Sebi Initiates Major Overhaul of Portfolio Management Regulations
In a significant development for India's financial markets, the Securities and Exchange Board of India (Sebi) has embarked on a comprehensive review and revamp of regulations governing the portfolio management services (PMS) industry. Sebi chairman Tuhin Kanta Pandey announced on Monday that a new set of regulations is expected to be fully implemented by mid-2026, marking a substantial regulatory evolution for the sector.
Rationalizing Six-Year-Old Framework
Speaking at an event organized by the Association of Portfolio Managers in India (Apmi) at the National Institute of Securities Markets, Pandey emphasized that certain provisions of the PMS regulations introduced six years ago require rationalization to better align with contemporary market dynamics. The regulatory framework established in 2020 needs updating to remain effective and adaptable to the rapidly evolving financial landscape.
"We propose to carry out a comprehensive review of the Sebi (Portfolio Managers) Regulations, 2020, so that the framework remains effective, adaptable, and aligned with evolving market dynamics," Pandey stated in his inaugural address. He clarified that Sebi's decision to undertake this review stems from identified areas needing rationalization since the regulations were first implemented.
Formal System for IPO-Bound Stock Trading
In a parallel initiative, Sebi's top officials are actively discussing the establishment of a formal system for trading stocks of companies during the period leading up to their initial public offerings (IPOs). This innovative mechanism, aimed at restricting unofficial grey market trading, would allow investors to trade shares in the days preceding the official IPO bidding window opening.
The concept, modeled after the 'when issued' trading section in sovereign bond markets, was initially proposed over a year ago by former Sebi chairperson Madhabi Puri Buch. Pandey clarified that this system would not encompass the entire unlisted securities space but would specifically target areas where Sebi maintains regulatory jurisdiction.
Comprehensive Consultation Process Ahead
While the exact scope of the PMS regulation review remains under development, Pandey confirmed that proposals are currently maturing within the regulatory body. Sebi plans to issue a single, comprehensive consultation paper within the coming months, inviting stakeholder feedback before finalizing the new regulatory framework.
The dual initiatives—revamping PMS regulations and establishing formal IPO-bound stock trading—represent Sebi's proactive approach to modernizing India's capital markets infrastructure. These measures aim to enhance transparency, reduce regulatory arbitrage, and create more structured trading environments for both portfolio managers and investors participating in pre-IPO markets.
As Sebi moves forward with these regulatory enhancements, market participants can anticipate more detailed guidelines and implementation timelines emerging throughout the consultation and development process leading to the 2026 deadline.
