- SEBI approved major changes to the regulatory framework for portfolio management services
- The overhaul expands investment options for portfolio managers, including overseas securities
- Portfolio managers can now invest in ETFs up to 1.25 times the clients' assets under management
The Securities and Exchange Board of India (SEBI) has approved a significant overhaul of the regulatory framework governing portfolio management services (PMS), widening investment avenues for portfolio managers while easing certain compliance requirements.
The changes were part of the key decisions taken at the SEBI Board meeting on Thursday, September 24. The regulator had earlier proposed broadening the investment universe for portfolio managers, including allowing investments in overseas securities and securities that are yet to be listed.
Under the revised framework, portfolio managers will be allowed to invest in exchange-traded funds (ETFs) up to 1.25 times the clients' assets under management (AUM), according to the Board meeting takeaways.
SEBI has also permitted PMS managers to invest in initial public offerings (IPOs) and primary market issuances in the debt market.
The minimum ticket size for PMS investments will remain at Rs 25 lakh, providing access to the expanded investment avenues within the existing minimum investment framework.
Foreign Investment Allowed Under Discretionary PMS
Another key change is the enabling of investments in foreign securities under discretionary portfolio management services.
The move is aimed at widening the investment universe available to PMS clients and bringing greater flexibility to portfolio managers. SEBI had proposed allowing portfolio managers to invest in overseas listed equity and debt securities as part of a broader effort to align PMS investment avenues with other regulated investment vehicles.
The changes come as the PMS industry has expanded significantly in recent years. SEBI's July proposal noted that assets managed by portfolio managers had risen from Rs 18.07 lakh crore in April 2019 to Rs 42.61 lakh crore by May 2026.
Compliance Norms Eased
SEBI has also relaxed certain compliance requirements for portfolio managers as part of the overhaul. One of the changes relates to the operating expense limit. Statutory levies will be excluded while calculating the current operating expenses cap of 0.5% per annum.
The move is expected to provide some relief to portfolio managers by ensuring that statutory charges are not counted within the prescribed operating expense ceiling.
The broader PMS overhaul comes amid SEBI's efforts to streamline regulations while providing regulated investment managers with greater flexibility. The Board meeting agenda had included a comprehensive review of PMS regulations alongside reforms covering foreign portfolio investors, accredited investors, alternative investment funds and other parts of the capital market.
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