SEBI rewrote the PMS rulebook. For a ₹50 lakh client, five things change
The Portfolio Managers Regulations, 2026 replace the 2020 rules from 1 April 2027. Most of what a PMS client signs up to stays the same, including the ₹50 lakh minimum. Five things change: old accounts below ₹50 lakh lose their exemption, IPOs and foreign securities are written in, and the disclosure document gets stricter deadlines.
Was this forwarded to you? Sign up to get Compound in your inbox.
SEBI published the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, dated 7 October 2026. They take effect on 1 April 2027 and repeal the 2020 regulations on that day.
The new text is longer and reorganised, so it reads like a bigger change than it is for most clients. Compared line by line with the 2020 regulations as last amended, most of the client-facing rules carry over word for word. Compound has already covered two additions: PRIM, a ₹25 lakh route that only buys mutual funds, and the ₹5 crore route to accredited investor status. This piece is about the ordinary PMS account.
What stays the same
| Rule | 2020 regulations | 2026 regulations |
|---|---|---|
| Minimum per client | ₹50 lakh | ₹50 lakh |
| Accredited investors | Exempt from the minimum | Exempt from the minimum |
| Mutual funds | Direct plans only, no distribution fee | Direct plans only, no distribution fee |
| Upfront fees | Not allowed | Not allowed |
| Fee types | Fixed, return-based, or both | Fixed, return-based, or both |
| Reports to the client | At least every three months | At least every three months |
| Performance in the disclosure document | Time-weighted return, last three years | Time-weighted return, last three years |
| Unlisted securities, large value accredited investors | Up to 100% | Up to 100% |
| Renewal at maturity | Counts as a fresh investment | Counts as a fresh investment |
The five changes
1. Old accounts below ₹50 lakh must reach the minimum. The 2020 regulations let investments that existed when they were notified, on 16 January 2020, "continue as such till maturity of the investment or as specified by the Board". The 2026 text removes that. Regulation 16(5) says the portfolio manager "shall ensure" that all investments made before the 2020 regulations meet the minimum "within twelve months from commencement". Commencement is 1 April 2027, so the deadline falls around 31 March 2028.
2. IPOs and new bond issues are named. The 2020 rule let a discretionary manager invest in securities "listed or traded on a recognized stock exchange", money market instruments, mutual fund units and other securities SEBI specifies. Regulation 17(1)(b) of the new text adds "initial public offer for equity securities" and "primary market issuance for debt securities" to that list.
3. Foreign securities are written in. The 2020 regulations do not mention foreign securities. The 2026 text says discretionary and non-discretionary managers may invest client funds in foreign securities "in such manner as maybe specified by the board", and that trades in them are the one exception to the rule that portfolio management runs from inside India. The limits will come in a SEBI circular.
4. The 25% unlisted cap leaves the regulations. Under the 2020 rules, a non-discretionary or advisory manager could put up to 25% of a client's assets into unlisted securities. The new text allows unlisted securities "subject to limits and conditions as may be specified by the Board", and does the same for exchange-traded derivatives. The number is no longer in the regulations; SEBI can set it, and change it, by circular.
5. The disclosure document has firmer deadlines. The manager still has to give you the disclosure document before you sign. What changes:
- It comes in digital format by default, with a free physical copy on request.
- It must be updated, and certified again by an independent chartered accountant, every year within six months of the financial year end. The 2020 text required certification but set no yearly date.
- A material change must be filed with SEBI within 15 calendar days, against 7 working days before, and disclosed to clients within 15 calendar days. The 2020 text had no rule on telling clients.
The new text also defines an "Independent Fund Manager", a fund manager who runs client portfolios in affiliation with a registered portfolio manager, on terms SEBI will specify. Anyone in that role with decision-making authority needs the same qualifications as the principal officer.
An illustration
Take a hypothetical account opened in 2019 for ₹30 lakh, still running in 2027. Under the 2020 rules it could continue until maturity. Under regulation 16(5), the portfolio manager has to bring it to ₹50 lakh by about March 2028. The regulation states the obligation and the deadline. It does not say whether the test is the amount invested or the current value of the portfolio, and it does not say what happens to an account that does not meet it. SEBI may answer both in a circular before April 2027.
An account opened after January 2020 is not affected, because it already had to meet ₹50 lakh at the start.
What is still open
Several numbers the regulations leave to SEBI circulars: foreign securities limits, the unlisted and derivative limits for non-discretionary clients, the terms for independent fund managers, and the format of the new disclosure document certificate. None had been issued when this piece was written. Until 31 March 2027, the 2020 regulations apply.
Questions
- When do SEBI's Portfolio Managers Regulations, 2026 take effect?
- On 1 April 2027. They were notified on 7 October 2026 and repeal the 2020 regulations from that date.
- Is the PMS minimum still ₹50 lakh?
- Yes. Regulation 16(3) keeps ₹50 lakh per client, and accredited investors remain exempt.
- What happens to PMS accounts opened before 2020 with less than ₹50 lakh?
- The 2026 regulations require the portfolio manager to make them meet the ₹50 lakh minimum within twelve months of 1 April 2027. The 2020 rules had let them continue until maturity.
- Can a PMS invest in IPOs under the new rules?
- Yes. Regulation 17(1)(b) adds initial public offers of equity and primary issues of debt securities to what a portfolio manager may invest in.
- Can a PMS invest abroad under the 2026 regulations?
- The regulations allow foreign securities in the manner SEBI specifies. The limits will come in a separate circular.
- Do PMS still have to use direct plans of mutual funds?
- Yes. The rule that a PMS invests only through direct plans and charges no distribution fee carries over unchanged.
Sources
- SEBI (Portfolio Managers) Regulations, 2026, notified 7 Oct 2026, effective 1 Apr 2027
- SEBI (Portfolio Managers) Regulations, 2020, as last amended on 3 Sep 2025
Compound is analysis, not investment advice. Reva Money is not a SEBI-registered investment adviser.
