Sebi hikes portfolio management scheme limit to Rs 50 lakh, networth requirement to Rs 5 cr

With a view to keep retail investors away from portfolio management schemes (PMS), Sebi on Wednesday decided to raise the minimum investment amount of clients for such schemes to Rs 50 lakh from the earlier Rs 25 lakh. Besides, it has decided to increase the networth requirement of portfolio managers to Rs 5 crore from 2 crore, Sebi Chairman Ajay Tyagi told reporters after the board meeting. He further said the existing portfolio managers will have to meet the enhanced requirement within 36 months.

PMS offers investors a range of specialised investment strategies to capitalise on opportunities in the market and made suitable to the needs of individual clients. The Sebi board has approved amendment the Sebi (Portfolio Managers) Regulations, which will enhance the eligibility criteria and define the role of principal officer clearly. Under the new norms, a portfolio manager needs to mandatorily employ minimum one person with defined eligibility criteria in addition to principal and compliance officer. “Minimum investment by clients of portfolio managers to be increased from the 25 lakh to Rs 50 lakh. Existing investments of clients may continue as such till end date of PMS agreement or as specified by the board,” Sebi said.

The regulator further said discretionary portfolio managers will invest only in listed securities, money market instruments and mutual funds, while non discretionary managers will have to invest not more than 25 per cent of their assets under management in unlisted securities. The appointment of custodian will be mandatory for all portfolio managers, except for those providing only advisory services to clients. “Hiking the investment limit for PMS from Rs 25 lakhs to Rs 50 lakhs is a bit restrictive.

Many potential investors are likely to be denied the benefits of PMS,” said V K Vijaykumar, Chief Investment Strategist at Geojit Financial Services.