PMS Rules in India: SEBI Norms for Portfolio Managers
Why in the news
An explainer covered the main SEBI rules that govern Portfolio Management Services (PMS), which are aimed at wealthy investors and meant to keep the market transparent and investors protected.
Key facts
| Rule | Requirement |
|---|---|
| Minimum investment | ₹50 lakh, cash or securities (targets HNIs) |
| Who can offer PMS | Only SEBI-registered portfolio managers |
| Net worth | At least ₹5 crore |
| Custodian | Compulsory if a client’s portfolio is above ₹500 crore |
| Client accounts | Kept separately for each client |
| Upfront fee | Not more than 25% of total fees for the agreement term |
| Associate transactions | Charges limited to 20% of value for each associate and service |
Agreement and transparency
- A written agreement must state fees, risks, scope of services, client rights and manager limits.
- Clients must acknowledge the fee structure before onboarding.
- Managers must regularly report performance, fees and risks.
- Detailed records of transactions and recommendations, with the reasoning, must be kept.
Other points
- No mandatory lock-in, but an exit load may apply per the agreement.
- Distributors have to obey SEBI’s conduct code and enrol with APMI (Association of Portfolio Management Intermediaries).
Significance
The framework keeps portfolio managers within a structured, transparent system while encouraging responsible growth of wealth management.
Exam angle
- Regulator: SEBI.
- Entry ticket: ₹50 lakh; manager net worth: ₹5 crore.
- Distributor registration: APMI.