Sebi Chief Tuhin Kanta Pandey Flags Significant PMS Overhaul
The Securities and Exchange Board of India (Sebi) is set to undertake a substantial overhaul of its portfolio management services (PMS) regulations, according to Chairperson Tuhin Kanta Pandey. This initiative, announced at a recent PMS conclave, also includes an examination of brokers’ requests for Sebi’s intervention regarding the Reserve Bank of India’s (RBI) latest capital market funding norms.
Comprehensive Review of PMS Regulations
– Objective: The motive behind this overhaul is to ensure the PMS framework remains effective and adaptable to evolving market dynamics.
– Timeline: Pandey mentioned that draft regulations are expected to be released for public consultation ahead of Sebi’s June board meeting.
– Current Industry Landscape: As of January 31, 2026, the PMS industry encompasses approximately 2.15 lakh clients managing Rs 10.5 lakh crore in assets (excluding EPFO and PF), reflecting a robust 17% CAGR.
Pandey emphasized that effective regulation alone cannot foster a strong industry. He stated, “The true strength of PMS will stem from daily actions in governance, suitability, technology, and conduct.”
Focus on Investor Suitability
– Key Principles: Investor suitability must remain central to the business model. Essential components include:
– Risk Profiling: A clear framework needs to be developed for assessing risks.
– Suitability Assessment: Firms must ensure thorough evaluation processes.
– Client Communication: Communication must be precise, consistent, and evidence-based.
Pandey added that PMS distributors must remain vigilant against mis-selling practices as they navigate the regulatory landscape.
Examination of New RBI Funding Norms
In conjunction with the PMS reforms, Sebi will also scrutinize representations from stock brokers concerning the RBI’s new capital market funding norms:
– Collateral Requirements: The RBI proposes increasing bank-guarantee collateral for proprietary traders from 50% to 100%.
– Ongoing Review: We received a representation on this matter, and we will assess necessary actions, Pandey remarked, highlighting the regulator’s commitment to addressing the concerns of market participants.
RBI Governor Sanjay Malhotra indicated that there are no current plans to revise the recently established rules, confirming that stringent scrutiny of bank lending to brokers is now a priority.
Oversight on Grey-Market Trading
Pandey also revealed that Sebi is actively working on mechanisms to oversee ‘to-be-listed’ stocks to tackle grey-market activities related to upcoming IPOs:
– Market Strategy: This initiative will focus specifically on stocks where Sebi has jurisdiction, potentially curbing grey-market trading.
– Next Steps: Operational details will be outlined, followed by the release of a consultation paper.
Disciplinary Measures within Sebi
In a notable day for the regulator, Pandey announced the suspension of a general manager linked to a sensitive vigilance matter, with disciplinary action forthcoming. He stated, “The evidence was serious enough for us to act swiftly,” reaffirming Sebi’s dedication to integrity.
Conclusion
As Sebi prepares for a significant overhaul of its PMS regulations, the potential changes promise to enhance governance standards and prioritize investor suitability. The scrutiny of RBI’s new funding norms further underscores the commitment to a transparent and effective market. With these reforms, Sebi aims to build a resilient and trustworthy financial landscape that can adapt to the evolving needs of investors and the economy alike.