MUMBAI: Markets regulator Sebi on Thursday approved a slew of reforms to deepen market participation, widen investment avenues and simplify regulatory norms, including an overhaul of portfolio management rules, greater access for FPIs to commodity derivatives and allowing depository receipts against REIT and InvIT units.
The Sebi board approved the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, replacing the existing 2020 framework, and permitted portfolio managers to invest in initial public offerings (IPOs), primary market debt issuances and a wider range of overseas securities.
The regulator also allowed FPIs to participate in physically settled, non-agricultural commodity derivative contracts, subject to safeguards requiring them to exit positions at least three days before expiry, before the start of the tender period.
In another key decision, Sebi approved a proposal to enable Real Estate Investment Trusts (REITs) and publicly listed Infrastructure Investment Trusts (InvITs) to issue Depository Receipts (DRs) in permissible overseas jurisdictions, with the aim of attracting foreign capital into these investment vehicles.
The board also widened the pool of accredited investors by allowing individuals with securities market assets of Rs 5 crore and body corporates with such assets of Rs 20 crore to qualify, alongside the existing income and net-worth criteria.
Sebi also approved a common advertisement code for specified market intermediaries, allowing them to use celebrities for brand-level or entity-level promotion, while prohibiting endorsements of specific financial products or services.
Under the revised PMS framework, portfolio managers will be permitted to invest up to 10 per cent of a client's assets under management in investment-grade, unlisted non-convertible debt securities, with the client's consent.
They will also be allowed to invest in overseas listed equity and debt, REITs, overseas mutual funds, exchange-traded funds, index funds and foreign government securities, subject to applicable regulations.
Sebi also introduced a route for portfolio managers to invest in direct plans of Indian mutual fund schemes, including ETFs, index funds and Specialised Investment Funds, with a minimum investment threshold of Rs 25 lakh.
"The introduction of PRIM (Portfolio Managers' Route for Investing in Mutual Funds) is a visionary step and could be a game-changer for Indian investors," Sandeep Jethwani, Co-founder, Dezerv, said.
The regulator further introduced the concept of Independent Fund Managers, who can manage and operate client portfolios in association with registered portfolio managers, while the registered portfolio manager will retain responsibility and liability for their activities.
To ease compliance, Sebi relaxed the educational qualification for principal officers and exempted portfolio managers with assets under management of less than Rs 100 crore from the dealing-room requirement, subject to adequate audit trails and internal controls.
The regulator said the revised PMS framework reduced the size of the regulations by 53 per cent, from 70 pages to 33 pages, while the word count was cut by around 42 per cent.
On the settlement framework, Sebi approved new regulations that provide for a revised formula for calculating settlement amounts and a fast-track route for cases involving settlement amounts of up to Rs 10 lakh.
The new framework will separately provide for disgorgement of wrongful gains, loss avoided or loss caused to investors, removing the existing double counting of such amounts while calculating settlement terms.
Makarand M Joshi, Founder partner MMJC & Associates, said that Sebi data showed settlement applications peaked at 703 in FY24-25, then moderated to 439 in FY25-26, with 170 applications disposed of. "This reflects both the growing use of settlement and the need to make the mechanism more efficient," he added.
Sebi also approved a fourth Settlement Scheme, 2026, for entities facing proceedings related to non-genuine trades in illiquid stock options on the BSE between April 1, 2014 and September 30, 2015.
The board also approved changes to REIT and InvIT regulations, including revising voting requirements for certain matters to 75 per cent of votes cast instead of 75 per cent of all outstanding units.
Further, Sebi amended the framework governing exit offers in case of a change in sponsor and clarified the treatment of dissenting unitholders.
In another decision, the regulator eased compliance requirements for research analysts and research entities by relaxing the requirement to maintain recordings of communications with institutional investor clients.
Sebi also expanded the regulatory framework for vault managers to cover bullion underlying other Sebi-specified instruments, including gold and silver ETFs and bullion derivatives.
The minimum net worth requirement for vault managers was raised from Rs 50 crore to Rs 75 crore, while requirements relating to storage, security, insurance, governance and risk management were strengthened.
Sebi said the measures are aimed at deepening market participation, improving ease of doing business, widening investment opportunities and strengthening the regulatory framework across various segments of the securities market.
