SEBI Notifies Portfolio Managers Regulations, 2026

SEBI has notified the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026 through Notification No. SEBI/LAD-DOP/2026/322 dated October 7, 2026. They replace the 2020 Regulations and are effective from April 1, 2027.

On July 23, 2026, SEBI issued a consultation paper on a comprehensive review of the 2020 Regulations, citing the growth of the PMS industry. The paper records that industry assets under management rose from ₹18.07 lakh crore in April 2019 to ₹42.61 lakh crore as of May 31, 2026, and that registered portfolio managers increased from 226 in 2020 to 515 in May 2026. The review aimed to expand investment avenues, consolidate and simplify provisions and ease compliance.

Key Changes

Wider investment options

Under Regulation 17(1)(b), portfolio managers may invest or advise clients to invest in IPOs for equity securities, primary-market issuances of debt securities, securities listed or traded on a recognised stock exchange, money market instruments, mutual fund units and other securities specified by SEBI. Discretionary and non-discretionary portfolio managers may invest client funds in foreign securities under Regulation 17(1)(c), in the manner specified by SEBI. Investment in unlisted securities and exchange-traded derivatives is permitted under Regulations 17(1)(d) and 17(1)(e), subject to the limits and conditions specified by SEBI.

Under the 2020 Regulations, portfolio managers could not invest client funds in foreign securities. Investment in unlisted securities was generally limited to non-discretionary and advisory services, up to 25% of a client’s assets under management, with limited exceptions, including for large value accredited investors. Regulation 17(1)(d) now extends investment in unlisted securities to discretionary services, subject to limits that SEBI will specify. The consultation paper had proposed expressly permitting investment in “to be listed” securities; the final text instead refers to IPOs for equity securities and primary-market issuances of debt securities in Regulation 17(1)(b).

The PRIM route

Regulation 2(1)(z) defines the Portfolio Management Service Route for Investment in Mutual Fund Units (PRIM) as an investment approach meeting the requirements of Chapter VI, which comprises Regulations 29 to 34. Under Regulation 32, portfolio managers offering PRIM must invest client funds only in direct plans of mutual funds in India, including index funds, exchange-traded funds and specialised investment funds.

An applicant seeking registration exclusively to offer PRIM must apply under Regulation 30(1). Under Regulation 30(2), an existing portfolio manager may be permitted to offer PRIM through segregated investment approaches, subject to conditions specified by SEBI. A PRIM-only applicant needs only a principal officer and a compliance officer, and the infrastructure requirement does not include a dealing room (Regulation 31(1)). Its principal officer may be a graduate with NISM certification and at least two years of securities-market experience (Regulation 31(2)).

Regulation 31(1)(iii) requires a portfolio manager exclusively offering PRIM to maintain a minimum net worth of ₹2 crore at all times (against ₹5 crore for other portfolio managers), with at least 10% of the minimum net-worth requirement deployed in unencumbered liquid assets. Regulation 33(1) prescribes a minimum investment of ₹25 lakh per client, against ₹50 lakh under Regulation 16(3). Regulation 34 empowers SEBI to impose additional conditions relating to segregation, record-keeping, fees and limits on investment in associates of the portfolio manager.

Independent fund managers and principal officers

Regulation 2(1)(n) defines an Independent Fund Manager as a fund manager who manages client portfolios in affiliation with a registered portfolio manager, in accordance with terms and conditions specified by SEBI. Under Regulation 4(b)(iii), an employee or Independent Fund Manager with decision-making authority relating to fund management must meet the same minimum qualification, experience and certification requirements as a principal officer. Regulation 17(2)(a)(iii), which otherwise bars portfolio managers from investing client funds on the advice of another entity, makes an exception for Independent Fund Managers.

Regulation 4(b)(i) relaxes the educational qualification for a principal officer. A graduate in any discipline now qualifies, as does the holder of a CFA charter or a CA, CS or CMA qualification, subject to NISM certification and the existing experience requirement.

Provisions on eligible fund managers and co-investment portfolio managers, previously spread across the 2020 Regulations, are now consolidated in Chapter III (Regulations 9–11) and Chapter IV (Regulations 12–13). Regulation 9(3) now provides for eligible fund managers acting for eligible investment funds that invest in foreign securities, with only Chapters I to III and Regulation 16(2) applying to that activity. The consultation paper noted that such managers had been treated as unable to offer services in foreign securities.

Registration, net worth and client obligations

The minimum net worth remains ₹5 crore under Regulation 4(a)(iv), but at least 10% of the minimum requirement must now be deployed in unencumbered liquid assets. Regulation 2(1)(u) also redefines net worth to include the securities premium account and to exclude loans and advances given by the portfolio manager, including to related parties or associates. Existing portfolio managers must comply with these requirements within 12 months from commencement of the Regulations.

Regulation 6(7) requires a portfolio manager to commence business within three years of registration, which means fulfilling conditions that SEBI will specify within that period. Existing portfolio managers have 36 months from commencement of the Regulations to comply (Regulation 6(8)).

Regulation 15(2)(a) allows the disclosure document to be provided in digital format, with a free physical copy available on request under Regulation 15(2)(b). Material changes must be filed with SEBI by way of an addendum within 15 calendar days, replacing the earlier seven-working-day timeline (Regulation 15(2)(f)), and disclosed to clients within 15 calendar days (Regulation 15(2)(i)).

Under Regulation 16(2), portfolio managers may not carry out investment management operations or execute portfolio management transactions outside India, except trades for investment in foreign securities. Regulation 4(a)(ii)(b) allows SEBI to exempt specified portfolio managers from the dealing-room requirement, and Regulation 8 introduces a procedure for surrendering a certificate of registration.

Clients whose investments predate the 2020 Regulations must meet the ₹50 lakh minimum investment within 12 months of commencement (Regulation 16(5)). Investments made before the 2020 Regulations must comply with prudential limits, the bar on unrated securities of related parties or associates, and credit-rating norms within 36 months (Regulation 17(1)(l)).