Sebi Board Meeting: PMS Overhaul, Easier Settlements, New Ad Code Among Key Changes

Market regulator Securities and Exchange Board of India (Sebi) has approved a new framework for portfolio managers that will allow them to invest in initial public offerings (IPOs), primary debt issuances, foreign securities and direct mutual fund plans, while easing several compliance requirements.

The Sebi Board, at its meeting on September 24, approved the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, replacing the 2020 regulations. The new framework is aimed at developing the PMS industry, easing compliance and removing redundant provisions.

PMS Can Now Invest In IPOs, Foreign Securities, Direct Mutual Funds

Under the new rules, portfolio managers can invest in IPOs and primary issuances in the debt market. Discretionary PMS can invest up to 10 per cent of client AUM in investment-grade, non-convertible, unlisted debt securities, subject to client consent. Investment in exchange-traded derivatives will be permitted up to 1.25 times client AUM.

PMS can also invest in foreign securities, including listed equity and debt, real estate investment trusts (Reits), overseas mutual funds, exchange traded funds (ETFs), index funds and foreign government debt, subject to Foreign Exchange Management Act (FEMA) and the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS).

Dharmendra Maurya, co-founder and CEO of Rupeeflo, a cross-border wealth and banking platform for NRIs, said that the move will “let an investor hold a single, coherent portfolio across geographies with Indian oversight and reporting.”

“For the PMS industry, this is a chance to differentiate on asset allocation rather than only on Indian stock-picking,” he added.

According to Dharmendra Jain, co-founder, Ionic Wealth, "This is a game-changing regulation, it expands the role of a portfolio advisor and wealth manager, allowing them to now use the PMS license to offer a full-spectrum portfolio as an Asset Allocator. This expands the portfolio opportunity across IPOs, global investments, unlisted investment-grade debt, and the use of derivatives to manage portfolio risk."

Sebi has also introduced the Portfolio Managers Route for Investing in Mutual Fund units, or PRIM. It will allow portfolio managers to invest client money in direct plans of mutual funds, including ETFs, index funds and Specialised Investment Funds (SIFs).

The minimum ticket size will be Rs 25 lakh. A new PRIM-only applicant will require a net worth of Rs 2 crore. Management fees will be capped at 1 per cent of client AUM, although performance-based fees will be allowed. Investments in schemes of affiliated, group or associate AMCs will be capped at 25 per cent.

Sebi will also introduce Independent Fund Managers, who can manage portfolios in association with registered portfolio managers. The registered portfolio manager will retain full responsibility and liability for their activities.

Sebi Eases PMS Compliance Rules

A graduate will now be eligible to become a principal officer. Dealing-room requirements will also be relaxed for portfolio managers with assets under management (AUM) below Rs 100 crore, covering 48 per cent of registered PMS as of now.

Sebi will introduce a standardised Investment Management Agreement, harmonise reporting timelines and promote digital disclosure documents. Statutory levies will also be excluded from the existing 0.5 per cent annual operating-expense limit.

The overhaul has reduced the regulations from 70 pages to 33 pages, a 53 per cent reduction. The number of provisos has fallen from 47 to four.

Sebi Board Approves New Settlement Framework

The Board has approved the Sebi (Settlement of Administrative and Civil Proceedings) Regulations, 2026, replacing the 2018 settlement regulations.

The new framework introduces a formula for settlement amounts based on the minimum penalty prescribed for the violation, adjusted for the stage of proceedings, regulatory action, gravity, aggravating factors and mitigating factors. Wrongful gains will be disgorged separately rather than being included in the base amount.

Sebi will be able to issue a settlement notice before a show-cause notice, giving entities 60 days to apply. The deadline after a show-cause notice will increase from 60 days to 90 days. A fast-track route will cover settlement amounts of up to Rs 10 lakh and specified violations, including disclosure violations.

Sebi Allows Celebrity Ads, Eases Analyst Rules And Expands FPI Derivatives Access

Sebi has relaxed call-recording requirements for research analysts and research entities dealing with institutional investors.

It has also approved a Common Advertisement Code covering stock brokers, depository participants, investment advisers, research analysts, online bond platform providers, portfolio managers and mutual funds or AMCs. Celebrity endorsements will be allowed for brand-level promotions, subject to safeguards. Other advertisements can be issued without prior approval, subject to reporting within three working days.

Foreign portfolio investors (FPIs) will be allowed to participate in non-agricultural index derivatives and non-cash-settled non-agricultural commodity derivatives. They will have to exit positions before the delivery obligation arises and cannot increase positions from three days before expiry.

Sebi Expands Vaulting Framework To More Gold-Linked Instruments

Sebi has also expanded the Vault Managers Regulations beyond Electronic Gold Receipts (EGRs) to cover bullion underlying ETFs and bullion derivatives. The net worth requirement for vault managers will rise from Rs 50 crore to Rs 75 crore, alongside tighter requirements for security, segregation, reconciliation and governance.

The regulator said the detailed operational requirements will be specified through a subsequent circular.

“A consequential circular will be issued to operationalise the amended regulatory framework, including requirements relating to storage and safekeeping, quality standards, reconciliation, inspection, audit, insurance, security and infrastructure requirements, risk management and grievance redressal for Vault Managers providing vaulting services for EGRs and other Sebi specified bullion related instruments,” Sebi said at its board meeting.

Reits, InvITs and Debt Listings

Sebi has approved a framework to enable Depository Receipts against Reit and InvIT units, with the initial framework providing for issuance and listing at an International Financial Services Centre (IFSC) in India. Foreign investors, including NRIs, will be allowed to invest.

“This could be a strong gateway for foreign capital into Indian real estate and infrastructure. Reits and InvITs offer steady, yield-oriented exposure, which is exactly what many global and NRI investors seek. However, accessing these assets directly requires dealing with Indian market accounts and repatriation procedures. Depository Receipts listed in IFSC allow investors to hold these assets through a familiar, internationally oriented structure,” said Maurya.

“Starting in GIFT City is sensible because it helps build depth in India’s own international financial centre rather than sending that activity offshore. How significant this becomes will depend on the detailed circular, particularly liquidity, pricing relative to the underlying units and tax treatment. Directionally, it widens the investor base for asset classes that need patient, long-term capital,” Maurya said.

For certain Reit and InvIT resolutions, the approval threshold will change from 75 per cent of all outstanding units to 75 per cent of votes cast. Sebi has also clarified sponsor exit rules and narrowed the definition of dissenting unitholders to those who vote against a resolution.

All units tendered in an exit offer will have to be accepted. If minimum public unitholding falls below the prescribed level, compliance will have to be restored within one year.

Sebi has also removed the requirement for issuers making their first non-convertible debentures (NCD) listing to list all outstanding unlisted NCDs issued on or after January 1, 2024. Issuers will now have to list only prospective NCD issuances.

AIF and Accredited Investor Rules

Investor protection preventing fund managers from using Alternative Investment Fund (AIF) assets to meet their own losses, damages or expenses will now apply to all forms of AIFs, not just AIFs structured as trusts.

Sebi will also allow AIF managers, AMCs offering SIFs and registered PMS managers to accredit investors. Securities-market exposure of at least Rs 5 crore for individuals and Rs 20 crore for body corporates and other trusts will qualify as an additional accreditation criterion.

Persons resident outside India, including FPIs, will be deemed accredited investors. LLPs will also qualify if every partner is an accredited investor.

“This will bring in many more accredited investors, with the flexibility to fractionalise PMS and AIF commitments down to Rs 10-25 lakh,” said Jain.

According to Maurya, “Today, the accreditation process is a paperwork hurdle, particularly for someone living abroad who has to verify income or net worth through an Indian agency. Removing that step shortens the path to products like AIFs, PMS and Specialised Investment Funds, where accredited status unlocks more flexible structures. For the diaspora, which has historically kept most of its savings overseas, this cuts one of the frictions that has kept them watching India's growth rather than participating in it. The real test will be how quickly intermediaries update their onboarding systems to reflect this."

Sebi has also approved a fourth settlement scheme for certain entities involved in non-genuine trades in BSE's illiquid stock-options segment between April 1, 2014 and September 30, 2015. The settlement amount will range from Rs 1.44 lakh for one to five contracts to Rs 7.20 lakh plus Rs 14,400 per contract for 51 contracts and above.