The Securities and Exchange Board of India has notified the Portfolio Management Services (PMS) framework effective from April 1, 2027. According to Press Trust of India and Rediff Moneynews, this framework replaces the existing 2020 framework and represents a significant expansion of investment avenues for portfolio managers. The new regulations, titled The Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, were notified on October 12 and will become effective from the next financial year. Under the new PMS framework, portfolio managers will be permitted to invest in Initial Public Offerings (IPOs), primary market debt issuances, securities listed or traded on stock exchanges, money market instruments, mutual funds, foreign securities, unlisted securities, and exchange-traded derivative instruments. As reported by Press Trust of India, this represents a substantial broadening of investment options beyond the previous framework.
Under the new PMS framework, portfolio managers will be permitted to invest in Initial Public Offerings (IPOs), primary market debt issuances, securities listed or traded on stock exchanges, money market instruments, mutual funds, foreign securities, unlisted securities, and exchange-traded derivative instruments. As reported by Press Trust of India and Rediff Moneynews, this represents a substantial broadening of investment options beyond the previous framework. Portfolio managers will also be allowed to offer discretionary or non-discretionary services for investment up to 100% of assets under management of large value accredited investors in unlisted securities, subject to appropriate disclosures in the disclosure document and terms agreed between the client and the portfolio manager. The framework specifically permits portfolio managers to offer advisory services related to unlisted securities for large investors, providing greater flexibility in investment strategies.
Sebi has introduced the Portfolio Managers Route for Investing in Mutual Fund units (PRIM) to enable portfolio managers to invest clients' funds in direct plans of mutual funds including ETFs, Index Funds and Specialised Investment Funds (SIFs) of Indian Asset Management Companies. According to Press Trust of India and Rediff Moneynews, the minimum investment threshold for PRIM is set at ₹25 lakh, which is lower than the ₹50 lakh minimum applicable to the conventional PMS route. This route facilitates direct investment in mutual fund units without intermediary charges, providing portfolio managers with enhanced access to mutual fund markets for their clients. An entity operating exclusively under PRIM is required to maintain a minimum net worth of ₹2 crore, while the framework provides a cap of 1% of AUM on the fixed component of management fees under this route, with performance-linked fees permitted subject to applicable requirements. The SEBI Board approved the PRIM framework on September 24, 2026, and the regulations specify an effective date of April 1, 2027.
The new regulations introduce the concept of Independent Fund Managers, who can manage and operate client portfolios in association with registered portfolio managers. As reported by Press Trust of India and Rediff Moneynews, while the registered portfolio manager will retain responsibility and liability for their activities, this framework allows for greater flexibility in portfolio management arrangements. The regulations also provide an exit option for clients in specified circumstances if the independent fund manager leaves or the arrangement is terminated, allowing portfolio managers to draw on external fund-management expertise without transferring their regulatory responsibility to the independent manager.
To ease compliance requirements, Sebi has relaxed the educational qualification for principal officers. According to Press Trust of India and Rediff Moneynews, even graduates will now be eligible to function as principal officer, representing a significant reduction in educational barriers for portfolio management firms. The dealing-room requirement has been relaxed for portfolio managers with AUM below ₹100 crore. Sebi has also introduced a standardised investment management agreement that incorporates authority to operate demat and trading accounts, while the requirement concerning bank-account power of attorney under the applicable Reserve Bank of India (RBI) framework continues to apply. The new regulations also provide a transition period of 12 months from commencement for existing investments below the ₹50 lakh threshold to bring them into compliance with the new framework.
