PMS: SEBI Revises Portfolio Management Service Rules; New Investment Avenues Open Up
Market regulator SEBI has notified the framework for Portfolio Management Services (PMS), thereby expanding investment opportunities for portfolio managers. They will now be able to invest in Initial Public Offerings (IPOs) and primary market debt issuances. A separate route for investing in mutual funds has also been introduced.
The Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, will replace the existing 2020 framework. These new rules will come into effect on April 1, 2027. SEBI announced this in a notification issued on October 7.
Where can portfolio managers invest now?
Under the new PMS framework, portfolio managers will be able to invest in IPOs on behalf of their clients. They will also be able to invest in primary market debt security issuances. Additionally, securities listed or traded on stock exchanges will fall within their investment scope. Money market instruments and mutual funds are included as well. They will also be permitted to invest in foreign securities, unlisted securities, and exchange-traded derivative instruments. High-value accredited investors may invest up to 100% of their assets under management in unlisted securities.
What is the PRIM route and how will it work?
SEBI has also introduced the Portfolio Manager Route for Investment in Mutual Funds (PRIM). This will enable portfolio managers to invest client funds in ‘Direct Plans’ of mutual funds. This includes ETFs, index funds, and Special Investment Funds (SIFs) offered by Indian Asset Management Companies (AMCs). A minimum investment limit of ₹25 lakh has been set for PRIM (Portfolio Managers Route for Investing in Mutual Fund Units). Entities specifically offering PRIM are required to maintain a minimum net worth of ₹2 crore.
What are the other significant changes?
The regulator has also introduced the concept of independent fund managers. They can manage and operate client portfolios in collaboration with registered portfolio managers; however, the registered portfolio managers will remain responsible and accountable for their activities. To ease compliance, SEBI has also relaxed the educational qualification requirements for principal officers. Graduates will now be eligible to serve as principal officers. The SEBI board had approved this proposal in September.
