SEBI to Ease PMS Compliance and Foster Innovation
SEBI Chairman Tuhin Kanta Pandey announces new PMS regulations to reduce compliance friction and enable innovation in the growing investment industry.
In a major move to align regulatory frameworks with market growth, the Securities and Exchange Board of India (SEBI) is set to overhaul Portfolio Management Services (PMS) regulations. Speaking at the APMI Annual Conference 2026 in Mumbai, SEBI Chairman Tuhin Kanta Pandey emphasized that as the industry matures, the regulatory landscape must evolve to reduce unnecessary friction while maintaining robust investor protection.
A New Era for Portfolio Management
The market regulator is moving away from a purely prescriptive approach toward one that actively enables innovation. This shift follows a comprehensive review of the PMS framework, which was recently approved by the SEBI board. Rather than making minor tweaks, the regulator has opted to rethink the entire framework based on stakeholder feedback.
The revised regulatory framework is built upon four core pillars:
- Industry Development: Driving the growth of the PMS sector.
- Ease of Compliance: Making it simpler for players to meet requirements.
- Simplification: Consolidating and streamlining the existing regulatory structure.
- Redundancy Removal: Eliminating outdated or unnecessary provisions.
Expanding Investment Horizons
To meet the increasingly diverse needs of investors, SEBI is widening the toolkit available to portfolio managers. Under a new regulatory route, managers will now be permitted to construct portfolios using direct plans of mutual funds, which includes:
- Exchange Traded Funds (ETFs)
- Index Funds
- Specialized Investment Funds
The minimum ticket size for these investments remains set at ₹25 lakh.
Introducing Independent Fund Managers (IFMs)
In a significant structural change, SEBI is introducing the concept of Independent Fund Managers (IFMs). This initiative aims to tap into entrepreneurial talent by allowing investment professionals to operate in association with established portfolio managers. However, the responsibility for all activities remains strictly with the registered portfolio manager.
Explosive Growth in the PMS Sector
The push for reform comes at a time of unprecedented expansion in the Indian investment landscape. The PMS industry has seen a massive surge in Assets Under Management (AUM):
- FY16: Approximately ₹1.4 lakh crore
- August 2026: Approximately ₹9.2 lakh crore
This represents a consistent annual growth rate of roughly 20 per cent. Furthermore, the number of registered portfolio managers has jumped from about 200 a decade ago to over 530, while the number of discretionary PMS clients has grown nearly fivefold to reach 2.2 lakh.
The Role of Technology and Accountability
While acknowledging the transformative power of technology, Chairman Pandey issued a stern reminder regarding accountability. He noted that while technology can enhance investment judgment, it cannot replace human responsibility. "Technology can augment investment judgment, it cannot outsource accountability," Pandey stated, stressing that accountability must remain human and identifiable.
He also highlighted the importance of inter-regulatory coordination, calling it essential rather than optional as the financial ecosystem grows more complex. While current data shows 9.5 per cent of Indian households are invested in the stock market—with another 20 to 30 per cent looking to enter—Pandey cautioned against the futility of trying to predict every possible risk, noting that "every prediction fails" eventually.