue.
Sebi will also harmonise reporting timelines, promote digital disclosure documents and clarify that statutory levies will be excluded from the existing 0.5 per cent annual operating expense cap. The revised framework also seeks to simplify the regulations by consolidating provisions and removing redundant and transitional clauses.
Sebi said the exercise reduced the regulations’ size by 53 per cent, from 70 pages to 33 pages; besides, the word count has also been cut by around 42 per cent. The PMS industry has grown significantly in recent years, and according to a Sebi data, the industry’s AUM rose to Rs 42.61 lakh crore as of May 31, 2026, from Rs 18.07 lakh crore in April 2019. The number of clients increased to 2.19 lakh from 1.5 lakh, while the number of portfolio managers rose to 515 from 226.
