What is PMS (Portfolio Management Services)?
Your own portfolio, in your own demat account, managed by a SEBI-registered portfolio manager.
Portfolio Management Services (PMS) is a contract under which a SEBI-registered portfolio manager manages, directs or advises on a portfolio that belongs to one client. The client's shares sit in the client's own demat account, and the manager runs that account under a power of attorney and a written agreement.
That is the whole idea in one line: a PMS is your portfolio, managed for you, not a share of a common pool. Almost every Chapter 7 question in XXI-A is a variation of it.
You save ₹100
- Full-length mock tests
- Chapter-wise question bank
- AI study plan
One payment, no subscription · Valid for 1 month
The definitions XXI-A quotes
These come from Regulation 2 of the SEBI (Portfolio Managers) Regulations, 2020, as amended up to September 2025.
- Portfolio manager
- A body corporate which, under a contract with a client, advises or directs or undertakes on behalf of the client the management or administration of a portfolio of securities or goods or funds of the client. An individual cannot register as a portfolio manager.
- Portfolio
- The total holdings of securities and goods belonging to any person. Goods here means commodities that underlie commodity derivatives.
- Principal officer
- The employee designated by the portfolio manager who is responsible for its portfolio management decisions and for all its other operations.
- Fiduciary capacity
- Regulation 23(3) says the portfolio manager acts in a fiduciary capacity with regard to the client's funds: it must put the client's interest ahead of its own.
How a PMS account works, start to finish
Take Mrs Iyer, a retired doctor in Pune, opening a ₹75 lakh discretionary account.
- 1
1. Documents before money
She receives the Disclosure Document before signing, completes KYC, and signs the PMS agreement and a power of attorney that lets the manager trade for her.
- 2
2. Her own demat account
A demat account is opened in her name and mapped to the portfolio manager's custodian. SEBI's Investor Charter allows 7 days from receipt of all documents to open the account for a resident individual.
- 3
3. Funding
She funds it from her verified bank account, or transfers shares from her verified demat account. Cash sits in a separate client account at a scheduled commercial bank, tracked client by client and reconciled daily.
- 4
4. Investing
The manager buys, say, 20 stocks under the investment approach she chose. Every share is held in her name. Dividends and bonus shares are credited to her account, and each sale is her own transaction.
- 5
5. Reporting and audit
She gets a report at least every three months showing holdings, transactions, dividends, expenses and the commission paid to her distributor, plus an annual audit certificate from an independent chartered accountant.
- 6
6. Exit
If the agreement ends, her securities and cash go back to her verified demat and bank accounts, with a detailed statement of accounts.
Rules that shape every PMS account
- check_circleMinimum ₹50 lakh in funds or securities per client, with named exceptions (see the minimum investment page).
- check_circleA discretionary manager must manage each client individually, in a manner that does not take on the character of a mutual fund. SEBI's master circular also bars marketing PMS portfolios as 'schemes'.
- check_circleThe manager cannot hold client securities in its own name, and must appoint a custodian unless it gives only advisory services.
- check_circleEach client's holdings are kept in separate accounts, apart from the manager's own funds and securities.
- check_circleThree kinds of service exist: discretionary, non-discretionary and advisory. The difference is who makes and executes the investment decision.
Free account, this exam preselected.
Why this matters at the client meeting
A client who says 'I'll buy into your PMS fund' has the wrong picture. Correct it early: they will see every stock in their own demat statement, every trade affects their own tax, and their returns can differ from another client's in the same investment approach because entry dates and cash flows differ.
How XXI-A tests this
Expect definition questions (a portfolio manager is a body corporate; the contract can cover securities, goods or funds) and true/false statements built on ownership. The trap options say the client buys 'units', the manager holds securities 'in its own name for convenience', or PMS is 'a scheme like a mutual fund'. All three are false.
A second pattern tests the custodian and bank account: client securities with a custodian, client cash in a separate account at a scheduled commercial bank.
FAQs
What is PMS in simple words?expand_more
A SEBI-registered portfolio manager manages a portfolio of shares and other securities for one client, under a written agreement. The securities stay in the client's own demat account.
Who regulates portfolio management services in India?expand_more
SEBI, under the SEBI (Portfolio Managers) Regulations, 2020 and the Master Circular for Portfolio Managers.
Are PMS shares held in my name?expand_more
Yes. Regulation 24(15) bars the portfolio manager from holding the securities of a client's portfolio in its own name. They sit in a demat account in the client's name, mapped to the manager's custodian.
Can an individual be a portfolio manager?expand_more
No. The regulations define a portfolio manager as a body corporate, which must also meet SEBI's net worth and staffing conditions to be registered.
How often does a PMS send reports?expand_more
As agreed in the contract, but at intervals not exceeding three months, and whenever the client asks.