SEBI (Portfolio Managers) Regulations, 2020
The Regulations say what a PM must do; the July 2025 Master Circular says how.
The SEBI (Portfolio Managers) Regulations, 2020 are the rulebook for every PMS in India. They were notified on January 16, 2020, replaced the 1993 regulations, and have been amended thirteen times since, most recently on September 3, 2025. SEBI's Master Circular for Portfolio Managers dated July 16, 2025 sits on top of them and carries the operational detail: fees, distributor supervision, related-party limits, reporting formats.
For a distributor the practical rule is simple: the Regulations say what must happen, the Master Circular says how. When a client asks why a rule exists, the answer is almost always one of the two.
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What the Regulations contain
Seven chapters plus schedules. Chapter IV is where most XXI-A questions come from.
I. Preliminary
Covers
Definitions
Rules a distributor uses
Portfolio manager, discretionary PM, principal officer, accredited investor, related party
II. Registration
Covers
Application, conditions, net worth, fees
Rules a distributor uses
PM must be a registered body corporate with net worth of at least ₹5 crore
III. Eligible fund managers
Covers
PMs managing eligible offshore funds
Rules a distributor uses
Rarely relevant to retail distribution
IV. General obligations
Covers
Code of conduct, client agreement, Disclosure Document, ₹50 lakh minimum, permitted investments, custody, reports, compliance officer, grievances
Rules a distributor uses
Almost every client conversation
V. Inspection
Covers
SEBI's inspection powers
Rules a distributor uses
None directly
VI and VI-A. Default and sandbox
Covers
Penalties, repeal of 1993 rules, regulatory sandbox
Rules a distributor uses
None directly
VII. Miscellaneous
Covers
SEBI's power to issue clarifications by circular
Rules a distributor uses
The legal basis of the Master Circular
| Chapter | Covers | Rules a distributor uses |
|---|---|---|
| I. Preliminary | Definitions | Portfolio manager, discretionary PM, principal officer, accredited investor, related party |
| II. Registration | Application, conditions, net worth, fees | PM must be a registered body corporate with net worth of at least ₹5 crore |
| III. Eligible fund managers | PMs managing eligible offshore funds | Rarely relevant to retail distribution |
| IV. General obligations | Code of conduct, client agreement, Disclosure Document, ₹50 lakh minimum, permitted investments, custody, reports, compliance officer, grievances | Almost every client conversation |
| V. Inspection | SEBI's inspection powers | None directly |
| VI and VI-A. Default and sandbox | Penalties, repeal of 1993 rules, regulatory sandbox | None directly |
| VII. Miscellaneous | SEBI's power to issue clarifications by circular | The legal basis of the Master Circular |
Definitions that get tested
- Portfolio manager
- A body corporate that, under a contract with a client, advises, directs or undertakes the management or administration of the client's portfolio of securities, goods or funds. An individual cannot register.
- Discretionary portfolio manager
- A PM that exercises, or may exercise, any degree of discretion over the client's investments. Under Reg 23(1) it manages each client individually and not like a mutual fund.
- Principal officer
- The employee designated as responsible for investment decisions on client portfolios and for all other operations of the PM.
- Portfolio
- The total holdings of securities and goods belonging to any person.
- Large value accredited investor
- An accredited investor who has agreed a minimum investment of ₹10 crore with the PM.
Where each rule sits
₹50 lakh minimum per client
Regulation
Reg 23(2)
Master Circular
2.5
No upfront fee; fixed, return based or hybrid fee
Regulation
Reg 22(11)
Master Circular
6.1
Distributor supervision and code of conduct
Regulation
Reg 23(11)
Master Circular
2.4, 2.4A, Annexure 2B
Related-party investments and consent
Regulation
Reg 22(1A), 24(3A)-(3E)
Master Circular
3.4-3.7, Annexure 3A
Derivatives
Regulation
Reg 24(7), 24(11)
Master Circular
3.2-3.3
Reports to clients (at least quarterly)
Regulation
Reg 31
Master Circular
5.5-5.6
Grievances within 21 calendar days
Regulation
Reg 34A
Master Circular
7.1-7.2
Investor Charter
Regulation
Reg 23(12)
Master Circular
4.4, Annexure 4B
| Topic | Regulation | Master Circular |
|---|---|---|
| ₹50 lakh minimum per client | Reg 23(2) | 2.5 |
| No upfront fee; fixed, return based or hybrid fee | Reg 22(11) | 6.1 |
| Distributor supervision and code of conduct | Reg 23(11) | 2.4, 2.4A, Annexure 2B |
| Related-party investments and consent | Reg 22(1A), 24(3A)-(3E) | 3.4-3.7, Annexure 3A |
| Derivatives | Reg 24(7), 24(11) | 3.2-3.3 |
| Reports to clients (at least quarterly) | Reg 31 | 5.5-5.6 |
| Grievances within 21 calendar days | Reg 34A | 7.1-7.2 |
| Investor Charter | Reg 23(12) | 4.4, Annexure 4B |
Free account, this exam preselected.
Amendments since 2020 worth knowing
- check_circle2021: accredited investors and large value accredited investors introduced (August); co-investment portfolio managers created (December); principal officer qualifications widened to include NISM's one-year postgraduate programme (March).
- check_circle2022: related party defined, prior client consent for related-party investments and prudential limits added (September 20, 2022).
- check_circle2023: online dispute resolution route (July) and grievance redressal within 21 calendar days (August).
- check_circleFebruary 10, 2025: PMs must comply with the Investor Charter (Reg 23(12)).
- check_circleSeptember 3, 2025: the model Disclosure Document was removed from the Regulations; its format now comes by SEBI circular (September 9, 2025). Older material still describes it as Schedule V.
Replacement Regulations approved, not yet in force
On September 24, 2026 the SEBI Board approved new SEBI (Portfolio Managers) Regulations, 2026 to supersede the 2020 Regulations. Proposals include derivatives exposure up to 1.25 times client AUM, IPO and foreign securities investment, a mutual-fund-only route with a ₹25 lakh minimum, and graduates qualifying as principal officers. As of October 3, 2026 SEBI's regulations list still shows the 2020 Regulations (last amended September 3, 2025) and no 2026 version. Until the new text is notified, the 2020 Regulations and the July 2025 Master Circular apply, and the XXI-A exam is set on them.
How XXI-A tests this
Expect direct recall: the definition of portfolio, who can be a portfolio manager (only a body corporate), the ₹5 crore net worth, which PMs need not appoint a custodian (those offering only advisory services, and co-investment PMs), and that a PM must never hold client securities in its own name. The trap is mixing up the instrument: candidates credit the Master Circular with a rule that is in the Regulations, or the reverse. The other trap is answering from a proposal; the 2026 changes are not the law until notified.
FAQs
What are the SEBI Portfolio Managers Regulations 2020?expand_more
The regulations SEBI notified on January 16, 2020 to govern portfolio management services: registration, client agreements, disclosures, permitted investments, reporting and grievances. They replaced the 1993 regulations.
Have the PMS regulations changed in 2026?expand_more
SEBI's Board approved replacement Regulations on September 24, 2026. They take effect only once notified; as of October 3, 2026 the 2020 Regulations as amended to September 3, 2025 still apply.
What is the difference between the PMS Regulations and the Master Circular?expand_more
The Regulations are the law made by SEBI's Board. The Master Circular consolidates SEBI's circulars issued under them, up to March 31, 2025, and sets the operational detail.
Can an individual become a portfolio manager in India?expand_more
No. The Regulations define a portfolio manager as a body corporate, and registration requires the applicant to be one.