SEBI Revises PMS Rules, Introduces Common Advertising Code

The Securities and Exchange Board of India (SEBI) has released new capital requirement guidelines for Portfolio Managers effective April 2027, as per news reports.  

These guidelines supersede the current 2020 regulatory requirements and clearly differentiate between regular portfolio management services and those that primarily provide services related to mutual fund investments. 

SEBI has released a single set of advertising guidelines for all market intermediaries. These updates describe how licensed financial firms may market themselves, which includes using celebrity endorsers. 

PMS Entry Requirements Revised 

The minimum net worth for regular portfolio managers has been set at ₹5 crore. Entities offering only the Portfolio Management Service Route for Investment in Mutual Fund units (PRIM) will need ₹2 crore. Both must maintain at least 10% of their net worth in unencumbered liquid assets. 

The minimum investment will remain different across the two routes: ₹50 lakh for regular PMS and ₹25 lakh for PRIM. Existing portfolio managers will get 12 months from the new rules' commencement to meet the capital requirements. 

Wider Investment Scope, Client Safeguards 

The framework permits investments in foreign and unlisted securities and exchange-traded derivatives, subject to applicable conditions. Large-value accredited investors may have their entire assets under management invested in unlisted securities, subject to disclosures and agreed terms. 

Portfolio managers must obtain prior client consent before investing in securities of related parties or associates, except where SEBI specifies otherwise.  

They cannot invest client money in unrated securities of such parties, and complaints must be addressed within 21 calendar days. 

Celebrity Endorsements Face Conditions 

Under the separate advertising code, celebrities can endorse regulated entities at the brand level, but cannot make claims about specific financial products or services or use endorsements to induce investors. Prior approval is required for celebrity advertisements, and their costs cannot be passed on to clients or mutual fund schemes. 

The code also sets disclosure conditions for ratings and rankings used in advertisements. Purely educational content without promotional intent is excluded. 

Read More: HCL Technologies Share Price Surges Over 5%; Reports 11.5% Revenue Growth in Q2 FY27! 

Conclusion 

The PMS regulations take effect on April 1, 2027, while the advertising code is scheduled to come into force on April 8, 2027. Both introduce new requirements for financial market participants and their communications with investors. 

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.