Portfolio management services after Sebi's new PMS rules

What is a portfolio management service, in plain terms?

A portfolio management service, or PMS, is a mandate. You sign an agreement, hand a registered manager a sum of money, and the manager decides what to buy and sell with it. The regulations define a discretionary portfolio manager as one who "exercises or may exercise, complete discretion" over the investment of the client's funds and the management of the client's portfolio.

Discretion is what defines the arrangement. In a mutual fund, thousands of investors share one pool and one scheme document. In a PMS, the holdings are the client's own, and the manager acts on a standing permission. The permission, written into the agreement, is the whole control the client has.

What did Sebi notify, and when does it apply?

The Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026 carry a notification dated 7 October 2026. They take effect on 1 April 2027 and replace the 2020 framework, according to the notification text reproduced by Taxguru.

Taxguru's summary lists what the document covers: registration, capital adequacy, client agreements, disclosure documents, conflicts of interest, fees, portfolio segregation, investment restrictions, custodians, audits and grievance redressal. It also says managers must not accept less than fifty lakh rupees per client, with an exception for accredited investors.

Two capital figures sit in the same text. A portfolio manager must hold a minimum net worth of ₹5 crore, and an entity registered only for the PRIM route must hold ₹2 crore. Outlook Money, reporting the notification, adds that at least 10 percent of the minimum net worth must sit in liquid, unencumbered assets. Existing managers get 12 months to meet it.

What is PRIM, and who is it for?

PRIM stands for the Portfolio Management Service Route for Investment in Mutual Fund units. A manager running it may invest client money only in direct plans of mutual funds, including exchange-traded funds, index funds and specialised investment funds of Indian asset management companies. The minimum investment is ₹25 lakh, against the ₹50 lakh general threshold, and a manager offering only PRIM needs ₹2 crore of net worth. Both figures are in the notification as quoted by PTI on Upstox.

An existing manager can offer PRIM through a separate investment approach, according to the report of the Sebi board's September approval by Business Standard.

PRIM is a narrower mandate. The manager chooses among mutual fund schemes and the client pays a manager for that choice. Whether that is worth paying for is a question about the individual manager's agreement, and nothing in the rule answers it.

What does a wider menu change for the client?

The change that matters is on the manager's side. The menu of what a manager may buy grew, and the client's job moved from asking what the manager can buy to deciding what the client permits. Four changes show it.

Change 1: the menu

The notification, quoted by PTI, lets portfolio managers invest in IPOs, primary-market debt issuances, listed securities, money market instruments, mutual funds, foreign securities, unlisted securities and exchange-traded derivatives. For clients classed as large value accredited investors, a manager may place up to 100 percent of assets in unlisted securities, if the disclosure document and the agreement say so. The regulations define that client as an accredited investor who has agreed a minimum investment of ten crore rupees.

For other discretionary clients, the board's approval sets narrower limits, as Business Standard reports them. Up to 10 percent of client assets may go into investment-grade unlisted debt, with the client's consent. Derivative exposure may run up to 1.25 times the client's assets.

Take ₹1 crore as the portfolio. Ten percent is ₹10 lakh in unlisted debt that cannot be sold on an exchange. A derivative ceiling of 1.25 times is ₹1.25 crore of exposure on ₹1 crore of the client's money, which is ₹25 lakh more than the client put in. Each limit is a ceiling, and the agreement can set it lower.

Change 2: the fee ceiling

The board's approval, as reported by Business Standard, caps the fixed management fee at 1 percent of client assets and permits performance-based fees as well. On ₹1 crore, the fixed fee at the cap is 1 percent of ₹1,00,00,000, or ₹1,00,000 a year. On a ₹25 lakh PRIM ticket, the same cap is ₹25,000 a year.

A cap is a ceiling and says nothing about where a given manager sits under it. The fee schedule in the agreement is the number that applies. A performance fee needs its own reading: what the hurdle is, how it is measured and over what period.

Change 3: who actually runs the money

The regulations introduce Independent Fund Managers, who can run client portfolios in association with a registered portfolio manager. Per Business Standard, the registered manager keeps full responsibility and liability for the Independent Fund Manager's activities. The client gets a mandatory exit option if that person leaves or is terminated.

For the client, the name on the agreement and the person making the decisions can now differ. The agreement should say which one the client is dealing with.

Change 4: a standard agreement

Business Standard reports that Sebi will introduce a standardised Investment Management Agreement and embed the authority to operate demat and trading accounts within it. The power of attorney already required for bank accounts stays.

A standard form helps because two managers' agreements can be read side by side. It does not remove the need to read the schedules where the manager's own permissions and fees are filled in.

Where is the common reading wrong?

Most coverage frames the news as a lower door into PMS, because PRIM halves the ticket. That reading puts the weight on the wrong number. The door is lower for one narrow mandate that buys mutual funds, and ₹25 lakh is still a large sum to hand over.

The bigger shift sits with the manager. A broader menu raises what a client can be exposed to without anyone breaking a rule. A manager's record on the old menu therefore says less than it used to. My position is that the agreement now matters more than the manager's pitch. A client who has read which assets are permitted, at what limits, at what fee, has done the one piece of diligence the rule cannot do for them.

What should a client check before signing a mandate?

Five questions, each answerable from the documents.

First, which asset classes does the agreement permit, and at what ceiling for each? Second, is the manager using the unlisted-debt or derivative allowance, or has the client capped both at zero? Third, what is the fixed fee, and does a performance fee apply on top? Fourth, who takes the investment decisions, the registered manager or an Independent Fund Manager, and what happens to the client if that person leaves? Fifth, how often is the portfolio reported, and does the report show every holding?

The Code of Conduct in the new regulations adds one more check. Per Outlook Money, a manager or employee giving investment advice in public media must disclose their own long or short position in the security while doing so. A manager who comments publicly can be held to that.

How does a published methodology answer the same question?

Every mandate asks who decides and how the client can check. A PMS answers with a person and an agreement. A rules-based index answers with a document.

A Qatobit index is the second kind. Qatobit designs and rebalances QSI Core, QSI Growth, QSI VRION and QSI GEQ8 monthly on a published methodology, so the weights and the schedule are written down before anyone invests. Holdings sit in institutional custody, and Proof of Reserves is published live. The fee is 0.35% per rebalance, with no annual management fee. An index has no standing permission to read, because the rulebook does the deciding.

That is a different product, built for a different decision. The point is the habit: whichever structure holds the money, find the document that says who decides, and read it first.

Where to go next

If you read methodology documents, how to evaluate any crypto index methodology sets out what to look for. For the fee side of any product, how to read a crypto platform's fee schedule walks through a schedule line by line.

Frequently asked questions

What are portfolio management services?

A portfolio management service is a mandate in which a registered manager invests a client's money under a signed agreement. In a discretionary service the manager decides what to buy and sell within the permissions the agreement gives.

What does PRIM mean in Sebi's new PMS rules?

PRIM is the Portfolio Management Service Route for Investment in Mutual Fund units. A manager on this route may invest client money only in direct plans of mutual funds, with a minimum investment of ₹25 lakh.

When do Sebi's new portfolio manager regulations take effect?

The Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026 take effect on 1 April 2027. They replace the 2020 framework, according to the notification text dated 7 October 2026.

What is the general minimum investment under the new PMS rules?

Managers must not accept less than fifty lakh rupees per client, with an exception for accredited investors. The PRIM route has a separate minimum investment of ₹25 lakh.

What does a Qatobit index cost?

Each QSI index charges 0.35% per rebalance, with no annual management fee and no exit load. The indexes rebalance monthly on a published methodology.

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