SEBI Board to Weigh PMS Regulations Overhaul and FPI Entry into Commodity Derivatives — September 24, 2026

The Securities and Exchange Board of India (SEBI) is taking up a comprehensive regulatory agenda at its board meeting, deliberating on more than a dozen key proposals designed to deepen market participation, simplify entry barriers, and strengthen surveillance across domestic asset classes.

Among the primary items on the table are a structural overhaul of Portfolio Management Services (PMS), broader access for Foreign Portfolio Investors (FPIs) in non-agricultural commodity derivatives, and significant changes to settlement guidelines.

Overhaul of the PMS Framework

The regulator is considering sweeping modifications to the SEBI (Portfolio Managers) Regulations to improve accessibility and broaden investment avenues:

• Mutual Fund-Only PMS (MF-PMS): SEBI has proposed a specialized MF-PMS category that would invest exclusively in direct plans of mutual fund schemes, exchange-traded funds (ETFs), and specialized investment funds (SIFs). To make professional portfolio management accessible to a wider mass-affluent demographic, the minimum investment ticket size is proposed to be halved to ₹25 lakh from the current ₹50 lakh threshold. Concurrently, the minimum net-worth requirement for applicants registering solely under this category could be lowered to ₹2 crore from ₹5 crore.
• Expanded Asset Universe: Discretionary portfolio managers may be permitted to invest in listed foreign equities and debt, overseas mutual funds, and securities proposed for listing, subject to Liberalised Remittance Scheme (LRS) and FEMA limits alongside explicit client consent. Managers could also be granted headroom to deploy up to 10% of client assets in investment-grade unlisted debt.
• Compliance Relief: The proposals include introducing demat portability, digital disclosure documents, relaxed qualification and dealing-room mandates, and simplified power-of-attorney processes.

FPI Participation in Non-Agri Commodity Derivatives

To bolster liquidity and foster tighter price convergence between cash and futures markets, SEBI is considering permitting FPIs to trade in physically deliverable non-agricultural commodity derivatives and commodity indices.

Under the proposed mechanism, overseas investors would be required to square off or roll over their positions at least three days prior to the start of the tender or delivery period. If an FPI fails to close its exposure in time, the open contract would automatically shift to a designated trading-cum-clearing member at exchange-determined settlement prices under pre-agreed arrangements, shielding foreign participants from physical delivery bottlenecks while maintaining market integrity.

Overhaul of Settlement Framework and Enforcement

SEBI is also addressing long-standing market feedback regarding its consent and settlement mechanisms:

• Penalty Linkage: The base settlement amount is expected to be linked directly to the minimum penalties statutory law prescribes, eliminating perceived leniency in settlements. Wrongful gains and investor losses would be ring-fenced from base calculations and recovered separately through disgorgement.
• Fast-Track Window: A fast-track settlement process is proposed for minor violations involving values up to ₹10 lakh, alongside an extension of the overall settlement application window from 60 days to 90 days.

Corporate Debt, REITs, and Unified Advertising Rules

The board meeting is also reviewing several auxiliary market-development initiatives:

• Debt Market Access: To ease borrowing costs for corporate issuers, SEBI may eliminate the mandatory appointment of merchant bankers for small-value private placements of debt. The board is also evaluating the rollout of a 'Credit Risk-o-Meter' for debt securities.
• Cross-Border Capital for Trusts: Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) may receive approval to issue Depository Receipts (DRs) abroad, easing offshore capital access.
• Common Advertising Code: SEBI is examining a standardized advertising code applicable uniformly across brokers, mutual funds, and portfolio managers, including stricter provisions governing celebrity endorsements.

Tags: SEBI Portfolio Management Services Foreign Portfolio Investors Commodity Derivatives REITs InvITs