Big changes could soon be on the horizon for the Portfolio Management Services (PMS) industry. The market regulator has indicated that it plans a comprehensive review of PMS regulations, a move that signals tighter scrutiny over a sector that has expanded rapidly in recent years. The objective is clear — bring greater transparency, accountability and investor protection to a space that now handles lakhs of crores in assets.
Speaking at a recent PMS conclave, Chairman Tuhin Kanta Pandey said the 2020 Portfolio Manager Regulations will be revisited. He stressed that merely framing rules is not enough; regulators must ensure they remain effective and relevant in evolving market conditions. The proposed review aims to strengthen the regulatory framework while keeping it flexible enough to adapt to market realities.
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What Could Change?
The first area under review is the 2020 regulatory framework itself. Over the past few years, investment products, distribution models and client expectations have evolved sharply. Authorities are likely to assess whether certain provisions have become outdated, overly complex or insufficient in addressing emerging risks.
Governance standards are expected to receive sharper focus. Strong internal controls, better documentation practices and clearer separation between business verticals may become key compliance requirements. The regulator believes that a robust industry cannot rely solely on written regulations — institutional discipline and operational transparency are equally crucial.
Mis-selling is another major concern. Industry players may face stricter expectations to ensure products are sold strictly in line with an investor’s risk profile and financial goals. Enhanced risk profiling, suitability assessments and uniform client communication standards could become mandatory. Greater accountability for PMS distributors is also likely to be part of the reform package.
Consultation Paper by June 2026
According to indications from the industry, the review may be taken up in the board meeting scheduled for June 2026. Following internal deliberations, a consultation paper outlining proposed changes is expected to be released. Stakeholders will be invited to provide feedback before final amendments are introduced.
This exercise is seen as part of a broader regulatory clean-up aimed at simplifying and modernising multiple rulebooks. The idea is not only to tighten supervision but also to streamline compliance requirements where possible.
A Rapidly Expanding Industry
As of January 2026, the PMS industry had approximately 2.15 lakh clients. Assets under management — excluding EPFO and provident fund allocations — stood at nearly Rs 10.5 lakh crore. The sector has been growing at a compound annual growth rate of around 17 percent.
Such rapid expansion has naturally drawn regulatory attention. With a rising number of high net-worth individuals opting for customised portfolio solutions, the need for stronger safeguards has intensified. Market watchers believe that greater regulatory clarity could enhance long-term investor confidence.
Focus on Pre-IPO Trading
The regulator is also examining an exchange-based mechanism for companies that are “to-be-listed.” The move aims to curb speculative grey market activities that often precede IPO listings. However, this mechanism is likely to be limited to companies that are in the process of going public, rather than the entire unlisted space. A separate consultation paper on this front may also be issued soon.
What It Means for Investors
If implemented, the proposed reforms could translate into improved transparency, stronger governance standards and reduced instances of mis-selling. Simplified yet stricter rules may create a more stable operating environment for portfolio managers while strengthening investor safeguards.
The coming months are expected to be crucial for the PMS industry. As regulatory discussions gather pace, both service providers and investors will be closely watching how the new framework reshapes one of the fastest-growing segments of India’s capital markets.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
