Summary of this article
Sebi introduces new portfolio management rules starting April 2027.
PRIM route lowers minimum investment threshold to twenty-five lakh.
Strict advertising codes prohibit deceptive promises and celebrity endorsements.
Securities and Exchange Board of India (Sebi) has notified its Sebi (Portfolio Managers) Regulations, 2026, on October 12 via a gazette notification. Sebi stated that the updated rules are set to replace the existing Portfolio Managers Regulations introduced in 2020.
Notably, the new portfolio management framework will come into effect on April 1, 2027. Alongside the revamp of rules for portfolio managers, the regulator has also notified an updated Code of Conduct in the Second Schedule.
Additionally, the regulator has also notified the Common Advertisement Code (CAC) under the Intermediaries Regulations on October 10 via a separate notification. Notably, the CAC aims to establish uniform advertising standards across all market intermediaries and introduce strict rules on celebrity endorsements, disclosures, and performance claims. The CAC is set to come into effect 180 days after gazette publication or on April 1, 2027.
What Are Sebi's Portfolio Managers Regulations 2026?
Sebi's updated portfolio managers rules apply to entities operating as portfolio managers in India, including discretionary, non-discretionary, and advisory service models.
The new rules also govern institutional vehicles such as fund managers, co-investment portfolio managers catering to Alternative Investment Funds (AIFs), and standalone entities seeking registration under newly created operational windows.
According to the notification applicants must appoint a Principal Officer, a Compliance Officer, and at least one additional employee to strengthen governance. Additionally, the Compliance Officer will be barred from sharing dual roles to ensure independent oversight.
The 2026 regulations also formally codify the Portfolio Management Service Route for Investment in Mutual Fund units (PRIM). Under the existing framework, all portfolio managers faced uniform minimum net worth requirements irrespective of the complexity or risk profile of the underlying assets they managed.
However, under the revamped norms, the regulator has established PRIM as a specialised window with lower entry barriers. While general portfolio managers have to mandatorily maintain a minimum net worth of Rs 5 crore, entities registered exclusively under the PRIM route are permitted a minimum net worth threshold of Rs 2 crore.
In order to maintain stability across the portfolio management ecosystem, the regulator has mandated that capital reserves remain liquid rather than be tied up in illiquid assets. Emphasising baseline balance sheet safety, the market regulator has mandated that portfolio managers deploy at least 10 per cent of the minimum net worth requirement in liquid assets.
"The applicant shall ensure to deploy at least ten percent of minimum net worth requirement in liquid assets which are unencumbered," Sebi said.
However, existing managers have been granted a 12-month transition period to meet the 10 per cent liquidity buffer.
The Role of the Code of Conduct and Advertising Rules
Sebi has retained and reinforced the Code of Conduct in the new norms for all registered intermediaries starting April 1, 2027. The code of conduct establishes explicit restrictions prohibiting managers from participating in proprietary trades which could clash with client interests. The code also bars market manipulators from creating artificial liquidity or rigging prices. In tandem, the newly notified CAC bars deceptive promises, prohibits dark patterns, and requires prior supervisory approval for any celebrity brand endorsements.
To prevent conflicts of interest and curb the misuse of privileged information in the public domain, the regulator tightened public commentary guidelines.
"A portfolio manager or any of its employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his long or short position in the said security has been made, while rendering such advice," Sebi said.
Additionally, the code enforces confidentiality over client data and obligates managers to obtain declarations of any unpublished price-sensitive information (UPSI) connections prior to onboarding clients.
How Do The New Norms Affect Investors?
For high-net-worth individuals (HNIs) and emerging retail investors, the new framework aims to increase accessibility while maintaining protective firewalls. The baseline minimum investment threshold for standard discretionary portfolio management services remains Rs 50 lakh per client. However, retail investors aspiring to access professional portfolio guidance can now do so through the newly carved PRIM route, where the minimum ticket size is halved to Rs 25 lakh, limited strictly to direct plans of mutual funds. For legacy portfolios established before the 2020 regulations, managers have been given 12 months to bring accounts up to the Rs 50 lakh minimum threshold.
Fee structures and operational costs will also become clearer and more protective for investors, ending hidden distributor markups and shielding clients from fee erosion.
"The portfolio manager may invest in mutual funds only through direct plans and shall not charge any kind of distribution related fees to the client," Sebi said.
Upfront fees are prohibited across the board, and managers cannot assure or guarantee arbitrary investment returns.
Portfolio managers are also barred from engaging in speculative transactions without delivery, badla financing, or lending client funds. Furthermore, client grievances must be redressed promptly within 21 calendar days, ensuring robust investor protection across the domestic wealth management industry.
