The MF-only PMS framework would aim to serve mass-affluent investors who seek professional portfolio management services for their mutual fund investments.
SEBI has proposed a dedicated MF-PMS framework for MFDs and portfolio managers.
The Securities and Exchange Board of India (SEBI) has proposed the introduction of a dedicated MF-only PMS (MF-PMS) framework, under which portfolio managers and mutual fund distributors (MFDs) can exclusively manage client investments in direct mutual fund schemes, including exchange-traded funds (ETFs) and specialised investment funds (SIFs).
Currently, portfolio managers are allowed to invest their clients' funds in units of mutual funds and other securities. However, the regulator has now proposed a dedicated MF-PMS based on representations and requests from industry stakeholders.
As per the proposal, the proposed MF-only PMS framework would aim to serve "mass-affluent investors who seek professional portfolio management services for their mutual fund investments".
"This framework is introduced to enable portfolio managers intending to exclusively manage client investments only in direct plans of Mutual Funds schemes including Exchange Traded Funds (ETFs) and Specialized Investment Funds (SIFs)," SEBI said in its "Consultation Paper on Comprehensive Review of SEBI (Portfolio Managers) Regulations, 2020" dated July 23, 2026.
Proposed guidelines for MF-PMS
SEBI said applicants intending to operate strictly within the proposed framework would need to obtain a separate registration as an MF-PMS. The following guidelines will apply to such registered MF-PMS:
Minimum investment limit: ₹25 lakh.
Net worth requirement: The minimum net worth required for applicants to start an MF-PMS will be ₹2 crore.
Certification for principal officer: A simplified certification would serve as the standard requirement.
Qualification and experience for the principal officer: NISM certification, graduation degree in any discipline with two years of experience in the **securities market, including with a portfolio manager, stock broker, investment advisor, research analyst or as a fund manager.
Disclosure: The format and requirements of the disclosure document would be simplified for better ease of use.
Exit load: To protect clients from double-charging of exit loads, provisions relating to the charging of exit loads in PMS portfolios will not apply to the MF-PMS framework.
Fees: Fixed management fee capped at 2.5% of the client's AUM. MF-PMS managers would also be allowed to charge a performance-based fee or a combination of both fixed management fees and a performance-based fee with the explicit consent of the client.
Optional requirements
Additional employee
A dedicated dealing room
Segregation of activities and clients by MFDs
A mutual fund distributor (MFD) registered under the MF-PMS framework will be required to maintain an arm’s length relationship between its activities as an MFD and an MF-PMS through a separately identifiable department or division.
The MF-PMS will also be required to have client-level segregation for its services as an MFD and MF-PMS.
MFDS will not be allowed to offer both mutual fund and MF-PMS services to the same client.
Existing portfolio managers will also be able to offer MF-PMS through a separate investment approach.
Key details of MF-PMS framework
In the consultation paper, SEBI has sought comments from industry stakeholders on the above proposals. Feedback on the following queries can be submitted until August 13, 2026.
1)Do you agree with the proposal of allowing a MF only PMS (MF-PMS)?
2) If yes, whether the relaxation proposed for minimum ticket size, reduced net worth, relaxation in qualification, experience and certification of the Principal Officer, additional employee, dealing room requirements, waiver from exit load appropriate?
3)Whether charging of management fees with a cap of 2.5% of client’s AUM, segregation of activities and client-level segregation are appropriate?
4)Should the MF-PMS be allowed to charge performance-based fees considering that it is providing service of only scheme selection and individual stock picking will be done by the mutual fund-fund manager?
5)Should there be any other safeguards or conditions specified for the MF-PMS framework? Mention the conditions or safeguards along with rationale.
Rajeev Kumar is a Deputy Editor at Upstox, and covers personal finance stories. In over 11 years as a journalist, he has written over 2,000 articles on topics like income tax, mutual funds, credit cards, insurance, investing, savings, and pension. He has previously worked with organisations like 1% Club, The Financial Express, Zee Business and Hindustan Times.
