SEBI Begins Review of PMS Framework
Securities and Exchange Board of India has started consultations with the Association of Portfolio Managers in India to review the existing Portfolio Management Services framework.
According to SEBI whole-time member Amarjeet Singh, the regulator is working on a broader assessment of PMS regulations and operational structures.
Key focus areas may include:
Operational efficiency
Investor protection
Compliance standards
Transparency requirements
Industry-wide governance practices
A consultation paper outlining proposed amendments is expected to be released in the coming weeks.
SEBI Proposes Changes to Mutual Fund Payment Rules
On May 20, SEBI released a consultation paper proposing limited relaxation in rules governing third-party payments in mutual funds.
The current restrictions were introduced under compliance requirements linked to the Prevention of Money Laundering Act (PMLA).
Proposed changes include:
Allowing verified third-party payment channels
Salary deduction-based SIP investments
Improved payment flexibility for investors
Under the proposal, employers may be allowed to deduct fixed amounts directly from employee salaries for SIP investments selected by employees.
Entities that could participate include
Listed companies
EPFO-registered firms
Asset Management Companies (AMCs)
The objective is to improve convenience while maintaining traceable and verified transaction systems.
Mutual Fund Donations Framework Under Consideration
SEBI is also examining a framework that could enable charitable donations through mutual fund investments.
Under discussion:
Investors directing part of subscriptions toward donations
Donation allocation from dividends or redemption proceeds
Contributions toward not-for-profit organisations
Funding support for Social Stock Exchange-listed entities
The regulator is considering:
Dedicated social impact mutual fund schemes
Donation features embedded within existing schemes
However, redemption proceeds and dividend payouts would continue to be credited only to verified investor bank accounts.
Proposal on Trail Commission Payments
Another significant proposal under review involves allowing AMCs to pay distributor trail commissions through mutual fund units instead of cash payouts.
This move may:
Improve operational efficiency
Align distributor interests with fund performance
Reduce certain transaction complexities
Focus on Foreign Investor Participation
SEBI is also discussing measures aimed at simplifying processes for foreign institutional investors (FIIs).
This comes after overseas investors reportedly sold Indian equities worth over ₹2.7 lakh crore between January and May 2026.
The regulator is additionally working with the Association of Mutual Funds in India on a common investor grievance and disclosure platform.
Public Consultation Open Till June 10
SEBI has invited public comments on the proposals till June 10, 2026.
The consultation process is expected to help shape future regulatory changes across:
PMS operations
Mutual fund transaction systems
Investor protection frameworks
Digital payment structures
Social impact investment channels
Conclusion
Securities and Exchange Board of India is undertaking a comprehensive review of several market frameworks, including PMS regulations, mutual fund payment systems and donation mechanisms. The proposed changes reflect a broader effort to modernise India’s financial ecosystem while balancing operational flexibility, investor convenience and regulatory oversight.
Summary
Securities and Exchange Board of India has initiated a broad review of regulations governing Portfolio Management Services (PMS) and mutual fund transactions. The regulator is also examining new mechanisms related to gifting, donations, salary-linked SIP investments and distributor commissions as part of efforts to improve transparency, operational flexibility and investor participation across financial markets
Disclaimer:
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