Sebi plans overhaul of PMS regulations, flags need for stronger governance

Regulator to revisit 2020 portfolio manager norms, tighten governance, curb mis-selling and explore exchange-based pre-ipo trading mechanism

The Securities and Exchange Board of India (Sebi) is planning a comprehensive review of the regulations governing portfolio managers, Chairman Tuhin Kanta Pandey said on Monday, signalling tighter oversight and higher governance standards for the industry.

 

Speaking at a PMS Conclave, Pandey said the regulator intends to revisit the Sebi (Portfolio Managers) Regulations, 2020, to ensure the framework remains effective, adaptable, and aligned with evolving market dynamics.

 

“We propose to carry out a comprehensive review of the portfolio management services (PMS) regulations so that the framework remains robust and relevant. However, regulation alone cannot build a strong industry,” Pandey said, underscoring the need for stronger governance and conduct standards among portfolio managers.

 

The PMS review could be taken up at Sebi’s June 2026 board meeting and will form part of the regulator’s broader overhaul, which also includes rationalisation of settlement regulations, takeover norms, and listing obligations and disclosure requirements.

 

As part of the process, Sebi will seek feedback from industry participants on areas requiring rationalisation, after which a consultation paper outlining the proposed changes will be issued.

 

Pandey also urged the PMS industry to focus on investor suitability to curb mis-selling and improve governance standards. He emphasised the need for strong internal controls, clear segregation across business units, and discipline in staffing and documentation.

 

“Risk profiling, suitability assessment, and client communication must be clear, consistent, and evidence-based. Going ahead, PMS distributor conduct will matter — the industry must guard against mis-selling,” he said.

 

The PMS industry had around 215,000 clients as of January 2026, with assets under management — excluding Employees’ Provident Fund Organisation and Provident Fund assets — of about ₹10.5 trillion, growing at a compound annual growth rate of 17 per cent.

 

On Sebi’s pilot proposal for a pre-initial public offering trading platform, or measures to curb grey market activity, Pandey said the issue has been deliberated internally, with a possible exchange-based mechanism being explored for ‘to-be-listed’ companies.

 

“There is a possibility of such a mechanism through the exchanges — not for the entire unlisted space, but limited to the ‘to-be-listed’ segment where Sebi’s jurisdiction is clearer,” he said, adding that the regulator is working on the operational contours of the proposal. A consultation paper will be issued in due course.

 

Separately, Pandey said Sebi is working with relevant government ministries to review the continuing ban on trading in certain agricultural commodities.