The Securities and Exchange Board of India (“SEBI”), at its board meeting on September 24, 2026, approved the SEBI (Portfolio Managers) Regulations, 2026 (“2026 PMS Regulations”), replacing the SEBI (Portfolio Managers) Regulations, 2020 (“2020 Regulations”).
The SEBI board approval follows a stakeholder survey conducted through the Association of Portfolio Managers in India (“APMI”) and a consultation paper issued by SEBI on July 23, 2026 (“Consultation Paper”). The 2026 PMS Regulations aim to develop the portfolio management services industry, ease compliance, consolidate regulatory provisions, simplify language and remove certain redundant provisions.
New investment avenues
Firstly, portfolio managers can now invest client funds in initial public offerings and primary market debt issuances. Subject to prior consent of the client, managers can invest up to 10% (ten percent) of a client’s assets under management (“AUM”) in investment-grade, non-convertible, unlisted debt securities under Discretionary Portfolio Management Services (“DPMS”).
Secondly, portfolio managers can now take derivatives exposure of up to 1.25 (one point two five) times a client’s AUM. Under the 2020 Regulations, portfolio managers could not leverage a client’s portfolio through derivatives, and they were also barred from speculative transactions. The 2026 PMS Regulations remove this restriction.
Thirdly, foreign securities are now a permitted asset class, available under, both, DPMS and Non-Discretionary Portfolio Management Services (“NDPMS”) routes. Permitted instruments include listed equity, listed debt, REITs, overseas mutual funds, exchange traded funds, index funds and foreign government debt. All such investments must comply with the Foreign Exchange Management Act, 1999 and the Reserve Bank of India’s Liberalized Remittance Scheme (“LRS”).
Fourthly, the 2026 PMS Regulations introduce the Portfolio Managers Route for Investing in Mutual Fund units (“PRIM”), a new, lower-entry route into a portfolio manager’s direct plans of mutual funds, ETFs, index funds and Specialized Investment Funds. An existing portfolio manager can offer PRIM as a separate investment approach, while a new applicant can seek a fresh registration to operate only within PRIM.
PRIM comes with its own entry and operating conditions: (i) a minimum ticket size of Rs. 25,00,000 (Rupees twenty-five lakh); (ii) a minimum net worth of Rs. 2,00,00,000 (Rupees two crore) for the portfolio manager; (iii) relaxed eligibility for the principal officer, who may qualify with a graduation degree, CFA or CA along with 2 (two) years of securities market experience and a simplified National Institute of Securities Markets certification; (iv) a waiver of exit load; (v) a 25% (twenty-five percent) cap on investments in schemes of affiliated, group or associate asset management companies; (vi) a fixed management fee capped at 1% (one percent) of client AUM, with a performance-based fee permitted separately; and (vii) segregation of activities and clients between mutual fund distribution and PRIM, except for accredited investors.
Fifthly, the 2026 PMS Regulations allow eligible fund managers to manage and advise eligible investment funds that invest in overseas securities, and where such funds invest into Indian securities, the investment limit stays aligned with the prevailing foreign portfolio investor framework.
New market participants
The 2026 PMS Regulations introduce Independent Fund Managers (“IFM”): individuals who manage and operate client portfolios in partnership with a SEBI-registered portfolio manager, letting the manager bring in outside investment talent under its own regulatory umbrella, subject to several safeguards. The registered portfolio manager, not the IFM, remains fully liable for everything the IFM does. Fees will be paid directly to the portfolio manager rather than the IFM, and every order the IFM places must pass through the portfolio manager’s own systems. A portfolio manager may work with several IFMs at once, but each IFM can only be attached to one portfolio manager at a time. Clients get a right to exit if an IFM leaves or is removed, and APMI will maintain a running, updated list of all active IFMs.
Ease of compliance
Firstly, smaller portfolio managers gain relief on infrastructure: under the 2020 Regulations, every portfolio manager needed a dealing room regardless of size, but the 2026 PMS Regulations relax this requirement for portfolio managers whose AUM is below Rs. 100,00,00,000 (Rupees one hundred crore), a threshold effectively covering nearly half the industry.
Secondly, SEBI has proposed a standardized Investment Management Agreement that will make terms easier for clients to understand and will build in authority to operate demat and trading accounts, so a separate document will not be needed. It remains to be seen, however, whether SEBI will prescribe a format or only key principles.
Simplified drafting language
Beyond substantive changes, the 2026 PMS Regulations will reflect a significant drafting overhaul. Provisions on registration, co-investments and other related matters that were previously scattered across the 2020 Regulations will be consolidated under relevant heads, and general obligations will be reorganized with clearer anchors for benchmarking, valuations and related matters. Various grandfather clauses and transitory provisions have been removed or modified with clear expiry dates, and redundant, replicative and transitory clauses have been deleted. That said, the text of the 2026 PMS Regulations has not yet been released and will need to be reviewed once notified.
Conclusion
These changes significantly reshape what a portfolio manager can offer. A client can now access foreign markets, primary market debt and greater derivatives exposure under DPMS and NDPMS, enter mutual funds through PRIM from as little as Rs. 25,00,000 (Rupees twenty-five lakh), or have an IFM manage their portfolio, with the portfolio manager continuing to bear full responsibility and liability. Smaller portfolio managers also gain relief, through relaxed principal officer qualifications and dealing room requirements.
For now, the 2026 PMS Regulations are board-approved but not yet notified, and important details, including the norms for overseas investment and PRIM benchmarking, are still to be prescribed through the final notified text and accompanying circulars.
Please find attached a copy of the regulations, here.
This update has been contributed by Armaan Patkar (Partner) and Aditi Maheshwari (Associate).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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