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PMS norms notified; net worth limit raised to Rs 5 crore

The markets regulator had issued the new guidelines in November 2019.

ETMarkets.com|
Last Updated: Jan 21, 2020, 09.37 PM IST
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Mumbai: The Centre on Tuesday notified Securities and Exchange Board of India’s (Sebi) new norms governing portfolio management services (PMS), which doubled minimum net worth requirement to Rs 5 crore and gave the existing ones three years to meet the revised norms.

The markets regulator had issued the new guidelines in November 2019.

The government also notified the hike in minimum investment amount for investors in PMS schemes to Rs 50 lakh from Rs 25 lakh earlier.

Assets managed by discretionary PMS products, excluding provident fund money, have grown almost three times to Rs 1.41 lakh crore at the end of June 2019 against Rs 48,000 crore in May 2014.

Though dwarfed by the mutual fund industry’s assets of more than Rs 26 lakh crore, several portfolio managers have mushroomed across the country, and had raised concerns that many of them might not be following best practices and products are being mis-sold.

Earlier, PMS products were not as tightly regulated, allowing their asset managers to follow more liberal fund management and selling practices.

Market participants welcomed the move.
“The new guidelines will go a long way in ensuring orderly growth and scale in the portfolio management services,” said Aashish Somaiyaa, Managing Director and CEO of Motilal Oswal Asset Management.

Considering that portfolio management services do have the ability to produce superior outcomes due to the latitude in investment approaches and basis of client relationships, some amount of standardisation and defining of bounds becomes imperative to protect investor interest and serve as guidelines, he added.

Others shared the view.

“With PMS increasingly becoming the investment of choice for savvy investors, these regulations will strive to strengthen the framework within which they operate,” said Vikaas Sachdeva- Chief Executive Officer of Emkay Investment Managers.

Going forward, it must be appreciated that this is a highly sophisticated client segment that is being catered to - hence, enough operating freedom to allow fund managers to innovate and come up with cutting edge investment solutions is going to be important. I also believe that more attention must be paid to the client onboarding process where a lot of efficiency can be built in through technology,” he added.

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