The Securities and Exchange Board of India is likely to consider a board meeting on September 24 to overhaul capital-market regulations. The regulatory agenda addresses around a dozen proposals, including a structural revamp of Portfolio Management Services, widened foreign portfolio investor access to commodities, and streamlined legal settlement mechanisms to deepen long-term capital pools.
The Bottom Line
- PMS Modernization: Discretionary portfolio managers may gain approval to invest in pre-IPO securities, unlisted debt, and overseas markets, alongside a new mutual-fund-only product category.
- Institutional Expansion: Foreign Portfolio Investors face expanded access to physically settled non-agricultural commodity derivatives, aiming to improve liquidity in domestic exchanges.
- Enforcement Efficiency: A revised settlement framework introduces fast-track resolution pathways for violations involving amounts up to ₹10 lakh, designed to clear enforcement backlogs.
Decoding the Portfolio Management Services Overhaul
The regulatory framework governing Portfolio Management Services is undergoing a review. The regulator is evaluating proposals to permit discretionary portfolio managers to allocate capital into pre-IPO securities and unlisted debt. Furthermore, fund managers could secure clearance to build international exposure by investing in overseas markets.
The proposed creation of a dedicated “mutual-fund-only” PMS category lowers entry barriers compared with regular PMS products. Additional adjustments cover net worth norms, derivative limits for discretionary portfolios, and qualification requirements for principal officers.
Unlisted debt instruments offer higher yields but lack secondary market liquidity.
Expanding the Accredited Investor Base and FPI Participation
To deepen domestic capital pools, the board reviewed adjustments to the accredited investor framework. Under the discussed parameters, individuals holding securities-market assets of ₹5 crore and body corporates with assets of ₹20 crore may qualify as accredited investors. This expansion could scale the eligible investor pool to around 4 lakh, compared with the existing Alternative Investment Fund investor base of about 1 lakh.
Concurrently, foreign market participants are poised for broader horizons. Foreign Portfolio Investors are slated to gain participation rights in physically settled non-agricultural commodity derivatives. Previously allowed in cash-settled non-agricultural commodity derivatives and commodity indices (except deliverable options contracts), FPIs entering physical delivery segments will necessitate operational alignment, particularly regarding position rollovers and tender period management.
| Proposed Reform Area | Key Structural Change | Target Market Impact |
|---|---|---|
| Portfolio Management Services | Pre-IPO, unlisted debt, and overseas allocations permitted | Wider product flexibility and retail participation via MF-PMS |
| Accredited Investors | Assets pegged at ₹5 crore (individuals) and ₹20 crore (corporates) | Expands eligible investor base to around 4 lakh entities |
| Commodity Derivatives | FPI entry into physically settled non-agri contracts | Increases institutional liquidity on domestic exchanges |
| Settlement Framework | Fast-track mechanism for violations up to ₹10 lakh | Accelerates backlog clearance and reduces litigation costs |
Streamlining Enforcement and Settlement Architectures
Litigation drag has long burdened both market intermediaries and regulatory bodies. The September 24 board meeting addressed this by advancing a structured overhaul of the SEBI (Settlement Proceedings) Regulations, 2018. The framework introduces a fast-track route for cases involving amounts up to ₹10 lakh, alongside provisions allowing settlement applications for matters pending before the Securities Appellate Tribunal or the Supreme Court.
The revised guidelines also rationalize financial penalties. Wrongful gains will be factored exclusively toward disgorgement rather than being counted again in base settlement amounts. Additionally, the filing window for settlement applications expands from 60 to 90 days, while penalties for refiling withdrawn applications drop from 50% to 20%.
Unified Compliance and REIT Capital Raising
Regulatory friction across marketing and fundraising channels is also being pruned. The board evaluated a common advertising code to replace fragmented, entity-specific guidelines. The unified framework shifts from mandatory prior approval to post-issue reporting within 24 hours, while carving out conditional pathways for brand-level celebrity endorsements.
In parallel, Real Estate Investment Trusts and Infrastructure Investment Trusts are positioned to tap foreign capital pools. The board weighed proposals allowing REITs and listed InvITs to issue depository receipts backed by their units on international exchanges. This mechanism provides institutional issuers with a route to raise foreign capital through overseas exchanges.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
