New defined terms

Associate, investment approach, net worth, regulatory sandbox and Scheduled Commercial Bank were defined only inside an Explanation to one regulation. Independent Fund Manager, investment agreement, non-discretionary portfolio manager and PRIM were not defined.

All nine are defined in regulation 2(1).

Each term now has one meaning throughout. For example, ‘associate’ was earlier defined only for the bar on unrated securities of associates; it now also drives the net worth deduction and the client-consent rule for associate investments.

Accredited investor

Defined in the PMS Regulations by reference to SEBI criteria and a certificate from an ‘accreditation agency’, which was separately defined.

Same meaning as regulation 2(1)(ab) of the AIF Regulations, 2012. ‘Accreditation agency’ is deleted. Large value accredited investor stays at ₹10 crore.

One definition for AIFs and PMS. Future changes to the AIF definition will apply to PMS automatically.

Discretionary and non-discretionary portfolio manager

Discretionary: exercises or may exercise ‘any degree of discretion’ over investment of funds ‘or’ management of the portfolio. Non-discretionary: not defined.

Discretionary: ‘complete discretion’ over investment of funds ‘and’ management of the portfolio (reg 2(1)(j)). Non-discretionary: manages funds as directed by the client (reg 2(1)(w)).

Partial discretion no longer makes a mandate discretionary.

Net worth (definition)

Explanation to reg 9: paid-up equity capital plus free reserves (excluding revaluation reserves), less accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written off.

Reg 2(1)(u): paid-up equity capital plus securities premium plus free reserves (excluding revaluation reserves), less accumulated losses, deferred expenditure and miscellaneous expenditure not written off, and less any loans and advances given by the portfolio manager, including to related parties or associates. The ₹5 crore minimum is unchanged.

Securities premium now counts. Loans and advances now reduce net worth.

Related party

Clause (v): a public company in which a director, partner or manager ‘is a director or holds’, along with relatives, more than 2% of paid-up capital. Proviso: anyone holding 20% or more of a listed entity (10% or more from 1 April 2023) is a related party.

Clause (v): ‘is a director and holds’ more than 2%. Proviso: 10% threshold only.

Clause (v) now matches section 2(76)(v) of the Companies Act, 2013, as SEBI’s consultation paper intended. Both conditions must be met, so fewer public companies are caught. The 10% test has applied since April 2023, so dropping the 20% wording changes nothing in practice.

How time is counted

A mix: 7 working days, 3 weeks, 15 days, one month and 30 days.

Calendar days (15, 21 and 30) or months. No working-day periods remain.

Simpler to track, but weekends and holidays now count.

Incomplete application

Rejected unless objections were removed within the time given, ‘not later than 3 weeks’. The applicant or principal officer could be called for personal representation.

May be rejected, but only after at least 30 calendar days to remove objections (reg 3(4)). The personal representation clause is gone; SEBI can still ask for information.

At least 30 days to fix gaps, against not later than three weeks earlier.

Principal officer: qualification and experience

Professional qualification in finance, law, accountancy or business management; or NISM one-year post-graduate programme in portfolio management; or CFA charter. Five years’ experience in related securities market activities (research analyst work counts), of which two years in portfolio management, investment advisory or fund management. Valid NISM certification.

Graduation in any discipline from a recognised Indian or foreign university; or CFA charter; or CA, CS or CMA (reg 4(b)). Experience requirement unchanged. Relevant NISM certification, kept valid at all times.

Many more candidates qualify. Experience and certification tests are unchanged in substance.

Other key personnel

A compliance officer and at least one more employee: a graduate with two years’ experience with a portfolio manager, stock broker, investment adviser or fund manager. Any employee with fund management decision-making authority had to meet the principal officer standard.

A principal officer, a compliance officer and one additional employee. The employee’s experience may include research analyst work; no certification is needed. The principal officer standard now also applies to any Independent Fund Manager the portfolio manager engages.

An Independent Fund Manager must meet the full principal officer standard.

Compliance officer

Mandatory. Cannot be the principal officer or the additional employee (except in a co-investment portfolio manager). Must report non-compliance to SEBI immediately and independently.

Same, plus eligibility criteria to be specified by SEBI (reg 27(2)).

SEBI’s consultation paper proposed the NISM Series III-C (Securities Intermediaries Compliance (Fund)) certification. Expect a circular.

Infrastructure and dealing room

Adequate office space, equipment and manpower (reg 7(2)(b)). The Master Circular (para 2.7, from the 30 September 2022 circular) already required a dealing team and dealing room controls: recorded lines, no mobile phones, restricted access.

A dealing room is now part of the eligibility test (reg 4(a)(ii)). SEBI may exempt classes of portfolio managers.

SEBI’s Board has said the dealing room requirement will be relaxed for portfolio managers with AUM below ₹100 crore (about 48% of registered portfolio managers). The exemption will come by circular. Larger firms should plan for a dedicated, segregated dealing room.

Net worth: liquid assets

No requirement of liquid assets earlier.

At least 10% of the minimum net worth in unencumbered liquid assets: cash, deposits with Scheduled Commercial Banks, money market instruments, Government securities, treasury bills, repo on Government securities, units of liquid and overnight funds, and other instruments SEBI specifies (reg 4(a)(iv)(c)). Existing portfolio managers have 12 months from commencement, that is, until 31 March 2028.

₹50 lakh for a ₹5 crore portfolio manager (₹20 lakh for a PRIM-only firm). The base is the minimum requirement, not actual net worth; the consultation paper had proposed 10% of net worth.

Disciplinary, litigation and conviction checks

Listed separately: disciplinary action against connected persons, securities market litigation with an adverse bearing on the business, and convictions for moral turpitude or economic offences.

Not listed. SEBI considers all relevant matters, the fit and proper criteria in Schedule II to the Intermediaries Regulations, 2008, and investors’ interest.

These factors are now assessed through the fit and proper test, which already covers them.

Fit and proper

SEBI considered whether the applicant was fit and proper and ‘may take into account’ the Schedule II criteria (reg 8).

The applicant must be fit and proper under Schedule II (reg 4(a)(v)), and must remain so at all times as a condition of the certificate (reg 6(6)).

A continuing condition written into the certificate, not only an entry test.

Grant of certificate and fees

Registration fee within 15 days of intimation, extendable to one month for sufficient cause. Certificate in Form B. Pre-2020 registrants deemed registered.

Registration fee within 30 calendar days of intimation, with no extension provision (reg 3(6)). SEBI ‘may’ then grant the certificate in its format. The deemed-registration clause is dropped as spent. Fees unchanged: ₹1 lakh application, ₹10 lakh registration, ₹5 lakh every three years (paid within three months before the block expires).

More time to pay, but treat 30 days as a hard deadline.

Conditions of certificate

Follow the Act and Regulations; prior approval for change in control; ‘forthwith inform’ SEBI of false, misleading or changed information; pay fees; resolve grievances within 21 calendar days; maintain net worth.

‘Promptly notify’ replaces ‘forthwith inform’. The fee condition moves to reg 7. Two new conditions: be fit and proper at all times, and commence business within three years of registration (reg 6).

Not starting business in time is a breach of a condition of registration.

Commencement of business

No time limit.

Within three years of registration. ‘Commencement’ means meeting conditions SEBI will specify. Portfolio managers operating before 1 April 2027 must meet the requirement within 36 months, that is, by 31 March 2030 (reg 6(7) and (8)).

Dormant registrations are at risk. SEBI’s consultation paper had proposed at least 10 clients or ₹5 crore AUM; the final test is left to a circular. Because reg 6(8) covers every existing portfolio manager, small operating firms should also check against the threshold once it is out.

Refusal of certificate

Rejected after a reasonable opportunity of being heard, communicated within 30 days. The applicant had to stop any portfolio management activity on receiving the decision.

Refused after a hearing and communicated with reasons within 30 days. The applicant may seek reconsideration within 30 days; SEBI decides in writing as soon as possible (reg 5). The clause on stopping activity is deleted.

Applicants now get reasons and a right to ask for reconsideration.

Surrender of certificate

No regulation. Form B only mentioned surrender.

A portfolio manager may apply to surrender its certificate in the manner and on the conditions SEBI specifies (reg 8).

A formal exit route, in line with other intermediaries. Firms planning an exit should also see SEBI’s 24 October 2025 circular on transfer of client portfolios.

Tax law reference and declarations

Section 9A(3) and (4) of the Income-tax Act, 1961. Declarations in Schedule VI.

Section 9(12) of the Income-tax Act, 2025. Declarations in a format SEBI specifies.

Follows the new Income-tax Act. Declaration format moves from a Schedule to SEBI circulars.

Which provisions apply

All other provisions applied, except: regs 22(1) to (4); 23(2), (3), (4), (8), (9); 24(1)(b), 24(2)(a), 24(7), 24(11); 26; 30(3); 31(1) to (3); Form C; Schedule IV.

Funds investing in Indian securities: all provisions apply except regs 15(1)(a) and (b), 15(2), 15(3); 16(3) to (9), (12), (13), (16), (18) to (21); 17(1), 17(2)(a)(iv), 17(4)(a)(i); 19; 23(5); 24(1) to (3); and the Third Schedule. Funds investing in foreign securities: only Chapters I, II and III and reg 16(2) apply.

Much wider relief. None of the investment rules in reg 17(1) apply, nor the Investor Charter, advertisement code, benchmarking or written-policy duties. SEBI’s Board has said eligible fund managers may now manage overseas investments; Indian investments stay within FPI limits.

Obligations

Thirteen obligations, including quarterly reports to SEBI and a custodian unless the fund already had one.

Seventeen. Changes: monthly reports in SEBI’s format (earlier quarterly); compliance with the FPI Regulations, 2019 for Indian securities (new); fees on mutually agreed terms (new); custodian ‘for making investment in India’, still not needed if the fund already has one.

Reporting goes from four times a year to twelve.

Framework

Provisos spread across the Regulations, added by the Fourth Amendment, 2021 (effective 8 December 2021).

One chapter (Chapter IV) with its own rules and a list of provisions that do not apply. Carried over: co-investment terms no more favourable than the AIF’s; identical exit terms and timing; early withdrawal only to the extent the AIF has exited; performance calculated as agreed with the client; 100% of AUM in unlisted securities of the AIF’s investee companies; a key investment team member may be principal officer.

Mostly a consolidation. Net worth (and so the liquid asset floor), the personnel table, the ₹50 lakh minimum, the renewal rule and the custodian requirement do not apply.

Certification

Contents certified by an independent chartered accountant. Filed with a confirmation in Form C, signed by the principal officer.

Certified by an independent chartered accountant when registration is granted and every year within six months of the financial year-end, in a format SEBI specifies (reg 15(2)(d)). Form C goes.

Annual CA certification is now a regulatory requirement.

Format and client copies

In the format SEBI specifies (Schedule V was omitted in September 2025 and replaced by SEBI’s 9 September 2025 circular). No rule on digital or physical copies.

Given to clients in digital format. A physical copy free of charge on request (reg 15(2)(a) and (b)).

Digital by default.

Annual update and filing

Filed with SEBI after registration, before giving it to any client, and on any material change. No annual update in the Regulations.

Updated every year within six months of year-end, and filed with SEBI with the CA certificate after registration, before circulation, and every year within six months of year-end (reg 15(2)(e) and (g)).

A fixed annual cycle: by 30 September for a 31 March year-end.

Material change

File the Disclosure Document with SEBI within 7 working days. The Master Circular (para 4.1) treats changes in control, principal officer, fees, charges and investment approaches as material.

Update by addendum. File with SEBI within 15 calendar days and tell clients within 15 calendar days (reg 15(2)(f) and (i)).

More time to file, and a new express deadline to tell clients.

Change in principal officer

Tell SEBI and clients within 7 working days (reg 22(9)).

No separate rule.

Because the Master Circular treats a change in principal officer as a material change, it will be caught by the 15-calendar-day addendum, filing and client notice. In practice the duty to tell clients remains.

Performance reporting and benchmarking

Uniform reporting in SEBI filings, marketing material, client reports and the website (reg 22(10)). Benchmarking under the Master Circular (para 4.6A, from the 16 December 2022 circular): four strategies, APMI-prescribed benchmarks.

Uniform reporting (reg 16(19)) and compliance with SEBI’s benchmarking framework (reg 16(20)).

The framework now has a regulatory anchor. It does not apply to PRIM, and does not apply to eligible fund managers for Indian-securities funds.

Legacy client accounts below ₹50 lakh

Client investments existing on notification of the 2020 Regulations (16 January 2020) could continue until maturity or as SEBI specified.

Must meet the ₹50 lakh minimum within 12 months from commencement (reg 16(5)).

The ’till maturity’ relief ends. Such clients must top up, exit or be restructured by 31 March 2028. Accredited investors remain exempt from the minimum.

Benefit from client funds

No direct or indirect benefit from client funds or securities.

No ‘undue’ benefit, directly or indirectly (reg 16(11)).

An absolute bar becomes a qualified one. ‘Undue’ is not defined.

Operations outside India

Not addressed.

Investment management and execution of transactions must take place in India, except execution of trades for investment in foreign securities (reg 16(2)).

Offshore research, dealing or group fund management hubs serving Indian PMS clients will need to be restructured.

Duties moved from circulars into the Regulations

Mostly in the Master Circular: advertisement code (para 2.1 and Annexure 2A), written-down policies on order placement and allocation (para 2.6), valuation under APMI norms (para 2.9) and benchmarking (para 4.6A). Investor Charter added to the Regulations in February 2025; 21-day grievance redressal in 2023. Insider trading code compliance sat in the Code of Conduct.

Expressly in reg 16(14) to (23): grievances within 21 calendar days; oversight of distributors; Investor Charter; valuation norms; advertisement code; uniform performance reporting; benchmarking framework; a written policy for managing client funds and securities; the portfolio manager’s own code of conduct under the PIT Regulations, 2015; any other responsibility SEBI specifies.

Most of these are not new duties, but a lapse is now a breach of the Regulations. One real change: the firm must have its own insider trading code, not just comply with the PIT code.

Code of Conduct

Item 1: observe ‘high standards of integrity and fairness’. Item 13(a): abide by the Act, rules, regulations, guidelines and schemes.

Item 1: act honestly, fairly and with due skill, care and diligence, in the interest of investors. Item 15 adds circulars.

A clearer, duty-of-care style standard that will be used in enforcement.

Permitted investments

For discretionary portfolio managers: securities listed or traded on a stock exchange, money market instruments, mutual fund units and other securities SEBI specified (reg 24(3)).

For all portfolio managers: equity IPOs, primary issues of debt, listed or traded securities, money market instruments, mutual fund units (direct plans only) and other securities SEBI specifies (reg 17(1)(b) and (g)).

IPOs and primary debt are now expressly allowed, ending doubt over ‘to be listed’ securities. The definition of money market instruments is removed from the Regulations.

Foreign securities

No provision in the Regulations or the Master Circular.

Discretionary and non-discretionary portfolio managers may invest in foreign securities as SEBI specifies (reg 17(1)(c)).

A new product line. SEBI’s Board indicated listed equity, debt, REITs, overseas mutual funds, ETFs, index funds and foreign government debt, under FEMA and the RBI’s Liberalised Remittance Scheme, so client-level LRS limits will matter.

Unlisted securities

Non-discretionary and advisory services: up to 25% of AUM. Discretionary services: not allowed. Large value accredited investors: up to 100%. Master Circular para 3.6: non-discretionary clients up to 10% in unlisted unrated debt of non-associates, within the 25%.

Discretionary, non-discretionary and advisory services may all invest in unlisted securities within SEBI limits (reg 17(1)(d)). The 100% allowance for large value accredited investors stays.

The 25% figure leaves the Regulations and will be set by circular. SEBI’s Board indicated discretionary PMS may put up to 10% of client AUM in investment-grade, non-convertible unlisted debt, with client consent.

Derivatives

Reg 24(7): client portfolios could not be leveraged for derivatives. Master Circular para 3.2 already allowed derivatives through recognised exchanges, including for hedging and rebalancing, with total exposure not above the client’s funds.

Exchange-traded derivatives allowed within SEBI limits (reg 17(1)(e)). The express no-leverage rule is not repeated. The ban on speculative (non-delivery) transactions stays, still excluding derivatives, and so does the ban on borrowing for clients.

Derivatives were already allowed; what changes is the room for limited leverage. SEBI’s Board indicated total exposure up to 1.25 times client AUM. The consultation paper also proposed unhedged short exposure up to 50% of AUM through equity derivatives, option premium capped at 10% of AUM, and explicit client consent.

Prudential and credit controls

Client-level prudential limits (Master Circular: 15% single and 25% group associate limits for equity and for debt/hybrid, 30% overall); no unrated securities of related parties or associates; alert-based monitoring; credit-rating rules. Not applicable to investments made before the 2022 Amendment Regulations, or to classes SEBI specified (advisory, co-investment, government-mandate clients).

Same controls (reg 17(1)(h) to (m)). Investments made before the 2020 Regulations commenced must comply within 36 months, by 31 March 2030. Classes SEBI specifies remain exempt.

Existing investments that do not comply with the revised prudential and credit-rating requirements may need to be realigned within the prescribed transition period.

Restricted activities and Independent Fund Managers

No bill discounting, badla financing, lending or placement; no investing in a portfolio managed by another portfolio manager; no investing on another entity’s advice; no speculative transactions; no holding client securities in own name.

Same, except that a portfolio manager may invest on the advice of an Independent Fund Manager, where permitted (reg 17(2)).

The IFM model becomes possible. SEBI’s Board set the safeguards: the portfolio manager bears full responsibility for the IFM; fees are paid to the portfolio manager; orders flow through its systems; one IFM can work with only one portfolio manager at a time; clients get an exit option if the IFM leaves; APMI will keep a central IFM database.

Segregation and cash management

Client funds and securities kept separate; the portfolio manager is responsible for safekeeping. The Master Circular (para 2.2) allowed a pooled client bank account with conditions and short-term parking in liquid funds.

Same, on conditions SEBI specifies (reg 17(3)(e)), with an express carve-out for short-term deployment of client funds in liquid mutual funds for cash management (reg 17(3)(f)).

Codifies existing practice.

What it is

No equivalent.

‘Portfolio Management Service Route for Investment in Mutual Fund units’ (reg 2(1)(z)): an investment approach that invests client funds only in direct plans of Indian mutual funds, including index funds, ETFs and specialised investment funds (reg 32).

A lighter PMS model for scheme selection and asset allocation using mutual funds.

Registration

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A separate PRIM-only certificate on SEBI’s conditions, or, for an existing portfolio manager, PRIM through segregated investment approaches (reg 30).

Two routes: a new standalone registration, or an add-on for existing firms.

Eligibility (PRIM-only firm)

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Infrastructure and manpower (no dealing room); a principal officer and a compliance officer (no additional employee); net worth of ₹2 crore at all times with 10% in liquid assets; a principal officer who is a graduate (or CFA, CA, CS or CMA) with a valid NISM certification and two years’ securities market experience, which may include mutual fund distribution (reg 31).

Much easier entry than the ₹5 crore regime. Valuation-norm and benchmarking-framework duties do not apply.

Minimum client investment

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₹25 lakh per client. A renewal counts as a fresh investment (reg 33).

Half the usual ₹50 lakh minimum.

Conditions to follow by circular

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SEBI may specify client segregation, records, fees and limits on investing in associates (reg 34).

SEBI’s Board indicated: fixed management fee capped at 1% of AUM (performance fee also permitted); a 25% cap on schemes of group or associate AMCs; no exit load provisions; and separation of mutual fund distribution and PRIM activities and clients, except for accredited investors.

Enforcement

Action under Chapter V of the Intermediaries Regulations, 2008, by ‘the Board or the Chairman’, for breach of the Act, rules or regulations.

Action ‘under securities laws or under any other law’, by SEBI, for breach of the Act, rules, regulations, or circulars and guidelines (regs 39 and 42). Inspection and investigation costs, including auditors’ fees, can be recovered (reg 41). Inspection without notice is allowed in investors’ or public interest.

A breach of a circular is now expressly actionable, and inspections can cost the firm money.

General relaxation

No general power. Only the regulatory sandbox exemption.

SEBI may relax strict enforcement of a requirement if the relaxation is procedural or technical, the non-compliance was beyond the portfolio manager’s control, or the requirement would cause undue hardship to clients. Application fee ₹1 lakh, non-refundable (reg 43). The sandbox exemption (up to 12 months) continues (reg 44).

A new, structured way to seek relief.

Clarifications

Guidelines ‘in the form of circulars’.

Notes or circulars, expressly binding on portfolio managers (reg 45).

SEBI clarifications are now expressly binding.

Schedules

Schedule I (forms), II (fees), III (Code of Conduct), IV (agreement contents), VI (eligible fund manager declarations). Schedule V (Disclosure Document) was omitted in September 2025.

Three: First (fees), Second (Code of Conduct), Third (agreement contents).

Forms and formats move to SEBI circulars and the SI Portal.

Agreement contents

Reg 22(2) listed 15 matters for the agreement, and Schedule IV had 18 items.

The list in the regulation is gone; the Third Schedule (20 items) is the only list. New items: 5 (authorisations needed to manage and administer the portfolio) and 9 (custody of securities, now separate). Item 4 is expanded (investment approach and restrictions). Item 7 (period) now covers early termination. Large value accredited investors remain exempt.

SEBI’s Board has announced a standardised Investment Management Agreement with demat and trading authority built in; a bank power of attorney will still be needed under RBI rules. Plan to re-paper client agreements once the standard format is issued.

Portfolio manager registered on 31 March 2027

Registered under the 2020 Regulations.

Registration continues as if granted under the 2026 Regulations, valid unless suspended or cancelled (reg 46(2)(a)).

No new application is needed.

Application pending under the 2020 Regulations

Made under the 2020 Regulations.

Treated as made under the matching 2026 provisions (reg 46(2)(b)).

Pending applicants should expect to be tested against the 2026 criteria (principal officer, dealing room, net worth formula, liquid assets).

Eligible fund managers already operating

Intimation and Schedule VI declaration filed under reg 17 of the 2020 Regulations.

No specific transition rule in Chapter III. The savings clause treats anything done under the 2020 Regulations as done under the matching 2026 provisions.

Existing eligible fund managers should not need to file a fresh intimation. Their declarations refer to section 9A of the 1961 Act, so plan to refresh them on SEBI’s new format.

Show-cause notices, enquiries and investigations

Under the 2020 Regulations.

Continue under the matching provisions. Rights, liabilities and penalties under the 2020 Regulations are unaffected (reg 46(2)(c)).

The repeal does not end pending actions.