SEBI Revises PMS Rules, Allows FPIs to Enter Non-Agricultural Commodity Derivatives

The Securities and Exchange Board of India (SEBI) Board has approved changes to the Portfolio Management Services (PMS) regulations, as per news reports.  

The revised framework allows PMS managers to invest in foreign securities, IPOs and specified unlisted debt, subject to the applicable conditions. 

PMS managers can invest in overseas listed equities and debt, along with overseas mutual funds investing in equities, debt and REITs. These investments will be subject to foreign exchange regulations and client consent. 

₹25 Lakh Minimum Investment 

A new category called Portfolio Management Services for Investment in Mutual Funds (PRIM) will allow PMS managers to invest in direct plans of mutual fund schemes. The minimum investment under this route will be ₹25 lakh. 

The rules also allow PMS managers to invest up to 10% of a client's assets under management in investment-grade unlisted debt. Such investments will require the client's consent. 

FPIs and Commodity Derivatives 

SEBI has approved a framework allowing foreign portfolio investors (FPIs) to participate in non-agricultural commodity derivatives. The rules include requirements for FPIs to exit or roll over their positions before the delivery period. 

The decision follows a consultation paper issued by SEBI in August on FPI participation in exchange-traded commodity derivatives. The framework includes safeguards relating to delivery of commodities. 

Accredited Investor Rules 

The Board has also changed the eligibility rules for accredited investors. Individuals with at least ₹5 crore in securities-market assets will qualify under the revised framework. 

Certain non-residents, including FPIs, can also be treated as accredited investors. SEBI had issued a consultation paper on changes to the framework in August. 

REITs, InvITs, and Vault Managers 

SEBI approved a framework for issuing Depository Receipts against units of REITs and InvITs. For certain decisions, the approval threshold will now be based on 75% of votes cast instead of 75% of all outstanding units. 

The regulator has also expanded the Vault Manager framework to bullion underlying ETFs and bullion derivatives. The minimum net worth requirement for Vault Managers has been raised from ₹50 crore to ₹75 crore. 

Settlement and Other Changes 

SEBI has approved a formula-based settlement mechanism, a fast-track process for eligible cases, and an extension of the settlement application period from 60 days to 90 days. 

It has also approved a 90-day one-time settlement window for specified pending cases and a fourth settlement scheme for eligible illiquid stock-options cases pending before authorities, SAT or courts. 

Read More: SEBI Expands AI Use to Monitor Market Manipulation and Online Fraud! 

Conclusion  

The new measures include wider PMS investment options, access for FPIs to non-agricultural commodity derivatives and changes to settlement rules. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.  

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.