Decoding SEBI's Portfolio Managers Regulations 2026

Decoding SEBI's Portfolio Managers Regulations 2026. The Securities and Exchange Board of India has notified the SEBI (Portfolio Managers) Regulations, 2026, through a notification dated 7 October 2026. These regulations will come into effect on 1 April 2027, replacing the SEBI (Portfolio Managers) Regulations, 2020 from that date. The new regulations address registration, professional qualifications, investment opportunities, client agreements, disclosures and financial resources. They also introduce the Portfolio Management Service Route for Investment in Mutual Fund units, known as PRIM, and recognise the concept of an Independent Fund Manager, or IFM.
For existing portfolio managers, the changes require preparation across personnel, documentation, financial arrangements and operating systems. For prospective applicants, they create different business possibilities depending on whether the applicant intends to offer ordinary portfolio management services or operate exclusively through PRIM. Several provisions expressly depend on limits, conditions or procedures to be specified by SEBI. Businesses should therefore distinguish the provisions contained in the notified regulations from operational details that will be addressed through applicable circulars and directions.
Commencement and Replacement of the Earlier Regulations
The first point to understand is the distinction between notification and commencement. Although the notification is dated October 2026, the new regulations become applicable from April 2027. This interval gives existing managers and prospective applicants time to assess the changes and prepare their operations. The transition also includes provisions that preserve earlier registrations, regulatory actions and pending matters.
Effective Date of the New Regulations
Regulation 1 states that the SEBI (Portfolio Managers) Regulations, 2026 will come into effect on 1 April 2027. Businesses must therefore continue meeting the currently operative requirements until the new regulations commence. They should not assume that the lower PRIM thresholds or expanded investment provisions can be used immediately merely because the regulations have been notified. Preparation can begin in advance, but implementation must follow the applicable commencement date and any supporting conditions.
Repeal of the 2020 Regulations
Under Regulation 46, the SEBI (Portfolio Managers) Regulations, 2020 stand repealed from the date the new regulations come into force. However, repeal does not remove earlier liabilities or invalidate actions already taken. Registrations, approvals, proceedings and other specified matters are preserved through the savings provisions. Existing managers should identify the corresponding provisions governing their activities and update internal references without assuming that the entire regulatory history of the business begins again.
Treatment of Pending Applications
Applications pending under the earlier regulations are treated as applications under the corresponding provisions of the new regulations. Applicants whose registration process extends into the transition period should review whether their proposed personnel, capital arrangements and documents satisfy the applicable requirements. They should also monitor clarification requests and implementation directions so that the application remains consistent with the business model they intend to launch.
Broader Educational Eligibility for Principal Officers
The revised educational requirements widen the routes through which a person can qualify as principal officer. This may help experienced securities-market professionals who do not hold one of the previously specified specialised qualifications. However, the change concerns educational eligibility; experience and certification requirements continue to apply separately.
Graduation as an Accepted Qualification
Regulation 4 recognises graduation from an eligible recognised university or institution as an educational route for the principal officer. It also recognises specified professional qualifications, including the CFA charter, Chartered Accountancy, Company Secretaryship and Cost and Management Accountancy. The practical effect is that a suitable graduate may become eligible without obtaining an additional specialised professional qualification solely to satisfy the educational condition. The applicant must nevertheless verify that the qualification falls within the wording of the regulations.
Experience Requirements for Ordinary Portfolio Managers
For an ordinary portfolio manager, the principal officer must have at least five years of relevant securities-market experience. At least two years must be in portfolio management, investment advisory services or areas connected with fund management. Graduation alone is therefore insufficient. When evaluating a candidate, the business should examine the person’s actual responsibilities and the relevance of the experience, rather than relying only on job titles or the total number of years spent in financial services.
Continuing NISM Certification
The principal officer must obtain the relevant NISM certification specified by SEBI and maintain its continuous validity. Educational eligibility, experience and certification should be checked as three separate conditions. A practical recruitment file should contain qualification records, experience evidence and valid certification details. The compliance team should also monitor expiry dates so that an otherwise eligible appointment does not become non-compliant because a certificate has lapsed.
Express Inclusion of IPO and Primary Debt Investments
The investment provisions expressly include equity initial public offers and primary-market issuance of debt securities. This broadens the opportunities that portfolio managers can assess within the permitted investment universe. However, availability under the regulations does not establish suitability for every portfolio. The manager must still consider the client mandate, investment approach, risks and applicable conditions.
Investment in Equity Initial Public Offers
The regulations expressly cover investment and advice relating to equity IPOs. This allows managers to evaluate participation at the initial offering stage instead of considering a security only after listing. The decision should be supported by research into the issuer’s business, financial position, valuation and offering terms. Managers should also consider allocation uncertainty and post-listing volatility. A newly offered security should undergo an investment assessment comparable to other portfolio opportunities.
Investment in Primary Debt Issuance
Primary-market debt issuance is also expressly included. This may enable managers to evaluate eligible debt securities at issuance, taking account of pricing, maturity, repayment arrangements and credit quality. The investment team should examine liquidity and exit possibilities, particularly where the intended holding period differs from the instrument’s maturity. Participation in a new debt issue should be supported by documented analysis and should remain consistent with the portfolio’s risk and liquidity requirements.
Changes to Internal Investment Procedures
Managers intending to use these opportunities should review their investment policies, approval processes and operational systems. Procedures should address application decisions, allocation, settlement, valuation and recordkeeping. Client agreements and disclosures should also accurately describe the intended investment universe. These preparations help ensure that the business can implement the strategy consistently once the relevant provisions become operational.
Investment in Foreign Securities
The regulations provide for discretionary and non-discretionary portfolio managers to invest client funds in foreign securities specified by SEBI. This is an enabling provision whose practical scope depends on the securities, manner of investment and conditions prescribed. It should not be interpreted as unrestricted permission to invest overseas.
Scope of the Permission
Regulation 17 refers to foreign securities and investment methods that SEBI may specify from time to time. Managers should therefore examine the applicable directions before deciding which securities or markets can form part of an offering. The provision does not, by itself, answer every question concerning limits, execution, custody or reporting. Product planning should recognise this distinction so that proposed services are not built around assumptions that later conditions may not support.
Currency and Overseas-Market Risks
Foreign investments may expose clients to currency movements in addition to changes in the value of the underlying security. Different market practices, settlement arrangements, trading hours and legal environments may also affect portfolio operations. Managers should assess these features when designing the investment approach and preparing client disclosures. The objective is to explain the sources of risk clearly enough for clients to understand how overseas exposure may affect their portfolio.
Coordination with Other Applicable Requirements
SEBI permissions must be considered alongside applicable foreign-exchange and other legal requirements. Before launching a foreign-investment service, the manager should assess the complete operating arrangement, including execution, custody, valuation and reporting. Client eligibility and contractual authority should also be reviewed. A provision in the portfolio-manager regulations should not be treated as replacing every other requirement relevant to an overseas transaction.
Unlisted Securities and Exchange-Traded Derivatives
The new regulations address investment or advice concerning unlisted securities and exchange-traded derivatives across discretionary, non-discretionary and advisory services. These opportunities remain subject to limits and conditions specified by SEBI. Managers should therefore prepare appropriate controls while avoiding assumptions about the final scope of permitted activity.
Investment in Unlisted Securities
Unlisted investments may offer exposure to businesses or instruments outside the listed market, but they can involve limited liquidity and more complex valuation. Managers should evaluate the reliability of financial information, investor rights, transfer restrictions and potential exit routes. The client’s investment horizon and withdrawal needs are particularly relevant. The regulatory provision should be applied together with the prescribed limits, the client mandate and the disclosures appropriate to the investment approach.
Exchange-Traded Derivative Instruments
Exchange-traded derivatives can serve different investment purposes, but their use requires a clear understanding of exposure, margins, settlement and potential losses. The regulations permit investment or advice subject to SEBI-specified conditions. Managers should identify the intended purpose of derivative use and establish monitoring procedures suited to that purpose. Client communication should explain how the instruments may affect the portfolio, including risks that may not be apparent from the initial amount committed.
Review of Existing Client Mandates
An expanded regulatory investment universe does not automatically amend every existing client agreement. Managers should examine whether the proposed instruments fall within the agreed investment approach and any client restrictions. Where a change is material, the business should assess the necessary amendments, disclosures and consents. This review helps prevent a gap between what regulations permit generally and what an individual client has authorised.
Introduction of PRIM
PRIM is a significant addition because it creates a dedicated portfolio management route focused on mutual fund units. It combines a defined investment universe with a lower client entry threshold and separate eligibility requirements for applicants operating exclusively through the route. Its commercial and operational design should be assessed independently from ordinary PMS.
Permitted Investment Universe
Regulation 32 restricts PRIM investments to direct plans of mutual funds in India, including index funds, exchange-traded funds and specialised investment funds. A PRIM offering should therefore remain within the permitted universe. It should not be presented as a lower-ticket version of an unrestricted securities portfolio. The manager’s value proposition may involve fund selection, allocation and monitoring, but those activities must operate within the route’s requirements.
Minimum Client Investment of Rs.25 Lakh
Regulation 33 provides a minimum investment of Rs.25 lakh, accepted through funds, securities or a combination of both. Renewal on maturity of the initial agreement period is treated as a fresh investment. This threshold applies specifically to PRIM. It should not be confused with the general Rs.50 lakh minimum under the ordinary PMS provisions, which remains subject to the applicable exceptions.
Implications for Investors
The lower PRIM threshold may allow more investors to consider professionally managed mutual fund portfolios. Nevertheless, investors should examine the overall cost, including portfolio-manager fees and underlying fund expenses, as applicable. The use of mutual funds does not eliminate market risk or guarantee outcomes. The investment approach should explain how the selected funds work together and why the resulting portfolio is appropriate for the intended client.
Offering PRIM Through an Existing Portfolio Manager
Existing managers may be permitted to introduce PRIM through segregated investment approaches. This provides an opportunity to add a mutual fund-focused service without treating it as identical to other PMS offerings. Operational separation and clear communication will be important, subject to SEBI’s prescribed conditions.
Segregated Investment Approaches
Regulation 30 contemplates PRIM through segregated investment approaches. Managers should establish how the approach will be identified in client documents, investment systems and reports. The applicable SEBI conditions will determine the detailed arrangements. The business should ensure that staff can distinguish PRIM accounts from other approaches and apply the correct investment universe and client threshold.
Capital Requirements for Existing Managers
The Rs.2 crore requirement applies to an applicant exclusively offering PRIM under the dedicated provisions. It should not automatically be treated as reducing the capital requirement of a manager continuing ordinary PMS activities. Existing managers should assess their complete range of services and the applicable registration conditions before making financial changes. A new PRIM offering does not, by itself, convert the entire business into a PRIM-only entity.
Client Communication and Product Design
The business should explain the difference between its PRIM and ordinary PMS approaches in straightforward language. Onboarding material, fee explanations and investment descriptions should reflect the actual service. Clear product design helps prevent clients from assuming that the lower entry threshold provides access to all of the manager’s strategies or investment instruments.
Separate Registration for PRIM-Only Applicants
A new applicant intending to operate exclusively within PRIM may seek registration under Chapter VI. The route provides different financial and personnel requirements while retaining the need for adequate infrastructure and compliance arrangements. Founders should assess whether the restricted investment universe suits their intended business.
Minimum Net Worth of Rs.2 Crore
An exclusively PRIM portfolio manager must maintain minimum net worth of Rs.2 crore throughout the period of certification. The requirement must be maintained separately and independently from capital requirements tied to other business activities. It is a financial obligation of the manager, distinct from client assets. Business planning should also allow for operating expenses and losses that could affect the entity’s financial position.
Principal Officer Eligibility
The principal officer may qualify through graduation or the specified professional qualifications, including CFA, CA, CS and CMA. At least two years of securities-market experience is required in the categories recognised by the regulations, which include mutual fund distribution. Relevant and valid NISM certification specified by SEBI remains necessary. The notified text should not be read as dispensing with certification or conclusively prescribing a particular simplified examination.
Infrastructure and Compliance Officer
PRIM-only applicants must have appropriate office space, equipment and manpower, together with a principal officer and compliance officer. A limited investment universe still requires dependable onboarding, execution, reconciliation, reporting and complaint-handling procedures. Applicants should select systems that can support the proposed client base and preserve the records needed to demonstrate compliance.
Recognition of Independent Fund Managers
The regulations define an Independent Fund Manager as a fund manager managing client portfolios in affiliation with a registered portfolio manager. This recognises an association-based operating model, subject to terms and conditions specified by SEBI. The model must remain connected to the registered portfolio manager’s regulated activities.
Nature of the IFM Arrangement
The IFM concept creates scope for investment professionals to work in association with a registered manager. It should not be described as permission to conduct an independent, unregistered PMS business. The parties will need arrangements consistent with SEBI’s conditions, including clarity about authority, supervision and operational responsibilities. Commercial agreements should follow those requirements rather than anticipate unrestricted independence.
Qualifications and Decision-Making Authority
An IFM engaged with fund-management decision-making authority must meet the principal officer’s minimum qualifications, experience and certification requirements. The same principle applies to employees exercising that authority. Managers should identify who actually makes portfolio decisions and verify eligibility accordingly. A different designation should not be used to avoid requirements attached to the underlying function.
Supervision and Recordkeeping
A practical IFM arrangement should make it possible to identify who made a decision, the authority under which it was made and the supporting rationale. Managers should prepare supervision and recordkeeping procedures consistent with the eventual operating conditions. Clear accountability is particularly important where investment personnel and operational teams work through different contractual arrangements.
Prescribed Investment Agreement Contents
The regulations strengthen consistency in client agreements by requiring written terms and prescribing core contents through the Third Schedule. The agreement should explain the service and the authority given to the manager. It is also an important reference when resolving questions about fees, instructions, reporting or termination.
Agreement Before Portfolio Management Begins
Regulation 15 requires a written investment agreement before the manager takes up the assignment. It should define the relationship and set out mutual rights, liabilities, obligations and authority. The business should ensure that the signed agreement corresponds to the actual approach offered. Differences between discretionary and non-discretionary responsibilities should be clearly explained.
Standardisation of Essential Terms
The Third Schedule covers matters including services, investment objectives, responsibilities, risks, fees, reporting and settlement. This supports consistency in essential disclosures without necessarily making every commercial clause identical. Managers should review their existing documents against the prescribed contents. The specific exception concerning agreement contents for large value accredited investors should be assessed separately.
Making Agreements Understandable
Compliance review should also consider whether clients can understand the terms. Explain fee calculations, investment authority, withdrawal procedures and material risks clearly. Where appropriate, examples can help illustrate financial consequences. Legal completeness and readability should support each other so that the agreement functions as a useful description of the relationship.
Digital Disclosure Documents and Annual Certification
The regulations promote digital delivery of disclosure documents while preserving the right to obtain a physical copy. They also establish annual updating, certification and filing obligations. Managers will need a reliable process connecting the certified document, regulatory filing, website version and client delivery records.
Digital Delivery Before Agreement
The Disclosure Document must be supplied in digital format, with the prescribed certificate, before entering into the client agreement. A physical copy must be provided without charge if requested. Managers should preserve evidence identifying the version supplied and the delivery date. Sending an outdated document can create a disclosure gap even where the latest version exists internally.
Independent Chartered Accountant Certification
The contents must be certified by an independent chartered accountant in the prescribed format at registration and annually within six months of the financial year-end. Certification should be supported by accurate information and a coordinated review process. Investment, finance, operations and compliance teams may each hold information relevant to the document, so responsibility for compilation should be clearly allocated.
Annual Updating and Filing
The manager must update the Disclosure Document annually within six months of year-end and complete the prescribed annual filing with certification. The initial filing must occur after registration and before circulation to clients. A compliance calendar should distinguish document preparation, certification, filing and publication so that completion of one step is not mistaken for completion of all requirements.
Website Availability
The latest Disclosure Document and relevant addenda must remain available on the website, including as soon as registration is granted. Managers should regularly check that links work and that outdated versions are not being supplied through separate onboarding channels. Internal version control can help establish which document applied at a particular time.
Reporting Material Changes Within 15 Calendar Days
Material changes require action during the year rather than only at the annual update. The regulations impose separate responsibilities concerning regulatory filing and client disclosure. Managers should create an escalation process that identifies significant changes promptly and records when the reporting period begins.
Update Through an Addendum
Following a material change, the manager must update the Disclosure Document by an addendum and file the document with that addendum within 15 calendar days. The process should identify who assesses materiality, who approves the update and who files it. Supporting records should explain the change and the date it occurred.
Communicate the Change to Clients
The material change must also be disclosed to clients within 15 calendar days of effecting it. Filing with SEBI does not automatically satisfy the client-communication obligation. Maintain evidence of both actions. Client messages should explain the development clearly and consistently with the updated Disclosure Document.
Unencumbered Liquid Assets Linked to Minimum Net Worth
The new liquidity requirement ensures that a portion of minimum regulatory net worth is held in qualifying unencumbered liquid assets. This creates a financial-management responsibility in addition to monitoring total net worth. Managers must assess both the amount held and whether the selected assets satisfy the requirement.
Ordinary Portfolio Managers
Ordinary portfolio managers must deploy at least 10% of the Rs.5 crore minimum net-worth requirement in qualifying liquid assets. This corresponds to Rs.50 lakh. The calculation is linked to minimum required net worth rather than automatically to the manager’s entire actual net worth. Managers should document the calculation and review compliance as financial arrangements change.
PRIM-Only Portfolio Managers
For an exclusively PRIM manager with minimum net worth of Rs.2 crore, the corresponding allocation is Rs.20 lakh. This is part of the financial-resource arrangement and should not automatically be described as additional net worth above Rs.2 crore. The assets must satisfy the specified eligibility and unencumbered conditions.
Eligible Instruments
The specified categories include cash, scheduled commercial bank deposits, money-market instruments, government securities, treasury bills, repos on government securities, and units of liquid and overnight mutual fund schemes. Other instruments may be specified by SEBI. Managers should verify that assets are not pledged or otherwise encumbered in a manner inconsistent with the requirement.
Transition for Existing Managers
Existing portfolio managers receive 12 months from commencement to comply with the liquidity requirement under Regulation 4. The transition should be used to review treasury arrangements, asset eligibility and supporting evidence. Managers should incorporate monitoring into routine financial reporting so that compliance continues after the initial adjustment.
Commencement of Business Within Three Years
The regulations require registered portfolio managers to commence business within a defined period. This discourages treating registration as an indefinitely inactive authorisation. The detailed conditions constituting commencement remain subject to SEBI specifications, making those directions important for both new and existing managers.
Requirement for New Managers
A portfolio manager must commence business activities within three years from registration. Applicants should therefore prepare realistic plans for staffing, systems and business development. They should also preserve evidence relevant to the prescribed commencement conditions once those conditions are specified.
Requirement for Existing Managers
Existing managers operating before commencement must fulfil the corresponding requirement within 36 months from commencement of the regulations. They should assess their position against the specified conditions rather than assume that historical registration alone is sufficient. Maintaining an office, website or basic infrastructure should not automatically be treated as satisfying the test.
Preparing for Implementation
The period before April 2027 should be used to turn the regulatory changes into practical business procedures. Preparation should reflect the chosen model: ordinary PMS, an existing manager adding PRIM, or an exclusively PRIM applicant. Each model requires a different assessment of capital, personnel and permitted activities.
Review Personnel and Financial Readiness
Verify principal officer, employee and IFM eligibility, certification validity and experience evidence. Review net worth and liquid-asset arrangements, identifying any shortfall or documentary gap. Assign responsibility and completion dates so that changes can be made before the applicable deadline.
Update Documents and Systems
Compare agreements and disclosures with the new requirements. Establish procedures for digital delivery, annual certification, material-change reporting and website updates. Test whether systems can distinguish PRIM from other investment approaches and apply the correct client thresholds and investment restrictions.
Monitor Supporting Circulars
Several areas depend on SEBI specifications, including foreign securities, unlisted investments, derivatives, IFM arrangements and PRIM operations. Managers should maintain a regulatory-update process and revise implementation plans when directions are issued. Commercial commitments should remain consistent with confirmed permissions and conditions.
Conclusion
The SEBI (Portfolio Managers) Regulations, 2026 introduce broader educational eligibility, a dedicated mutual fund investment route and provisions for expanded investment opportunities. They also reinforce expectations concerning financial resources, client documentation, disclosures and operational readiness.
Existing managers and new applicants should prepare for 1 April 2027 by assessing their intended business model, verifying personnel eligibility and updating capital arrangements, documents and systems. Careful attention to supporting SEBI circulars will be essential where the regulations leave detailed limits or procedures to be specified.
Based on the attached notified regulations:
Frequently Asked Questions (FAQ’s)
Q1. When will the SEBI (Portfolio Managers) Regulations, 2026 become effective?
Ans. The regulations were notified through a notification dated 7 October 2026 and will take effect on 1 April 2027. The 2020 regulations will stand repealed from that date, subject to provisions preserving earlier registrations, actions, liabilities and pending matters.
Q2. Can a graduate become a principal officer under the new regulations?
Ans. Yes, graduation from an eligible recognised university or institution is an accepted qualification. However, an ordinary PMS principal officer must also meet the prescribed five-year experience requirement, including two years in specified areas, and maintain the relevant NISM certification.
Q3. Can portfolio managers invest client funds in IPOs and primary debt issues?
Ans. The regulations expressly include equity IPOs and primary-market debt issuance within the investment provisions. Investments must remain consistent with the client agreement, investment approach and applicable regulatory conditions. Express permission does not make every issue suitable for every client.
Q4. Do the regulations allow investment in foreign securities?
Ans. They provide for discretionary and non-discretionary portfolio managers to invest in foreign securities specified by SEBI, in the prescribed manner. This is not unrestricted overseas-investment permission. Managers must also assess applicable foreign-exchange and other legal requirements.
Q5. Can portfolio managers invest in unlisted securities and derivatives?
Ans. The regulations permit investment or advice concerning unlisted securities and exchange-traded derivatives, subject to limits and conditions specified by SEBI. Managers must also review client mandates, disclosures and operational controls before introducing these instruments.
Q6. What is PRIM, and what is its minimum investment amount?
Ans. PRIM means the Portfolio Management Service Route for Investment in Mutual Fund units. It permits investment in direct plans of mutual funds in India, including index funds, ETFs and specialised investment funds. Its minimum client investment is Rs.25 lakh; the general ordinary PMS minimum remains Rs.50 lakh, subject to exceptions.
Q7. What are the requirements for an exclusively PRIM portfolio manager?
Ans. A PRIM-only applicant must maintain minimum net worth of Rs.2 crore, adequate infrastructure, a principal officer and a compliance officer. The principal officer needs an eligible qualification, at least two years of specified securities-market experience, and relevant valid NISM certification.
Q8. Who is an Independent Fund Manager?
Ans. An Independent Fund Manager, or IFM, manages client portfolios in affiliation with a registered portfolio manager under SEBI-specified conditions. An IFM exercising fund-management decision-making authority must meet the principal officer’s minimum qualification, experience and certification requirements.
Q9. What are the new Disclosure Document requirements?
The Disclosure Document must be provided digitally before the agreement, with a free physical copy on request. Annual updating, independent chartered accountant certification and filing are required within six months of year-end. Material changes require an addendum filing and client disclosure within 15 calendar days.
Q10. What liquidity and business-commencement requirements apply?
Ans. The regulations require 10% of minimum regulatory net worth in qualifying unencumbered liquid assets Rs.50 lakh for ordinary PMS and Rs.20 lakh for PRIM-only managers. Existing managers receive the prescribed liquidity transition period. Business must commence within three years of registration, with corresponding transition provisions for existing managers and conditions specified by SEBI.

The Securities and Exchange Board of India has notified the SEBI (Portfolio Managers) Regulations, 2026, through a notification dated 7 October 2026. These regulations will come into effect on 1 April 2027, replacing the SEBI (Portfolio Managers) Regulations, 2020 from that date. The new regulations address registration, professional qualifications, investment opportunities, client agreements, disclosures and financial resources. They also introduce the Portfolio Management Service Route for Investment in Mutual Fund units, known as PRIM, and recognise the concept of an Independent Fund Manager, or IFM.

For existing portfolio managers, the changes require preparation across personnel, documentation, financial arrangements and operating systems. For prospective applicants, they create different business possibilities depending on whether the applicant intends to offer ordinary portfolio management services or operate exclusively through PRIM. Several provisions expressly depend on limits, conditions or procedures to be specified by SEBI. Businesses should therefore distinguish the provisions contained in the notified regulations from operational details that will be addressed through applicable circulars and directions.

Commencement and Replacement of the Earlier Regulations

The first point to understand is the distinction between notification and commencement. Although the notification is dated October 2026, the new regulations become applicable from April 2027. This interval gives existing managers and prospective applicants time to assess the changes and prepare their operations. The transition also includes provisions that preserve earlier registrations, regulatory actions and pending matters.

Effective Date of the New Regulations

Regulation 1 states that the SEBI (Portfolio Managers) Regulations, 2026 will come into effect on 1 April 2027. Businesses must therefore continue meeting the currently operative requirements until the new regulations commence. They should not assume that the lower PRIM thresholds or expanded investment provisions can be used immediately merely because the regulations have been notified. Preparation can begin in advance, but implementation must follow the applicable commencement date and any supporting conditions.

Repeal of the 2020 Regulations

Under Regulation 46, the SEBI (Portfolio Managers) Regulations, 2020 stand repealed from the date the new regulations come into force. However, repeal does not remove earlier liabilities or invalidate actions already taken. Registrations, approvals, proceedings and other specified matters are preserved through the savings provisions. Existing managers should identify the corresponding provisions governing their activities and update internal references without assuming that the entire regulatory history of the business begins again.

Treatment of Pending Applications

Applications pending under the earlier regulations are treated as applications under the corresponding provisions of the new regulations. Applicants whose registration process extends into the transition period should review whether their proposed personnel, capital arrangements and documents satisfy the applicable requirements. They should also monitor clarification requests and implementation directions so that the application remains consistent with the business model they intend to launch.

Broader Educational Eligibility for Principal Officers

The revised educational requirements widen the routes through which a person can qualify as principal officer. This may help experienced securities-market professionals who do not hold one of the previously specified specialised qualifications. However, the change concerns educational eligibility; experience and certification requirements continue to apply separately.

Graduation as an Accepted Qualification

Regulation 4 recognises graduation from an eligible recognised university or institution as an educational route for the principal officer. It also recognises specified professional qualifications, including the CFA charter, Chartered Accountancy, Company Secretaryship and Cost and Management Accountancy. The practical effect is that a suitable graduate may become eligible without obtaining an additional specialised professional qualification solely to satisfy the educational condition. The applicant must nevertheless verify that the qualification falls within the wording of the regulations.

Experience Requirements for Ordinary Portfolio Managers

For an ordinary portfolio manager, the principal officer must have at least five years of relevant securities-market experience. At least two years must be in portfolio management, investment advisory services or areas connected with fund management. Graduation alone is therefore insufficient. When evaluating a candidate, the business should examine the person’s actual responsibilities and the relevance of the experience, rather than relying only on job titles or the total number of years spent in financial services.

Continuing NISM Certification

The principal officer must obtain the relevant NISM certification specified by SEBI and maintain its continuous validity. Educational eligibility, experience and certification should be checked as three separate conditions. A practical recruitment file should contain qualification records, experience evidence and valid certification details. The compliance team should also monitor expiry dates so that an otherwise eligible appointment does not become non-compliant because a certificate has lapsed.

Express Inclusion of IPO and Primary Debt Investments

The investment provisions expressly include equity initial public offers and primary-market issuance of debt securities. This broadens the opportunities that portfolio managers can assess within the permitted investment universe. However, availability under the regulations does not establish suitability for every portfolio. The manager must still consider the client mandate, investment approach, risks and applicable conditions.

Investment in Equity Initial Public Offers

The regulations expressly cover investment and advice relating to equity IPOs. This allows managers to evaluate participation at the initial offering stage instead of considering a security only after listing. The decision should be supported by research into the issuer’s business, financial position, valuation and offering terms. Managers should also consider allocation uncertainty and post-listing volatility. A newly offered security should undergo an investment assessment comparable to other portfolio opportunities.

Investment in Primary Debt Issuance

Primary-market debt issuance is also expressly included. This may enable managers to evaluate eligible debt securities at issuance, taking account of pricing, maturity, repayment arrangements and credit quality. The investment team should examine liquidity and exit possibilities, particularly where the intended holding period differs from the instrument’s maturity. Participation in a new debt issue should be supported by documented analysis and should remain consistent with the portfolio’s risk and liquidity requirements.

Changes to Internal Investment Procedures

Managers intending to use these opportunities should review their investment policies, approval processes and operational systems. Procedures should address application decisions, allocation, settlement, valuation and recordkeeping. Client agreements and disclosures should also accurately describe the intended investment universe. These preparations help ensure that the business can implement the strategy consistently once the relevant provisions become operational.

Investment in Foreign Securities

The regulations provide for discretionary and non-discretionary portfolio managers to invest client funds in foreign securities specified by SEBI. This is an enabling provision whose practical scope depends on the securities, manner of investment and conditions prescribed. It should not be interpreted as unrestricted permission to invest overseas.

Scope of the Permission

Regulation 17 refers to foreign securities and investment methods that SEBI may specify from time to time. Managers should therefore examine the applicable directions before deciding which securities or markets can form part of an offering. The provision does not, by itself, answer every question concerning limits, execution, custody or reporting. Product planning should recognise this distinction so that proposed services are not built around assumptions that later conditions may not support.

Currency and Overseas-Market Risks

Foreign investments may expose clients to currency movements in addition to changes in the value of the underlying security. Different market practices, settlement arrangements, trading hours and legal environments may also affect portfolio operations. Managers should assess these features when designing the investment approach and preparing client disclosures. The objective is to explain the sources of risk clearly enough for clients to understand how overseas exposure may affect their portfolio.

Coordination with Other Applicable Requirements

SEBI permissions must be considered alongside applicable foreign-exchange and other legal requirements. Before launching a foreign-investment service, the manager should assess the complete operating arrangement, including execution, custody, valuation and reporting. Client eligibility and contractual authority should also be reviewed. A provision in the portfolio-manager regulations should not be treated as replacing every other requirement relevant to an overseas transaction.

Unlisted Securities and Exchange-Traded Derivatives

The new regulations address investment or advice concerning unlisted securities and exchange-traded derivatives across discretionary, non-discretionary and advisory services. These opportunities remain subject to limits and conditions specified by SEBI. Managers should therefore prepare appropriate controls while avoiding assumptions about the final scope of permitted activity.

Investment in Unlisted Securities

Unlisted investments may offer exposure to businesses or instruments outside the listed market, but they can involve limited liquidity and more complex valuation. Managers should evaluate the reliability of financial information, investor rights, transfer restrictions and potential exit routes. The client’s investment horizon and withdrawal needs are particularly relevant. The regulatory provision should be applied together with the prescribed limits, the client mandate and the disclosures appropriate to the investment approach.

Exchange-Traded Derivative Instruments

Exchange-traded derivatives can serve different investment purposes, but their use requires a clear understanding of exposure, margins, settlement and potential losses. The regulations permit investment or advice subject to SEBI-specified conditions. Managers should identify the intended purpose of derivative use and establish monitoring procedures suited to that purpose. Client communication should explain how the instruments may affect the portfolio, including risks that may not be apparent from the initial amount committed.

Review of Existing Client Mandates

An expanded regulatory investment universe does not automatically amend every existing client agreement. Managers should examine whether the proposed instruments fall within the agreed investment approach and any client restrictions. Where a change is material, the business should assess the necessary amendments, disclosures and consents. This review helps prevent a gap between what regulations permit generally and what an individual client has authorised.

Introduction of PRIM

PRIM is a significant addition because it creates a dedicated portfolio management route focused on mutual fund units. It combines a defined investment universe with a lower client entry threshold and separate eligibility requirements for applicants operating exclusively through the route. Its commercial and operational design should be assessed independently from ordinary PMS.

Permitted Investment Universe

Regulation 32 restricts PRIM investments to direct plans of mutual funds in India, including index funds, exchange-traded funds and specialised investment funds. A PRIM offering should therefore remain within the permitted universe. It should not be presented as a lower-ticket version of an unrestricted securities portfolio. The manager’s value proposition may involve fund selection, allocation and monitoring, but those activities must operate within the route’s requirements.

Minimum Client Investment of Rs.25 Lakh

Regulation 33 provides a minimum investment of Rs.25 lakh, accepted through funds, securities or a combination of both. Renewal on maturity of the initial agreement period is treated as a fresh investment. This threshold applies specifically to PRIM. It should not be confused with the general Rs.50 lakh minimum under the ordinary PMS provisions, which remains subject to the applicable exceptions.

Implications for Investors

The lower PRIM threshold may allow more investors to consider professionally managed mutual fund portfolios. Nevertheless, investors should examine the overall cost, including portfolio-manager fees and underlying fund expenses, as applicable. The use of mutual funds does not eliminate market risk or guarantee outcomes. The investment approach should explain how the selected funds work together and why the resulting portfolio is appropriate for the intended client.

Offering PRIM Through an Existing Portfolio Manager

Existing managers may be permitted to introduce PRIM through segregated investment approaches. This provides an opportunity to add a mutual fund-focused service without treating it as identical to other PMS offerings. Operational separation and clear communication will be important, subject to SEBI’s prescribed conditions.

Segregated Investment Approaches

Regulation 30 contemplates PRIM through segregated investment approaches. Managers should establish how the approach will be identified in client documents, investment systems and reports. The applicable SEBI conditions will determine the detailed arrangements. The business should ensure that staff can distinguish PRIM accounts from other approaches and apply the correct investment universe and client threshold.

Capital Requirements for Existing Managers

The Rs.2 crore requirement applies to an applicant exclusively offering PRIM under the dedicated provisions. It should not automatically be treated as reducing the capital requirement of a manager continuing ordinary PMS activities. Existing managers should assess their complete range of services and the applicable registration conditions before making financial changes. A new PRIM offering does not, by itself, convert the entire business into a PRIM-only entity.

Client Communication and Product Design

The business should explain the difference between its PRIM and ordinary PMS approaches in straightforward language. Onboarding material, fee explanations and investment descriptions should reflect the actual service. Clear product design helps prevent clients from assuming that the lower entry threshold provides access to all of the manager’s strategies or investment instruments.

Separate Registration for PRIM-Only Applicants

A new applicant intending to operate exclusively within PRIM may seek registration under Chapter VI. The route provides different financial and personnel requirements while retaining the need for adequate infrastructure and compliance arrangements. Founders should assess whether the restricted investment universe suits their intended business.

Minimum Net Worth of Rs.2 Crore

An exclusively PRIM portfolio manager must maintain minimum net worth of Rs.2 crore throughout the period of certification. The requirement must be maintained separately and independently from capital requirements tied to other business activities. It is a financial obligation of the manager, distinct from client assets. Business planning should also allow for operating expenses and losses that could affect the entity’s financial position.

Principal Officer Eligibility

The principal officer may qualify through graduation or the specified professional qualifications, including CFA, CA, CS and CMA. At least two years of securities-market experience is required in the categories recognised by the regulations, which include mutual fund distribution. Relevant and valid NISM certification specified by SEBI remains necessary. The notified text should not be read as dispensing with certification or conclusively prescribing a particular simplified examination.

Infrastructure and Compliance Officer

PRIM-only applicants must have appropriate office space, equipment and manpower, together with a principal officer and compliance officer. A limited investment universe still requires dependable onboarding, execution, reconciliation, reporting and complaint-handling procedures. Applicants should select systems that can support the proposed client base and preserve the records needed to demonstrate compliance.

Recognition of Independent Fund Managers

The regulations define an Independent Fund Manager as a fund manager managing client portfolios in affiliation with a registered portfolio manager. This recognises an association-based operating model, subject to terms and conditions specified by SEBI. The model must remain connected to the registered portfolio manager’s regulated activities.

Nature of the IFM Arrangement

The IFM concept creates scope for investment professionals to work in association with a registered manager. It should not be described as permission to conduct an independent, unregistered PMS business. The parties will need arrangements consistent with SEBI’s conditions, including clarity about authority, supervision and operational responsibilities. Commercial agreements should follow those requirements rather than anticipate unrestricted independence.

Qualifications and Decision-Making Authority

An IFM engaged with fund-management decision-making authority must meet the principal officer’s minimum qualifications, experience and certification requirements. The same principle applies to employees exercising that authority. Managers should identify who actually makes portfolio decisions and verify eligibility accordingly. A different designation should not be used to avoid requirements attached to the underlying function.

Supervision and Recordkeeping

A practical IFM arrangement should make it possible to identify who made a decision, the authority under which it was made and the supporting rationale. Managers should prepare supervision and recordkeeping procedures consistent with the eventual operating conditions. Clear accountability is particularly important where investment personnel and operational teams work through different contractual arrangements.

Prescribed Investment Agreement Contents

The regulations strengthen consistency in client agreements by requiring written terms and prescribing core contents through the Third Schedule. The agreement should explain the service and the authority given to the manager. It is also an important reference when resolving questions about fees, instructions, reporting or termination.

Agreement Before Portfolio Management Begins

Regulation 15 requires a written investment agreement before the manager takes up the assignment. It should define the relationship and set out mutual rights, liabilities, obligations and authority. The business should ensure that the signed agreement corresponds to the actual approach offered. Differences between discretionary and non-discretionary responsibilities should be clearly explained.

Standardisation of Essential Terms

The Third Schedule covers matters including services, investment objectives, responsibilities, risks, fees, reporting and settlement. This supports consistency in essential disclosures without necessarily making every commercial clause identical. Managers should review their existing documents against the prescribed contents. The specific exception concerning agreement contents for large value accredited investors should be assessed separately.

Making Agreements Understandable

Compliance review should also consider whether clients can understand the terms. Explain fee calculations, investment authority, withdrawal procedures and material risks clearly. Where appropriate, examples can help illustrate financial consequences. Legal completeness and readability should support each other so that the agreement functions as a useful description of the relationship.

Digital Disclosure Documents and Annual Certification

The regulations promote digital delivery of disclosure documents while preserving the right to obtain a physical copy. They also establish annual updating, certification and filing obligations. Managers will need a reliable process connecting the certified document, regulatory filing, website version and client delivery records.

Digital Delivery Before Agreement

The Disclosure Document must be supplied in digital format, with the prescribed certificate, before entering into the client agreement. A physical copy must be provided without charge if requested. Managers should preserve evidence identifying the version supplied and the delivery date. Sending an outdated document can create a disclosure gap even where the latest version exists internally.

Independent Chartered Accountant Certification

The contents must be certified by an independent chartered accountant in the prescribed format at registration and annually within six months of the financial year-end. Certification should be supported by accurate information and a coordinated review process. Investment, finance, operations and compliance teams may each hold information relevant to the document, so responsibility for compilation should be clearly allocated.

Annual Updating and Filing

The manager must update the Disclosure Document annually within six months of year-end and complete the prescribed annual filing with certification. The initial filing must occur after registration and before circulation to clients. A compliance calendar should distinguish document preparation, certification, filing and publication so that completion of one step is not mistaken for completion of all requirements.

Website Availability

The latest Disclosure Document and relevant addenda must remain available on the website, including as soon as registration is granted. Managers should regularly check that links work and that outdated versions are not being supplied through separate onboarding channels. Internal version control can help establish which document applied at a particular time.

Reporting Material Changes Within 15 Calendar Days

Material changes require action during the year rather than only at the annual update. The regulations impose separate responsibilities concerning regulatory filing and client disclosure. Managers should create an escalation process that identifies significant changes promptly and records when the reporting period begins.

Update Through an Addendum

Following a material change, the manager must update the Disclosure Document by an addendum and file the document with that addendum within 15 calendar days. The process should identify who assesses materiality, who approves the update and who files it. Supporting records should explain the change and the date it occurred.

Communicate the Change to Clients

The material change must also be disclosed to clients within 15 calendar days of effecting it. Filing with SEBI does not automatically satisfy the client-communication obligation. Maintain evidence of both actions. Client messages should explain the development clearly and consistently with the updated Disclosure Document.

Unencumbered Liquid Assets Linked to Minimum Net Worth

The new liquidity requirement ensures that a portion of minimum regulatory net worth is held in qualifying unencumbered liquid assets. This creates a financial-management responsibility in addition to monitoring total net worth. Managers must assess both the amount held and whether the selected assets satisfy the requirement.

Ordinary Portfolio Managers

Ordinary portfolio managers must deploy at least 10% of the Rs.5 crore minimum net-worth requirement in qualifying liquid assets. This corresponds to Rs.50 lakh. The calculation is linked to minimum required net worth rather than automatically to the manager’s entire actual net worth. Managers should document the calculation and review compliance as financial arrangements change.

PRIM-Only Portfolio Managers

For an exclusively PRIM manager with minimum net worth of Rs.2 crore, the corresponding allocation is Rs.20 lakh. This is part of the financial-resource arrangement and should not automatically be described as additional net worth above Rs.2 crore. The assets must satisfy the specified eligibility and unencumbered conditions.

Eligible Instruments

The specified categories include cash, scheduled commercial bank deposits, money-market instruments, government securities, treasury bills, repos on government securities, and units of liquid and overnight mutual fund schemes. Other instruments may be specified by SEBI. Managers should verify that assets are not pledged or otherwise encumbered in a manner inconsistent with the requirement.

Transition for Existing Managers

Existing portfolio managers receive 12 months from commencement to comply with the liquidity requirement under Regulation 4. The transition should be used to review treasury arrangements, asset eligibility and supporting evidence. Managers should incorporate monitoring into routine financial reporting so that compliance continues after the initial adjustment.

Commencement of Business Within Three Years

The regulations require registered portfolio managers to commence business within a defined period. This discourages treating registration as an indefinitely inactive authorisation. The detailed conditions constituting commencement remain subject to SEBI specifications, making those directions important for both new and existing managers.

Requirement for New Managers

A portfolio manager must commence business activities within three years from registration. Applicants should therefore prepare realistic plans for staffing, systems and business development. They should also preserve evidence relevant to the prescribed commencement conditions once those conditions are specified.

Requirement for Existing Managers

Existing managers operating before commencement must fulfil the corresponding requirement within 36 months from commencement of the regulations. They should assess their position against the specified conditions rather than assume that historical registration alone is sufficient. Maintaining an office, website or basic infrastructure should not automatically be treated as satisfying the test.

Preparing for Implementation

The period before April 2027 should be used to turn the regulatory changes into practical business procedures. Preparation should reflect the chosen model: ordinary PMS, an existing manager adding PRIM, or an exclusively PRIM applicant. Each model requires a different assessment of capital, personnel and permitted activities.

Review Personnel and Financial Readiness

Verify principal officer, employee and IFM eligibility, certification validity and experience evidence. Review net worth and liquid-asset arrangements, identifying any shortfall or documentary gap. Assign responsibility and completion dates so that changes can be made before the applicable deadline.

Update Documents and Systems

Compare agreements and disclosures with the new requirements. Establish procedures for digital delivery, annual certification, material-change reporting and website updates. Test whether systems can distinguish PRIM from other investment approaches and apply the correct client thresholds and investment restrictions.

Monitor Supporting Circulars

Several areas depend on SEBI specifications, including foreign securities, unlisted investments, derivatives, IFM arrangements and PRIM operations. Managers should maintain a regulatory-update process and revise implementation plans when directions are issued. Commercial commitments should remain consistent with confirmed permissions and conditions.

Conclusion

The SEBI (Portfolio Managers) Regulations, 2026 introduce broader educational eligibility, a dedicated mutual fund investment route and provisions for expanded investment opportunities. They also reinforce expectations concerning financial resources, client documentation, disclosures and operational readiness.

Existing managers and new applicants should prepare for 1 April 2027 by assessing their intended business model, verifying personnel eligibility and updating capital arrangements, documents and systems. Careful attention to supporting SEBI circulars will be essential where the regulations leave detailed limits or procedures to be specified.

Based on the attached notified regulations:

Frequently Asked Questions (FAQ’s)

Q1. When will the SEBI (Portfolio Managers) Regulations, 2026 become effective?

Ans. The regulations were notified through a notification dated 7 October 2026 and will take effect on 1 April 2027. The 2020 regulations will stand repealed from that date, subject to provisions preserving earlier registrations, actions, liabilities and pending matters.

Q2. Can a graduate become a principal officer under the new regulations?

Ans. Yes, graduation from an eligible recognised university or institution is an accepted qualification. However, an ordinary PMS principal officer must also meet the prescribed five-year experience requirement, including two years in specified areas, and maintain the relevant NISM certification.

Q3. Can portfolio managers invest client funds in IPOs and primary debt issues?

Ans. The regulations expressly include equity IPOs and primary-market debt issuance within the investment provisions. Investments must remain consistent with the client agreement, investment approach and applicable regulatory conditions. Express permission does not make every issue suitable for every client.

Q4. Do the regulations allow investment in foreign securities?

Ans. They provide for discretionary and non-discretionary portfolio managers to invest in foreign securities specified by SEBI, in the prescribed manner. This is not unrestricted overseas-investment permission. Managers must also assess applicable foreign-exchange and other legal requirements.

Q5. Can portfolio managers invest in unlisted securities and derivatives?

Ans. The regulations permit investment or advice concerning unlisted securities and exchange-traded derivatives, subject to limits and conditions specified by SEBI. Managers must also review client mandates, disclosures and operational controls before introducing these instruments.

Q6. What is PRIM, and what is its minimum investment amount?

Ans. PRIM means the Portfolio Management Service Route for Investment in Mutual Fund units. It permits investment in direct plans of mutual funds in India, including index funds, ETFs and specialised investment funds. Its minimum client investment is Rs.25 lakh; the general ordinary PMS minimum remains Rs.50 lakh, subject to exceptions.

Q7. What are the requirements for an exclusively PRIM portfolio manager?

Ans. A PRIM-only applicant must maintain minimum net worth of Rs.2 crore, adequate infrastructure, a principal officer and a compliance officer. The principal officer needs an eligible qualification, at least two years of specified securities-market experience, and relevant valid NISM certification.

Q8. Who is an Independent Fund Manager?

Ans. An Independent Fund Manager, or IFM, manages client portfolios in affiliation with a registered portfolio manager under SEBI-specified conditions. An IFM exercising fund-management decision-making authority must meet the principal officer’s minimum qualification, experience and certification requirements.

Q9. What are the new Disclosure Document requirements?

The Disclosure Document must be provided digitally before the agreement, with a free physical copy on request. Annual updating, independent chartered accountant certification and filing are required within six months of year-end. Material changes require an addendum filing and client disclosure within 15 calendar days.

Q10. What liquidity and business-commencement requirements apply?

Ans. The regulations require 10% of minimum regulatory net worth in qualifying unencumbered liquid assets Rs.50 lakh for ordinary PMS and Rs.20 lakh for PRIM-only managers. Existing managers receive the prescribed liquidity transition period. Business must commence within three years of registration, with corresponding transition provisions for existing managers and conditions specified by SEBI.