SEBI Proposes Greater Investment Freedom for Portfolio Managers

India's securities market regulator, the Securities and Exchange Board of India (SEBI), has put forward proposals to ease compliance norms for portfolio managers and broaden the range of assets they can invest in on behalf of clients, including overseas securities and unlisted debt instruments.

The regulator stated that the proposed changes are aimed at improving the ease of doing business while giving portfolio managers greater flexibility to tailor client portfolios to individual needs. The consultation comes at a time when India's portfolio management services (PMS) industry has seen steady growth in assets under management, driven by increasing demand from high-net-worth investors for more customized investment strategies.

Expanded Investment Universe

Under the proposed framework, portfolio managers would gain the ability to allocate client funds across a wider array of asset classes. Notably, the proposals include allowing investments in overseas securities and unlisted debt, asset categories that have historically been subject to tighter restrictions under India's PMS regulatory regime. If implemented, the changes would bring PMS offerings closer in line with the flexibility already available to certain alternative investment funds (AIFs), which operate under a separate SEBI regulatory framework and have attracted growing interest from the same segment of affluent investors.

SEBI regulates portfolio managers under the SEBI (Portfolio Managers) Regulations. Portfolio managers offer discretionary and non-discretionary services to clients, managing investments according to agreed-upon strategies. The minimum investment threshold for PMS clients in India is currently set at 50 lakh rupees, positioning the product for high-net-worth and upper-tier investors.

Easing Compliance Burden

In addition to expanding the investable universe, SEBI's proposals seek to streamline compliance requirements for registered portfolio managers. The stated objective is to reduce operational friction and regulatory overhead, thereby enhancing the competitiveness of India's portfolio management industry relative to other regulated investment vehicles serving similar client segments.

The regulator has emphasized that these changes are part of a broader effort to improve the ease of doing business in India's financial markets. SEBI periodically reviews its regulatory frameworks to align them with evolving market conditions and participant needs, and these proposals follow a pattern of incremental reforms across its various regulated intermediaries.

Background

SEBI is the statutory regulatory body for securities and commodity markets in India, established under the SEBI Act of 1992. Headquartered in Mumbai, it is mandated to protect investor interests and promote the development of the securities market. The current proposals are subject to SEBI's standard consultation process, after which the regulator may issue final notified regulations incorporating modifications based on stakeholder feedback.

Source: CNBC-TV18