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swati Bakhda made post

What are the implications of the new norms for PMS announced by SEBI and what will be the impact?

Answer
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Dia Deshpande answered.
9 months ago


SEBI had long been concerned that PMS norms were too lax and allowed the retail investor to participate with knowing fully-well the risks in PMS. The latest SEBI board meeting has tightened the regulations on PMS. Here are some of the highlights.

· To keep retail investors away from portfolio management schemes (PMS), SEBI has hiked the minimum investment amount by clients in PMS schemes from Rs.25 lakhs to Rs.50 lakhs.

· In addition, SEBI has also increased the net worth requirement for PMS Managers from Rs.2 crore to Rs. 5 crore. This will ensure that only the serious players will actually come into PMS.

· This is a clear indication that SEBI wants the retail investors to predominantly stick to only the mutual funds route, where risks are better managed and the discretion is not as high as in the case of PMS.

· While IRAs are pleased with the announcement as it will increase their mutual funds business, the PMS funds are not too happy as it makes them too rigid and also limits their flexibility at the same time closing one door for the retail investors.

However, managing risk is the core and many retail investors in the past have got into structured products without understanding the implications. As a safety measure, this is surely laudable.