The Securities and Exchange Board of India (SEBI), the regulatory body overseeing the Indian stock market, has approved significant amendments to the rules for portfolio managers. These changes will lead to an expansion of investment scope, increasing the reach of portfolio managers to various new options.
Previously, portfolio managers had certain fixed routes for investment, but now their scope is set to expand to several new options related to IPOs, foreign stocks, debt securities, REITs, InvITs, settlements, and advertisements.
SEBI has approved the new Portfolio Managers Regulation for 2026, replacing the old regulations from 2020. Under this new rule, investment opportunities for Portfolio Managers (PMS) will increase. They will now be able to invest in foreign listed stocks, debt securities, REITs, foreign mutual funds, ETFs, index funds, and foreign government securities, provided that the rules and limits set by SEBI are adhered to.
Additionally, with the client's consent, portfolio managers can also invest up to 10 percent of their total Assets Under Management (AUM) in investment-grade unlisted non-convertible debt securities.
Under the new SEBI rules, the route for portfolio managers to invest in IPOs and primary market debt has also been streamlined. This means that investors managing funds through PMS will have expanded investment options when new shares enter the stock market.
Furthermore, investment in direct plan schemes of Indian mutual funds has also been permitted, including ETFs, index funds, and specialized investment funds. The minimum investment limit for this facility has been set at ₹25 lakh.
Along with increasing investment options, SEBI has also focused on simplifying the regulations. The document size of the new PMS rules has been reduced from 70 pages to 33 pages, and according to SEBI, the word count has decreased by approximately 42 percent. This step aims to make it easier for portfolio managers to understand and comply with the regulations compared to before.
SEBI has also approved a new concept of the Independent Fund Manager. Such fund managers will be able to manage a client's portfolio in collaboration with a registered portfolio manager, although their responsibility and accountability will remain with the registered portfolio manager. Relaxation has also been provided in the educational qualification criteria for becoming a Principal Officer. Moreover, portfolio managers with AUM less than ₹100 crore will be exempted from the mandatory dealing room requirement, although they must maintain an audit trail and strong internal controls.
SEBI has also paved a new way for Foreign Portfolio Investors (FPIs). FPIs can now participate in physically settled non-agricultural commodity derivative contracts. These are capital market contracts whose underlying value is determined by raw materials other than agricultural products, metals, or energy sources. However, a time limit has been set for this; FPIs must close their positions before the tender period begins and at least three days before it ends.
SEBI has also expanded the category of Accredited Investors. Now, individual investors with assets of ₹5 crore and body corporates with assets of ₹20 crore can join this category if they meet certain existing income and net worth criteria. Accredited investors are considered investors who have a higher financial capacity to invest in certain specific investment options.
Rules have also been established regarding the presence of celebrities in advertisements of financial companies or market intermediaries. SEBI has approved a Common Advertisement Code. Under this code, celebrities can promote a brand or company, but they cannot directly endorse a specific financial product or service. This implies that a celebrity can represent the company in an advertisement, but they cannot claim that investors should buy or invest in a specific financial product.
Changes will also be made to the settlement process in cases of disputes and regulatory violations related to the stock market. SEBI has approved a new formula for calculating settlement amounts. Fast-track settlement will be provided for cases up to ₹10 lakh. The recovery of improperly earned amounts, saved losses, or investor losses will be separately determined. The new formula aims to solve the problem of double counting the same loss or amount while determining the settlement amount.
According to SEBI data, 703 settlement applications were received in the financial year 24-25, while 439 applications were received in the financial year 25-26, and 170 cases were settled. SEBI has also approved the Fourth Settlement Scheme, 2026, for cases related to non-genuine trades in BSE illiquid stock options between April 1, 2014, and September 30, 2015.