SEBI proposes greater flexibility for portfolio managers investing client funds
What's the story
The Securities and Exchange Board of India (SEBI) has proposed changes to its regulations governing portfolio management services (PMS). The proposed changes would give portfolio managers more leeway in investing client funds. This is part of a larger review process aimed at improving the regulatory framework for the PMS industry.
Regulatory adjustments
Proposed changes to enhance business flexibility
In a consultation paper released on Thursday, SEBI proposed allowing portfolio managers to invest in unlisted securities, foreign-listed equity, and debt securities, among other things.
If approved, these changes would give portfolio managers more freedom to diversify client portfolios beyond the current investment avenues.
The regulator said these proposals are aimed at improving business flexibility while giving portfolio managers more room in managing client portfolios.
Market expansion
AUM in PMS sector surged to ₹42.61 trillion
The review of PMS regulations was triggered by the rapid growth of the industry.
Assets under management (AUM) in this sector have surged to ₹42.61 trillion as of May 31, 2026, from ₹18.07 trillion in April 2019.
SEBI noted that "considering the increasing sophistication of investors," there is a need to review these regulations given the growing demand for personalized solutions and diverse investment portfolios.
Industry alignment
Proposed alignment with other investment vehicles
The proposed changes also seek to align PMS with mutual funds and Alternative Investment Funds (AIFs), both of which already allow overseas investments.
Currently, portfolio managers can't invest in unlisted debt instruments. However, SEBI has now proposed allowing up to 10% of a client's portfolio to be invested in such securities.
This move is seen as an attempt by SEBI to balance greater investment flexibility with investor protection.