SEBI Circular on Portfolio Management Services (PMS): Enhancing Disclosure and Investor Transparency

Introduction

Over the years the SEBI has tried to bolster the regulatory structure governing market intermediaries to improve market transparency and protect investors. One of the key focuses for the SEBI has been the Portfolio Management Services (“PMS”) which mainly services high-net-worth clients. As a result of the growing scale and influence of PMS, there has been a continued focus on the segment. Portfolio Managers had important changes with the new circulation on October 2025, streamlined revisions on the framework ‘Master Circular for Portfolio Managers’ dated June 7, 2024, and the later amendment which stripped Schedule V from the SEBI (Portfolio Managers) Regulations, 2020.

The revised framework seeks to focus on simplification of disclosures, efficiency in client onboarding processes, and thorough empowerment of investors relating to their rights, fees, and risks associated with their investments.

Explanation

• Simplified Disclosure Framework

In the past, portfolio managers had to submit disclosure documents according to the rigid formats set by Schedule V of the SEBI (Portfolio Managers) Regulations, 2020. SEBI has now provided itself with the option to set disclosure requirements through circulars and has removed Schedule V.

This change means portfolio managers now must routinely review and revise their disclosure documents in line with the circulars issued by SEBI. This change should make compliance easier and, more importantly, ensure that clients have relevant disclosure documents.

• Consolidation through the Master Circular

The Master Circular for Portfolio Managers issued on June 7, 2024, and effective that date, consolidated circulars and guidelines issued to portfolio managers up to 31 March 2024. This circular is a consolidation of the instructions which were issued previously, thereby minimizing duplication and contradiction.

This circular details the processes for registration, reporting, and the disclosure requirements through client agreements. The portfolio managers nowhave one compliance reference point, which simplifies their review for the regulators.

• Strengthened Client Onboarding and Fee Disclosure

Effective from October 1, 2024, SEBI has enforced new norms to ensure better client understanding and transparency in fee structures. Under the revised framework:

• Portfolio managers must enter into a written agreement clearly outlining rights and obligations.
• Clients must acknowledge the fee structure through a separately signed annexure, which may be physical or electronic.
• Each portfolio manager must provide a fee calculation tool to help clients understand how fees will be charged under different scenarios over multiple years.

These requirements aim to make fee disclosure more transparent and prevent any form of miscommunication between portfolio managers and clients.

• Performance Benchmarking and Reporting

To improve comparability across the industry, SEBI’s circular mandates that each Investment Approach (“IA”) be linked to a specific strategy category – Equity, Debt, Hybrid, or Multi-Asset and benchmarked against an appropriate index.

If a manager changes a benchmark or modifies a strategy, they must offer clients an exit option without exit load. In addition, valuation of debt and money market instruments must comply with standardized norms issued by the Association of Portfolio Managers in India (“APMI”).

This benchmarking system ensures that performance reporting is fair, consistent, and transparent, allowing investors to evaluate results against uniform standards.

Compliance and Reporting Obligations

According to the Master Circular, portfolio managers and their branch offices will have to register via the Intermediary Portal to obtain SEBI permission and submit periodic compliance reports, including information on assets under management, performance, and other operational details.

They will have to keep written internal policies on the investment process, trade allocation, risk management, and conflict-of-interest which will serve to increase documentation thoroughness and investment process accountability.

Practical Impact on Existing Disclosure Documents

Considering the new framework, portfolio managers will have to take considerable time to assess and amend their Disclosure Documents and the documentation constituting their agreements with clients. References to Schedule V must be deleted and replaced with a clause indicating disclosures will be made according to the latest SEBI circulars.

In addition, SEBI norms and recent changes in the tax structure require risk factors, tax consequences, and valuation methods to be updated on a regular basis. The new norm requires regular compliance reviews to ensure there are no lapses.

Conclusion

The recent reforms introduced by SEBI are a rapid step to modernizing India’s Portfolio Management Services regime. SEBI has introduced a more flexible disclosure regime that allows and encourages a disclosure-based comm approach. This balances the user’s right to do business with the protection of the investing public. For portfolio managers, the reforms mean more responsibility on monitoring the compliance and potential of active compliance. For clients the reforms mean clear disclosures, fees, and performance reports. Overall, these are promising steps to modernizing the investor framework in which SEBI works and continues to promote the seamless, investor-friendly, and actively regulated PMS framework. These too will be with the times in the evolving and complex world of finance.