SEBI Reviews PMS Framework; Begins Consultations on Mutual Fund Gifting and Donations

The Securities and Exchange Board of India (SEBI) is reviewing rules related to Portfolio Management Services (PMS) and has started consultations on mutual fund transactions involving gifting, donations and third-party payments. 

SEBI whole-time member Amarjeet Singh said the regulator is working with the Association of Portfolio Managers in India (APMI) on a wider review of the PMS framework. A consultation paper on the proposed changes is expected to be released soon. 

The comments were made during the Wealth and Capital Market Summit organised by the Indian Chamber of Commerce. 

Mutual Fund Payment Proposals 

On May 20, SEBI issued a consultation paper proposing limited changes to current restrictions on third-party payments in mutual funds. The existing rules were framed under Prevention of Money Laundering Act (PMLA) requirements. 

Under the proposal, certain payments through third parties may be allowed through verified and traceable channels. One of the suggestions includes salary deductions by employers for systematic investment plans chosen by employees. 

Listed companies, EPFO-registered firms and asset management companies (AMCs) may be allowed to deduct fixed amounts from salaries and route them towards mutual fund investments selected by employees. 

SEBI has also proposed allowing AMCs to pay trail commissions to distributors through mutual fund units instead of cash. 

Donation Route Under Discussion 

The regulator is separately examining a framework for charitable donations through mutual funds. Under the proposal, investors may be allowed to direct a portion of their subscription amount, dividend income or redemption proceeds towards not-for-profit organisations or instruments listed on the Social Stock Exchange. 

The consultation paper has suggested either dedicated schemes linked to social causes or donation features within existing mutual fund schemes. 

SEBI said redemption proceeds and dividends would continue to be credited only to verified bank accounts of investors or distributors. Public comments on the proposals have been invited till June 10. 

Overseas Investor Discussions 

Singh also said discussions are underway on further simplification measures for foreign investors. Foreign institutional investors have sold Indian equities worth more than f ₹2.7 lakh crore between January and May 2026. 

SEBI is also holding discussions with Association of Mutual Funds in India (AMFI) on a common platform where investors can raise concerns and seek disclosures through AMCs. 

Read More: Stock Market Holiday this Week (May 25 –29): Will NSE, BSE And MCX Remain Open On Bakri Eid?! 

Conclusion  

SEBI’s proposals cover changes across PMS operations, mutual fund payment routes and donation mechanisms. Public feedback on the consultation paper will remain open till June 10. 

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