SEBI Revises PMS Rules 2026, Expands FPI Access to Non-Agricultural Commodity Derivatives
Introduction
The Securities and Exchange Board of India (SEBI) Board has approved a series of regulatory changes covering Portfolio Management Services (PMS), foreign portfolio investor (FPI) participation in commodity derivatives, accredited investors, REITs and InvITs, and settlement proceedings. The decisions were announced following the SEBI Board meeting held on September 24, 2026.
The new PMS framework expands the investment avenues available to portfolio managers, including investments in initial public offerings (IPOs), primary-market debt issuances and specified foreign securities. The changes are relevant for investors evaluating market intermediaries, including the top stock brokers in India, as the securities-market regulatory framework continues to evolve.
SEBI Expands PMS Investment Options
Under the SEBI (Portfolio Managers) Regulations, 2026 approved by the Board, portfolio managers will be permitted to invest in IPOs and primary-market debt issuances. The framework also enables both discretionary and non-discretionary PMS to invest in specified foreign securities, including listed overseas equity and debt, REITs, overseas mutual funds, exchange-traded funds (ETFs), index funds and foreign government debt, subject to applicable foreign-exchange regulations and prescribed conditions.
Under discretionary portfolio management services (DPMS), portfolio managers may invest up to 10% of a client's assets under management (AUM) in investment-grade, non-convertible, unlisted debt securities, subject to obtaining the client's consent. The revised framework also provides greater flexibility for investments through exchange-traded derivatives, with exposure permitted up to 1.25 times the client's AUM.
New PRIM Category With Rs. 25 Lakh Minimum Investment
SEBI has approved a new category called the Portfolio Managers Route for Investing in Mutual Fund Units (PRIM). The route will allow portfolio managers to invest client funds in direct plans of mutual fund schemes, including index funds and ETFs, as well as specialised investment funds (SIFs). The minimum investment under the PRIM route will be Rs. 25 lakh.
The PRIM framework creates a mutual-fund-focused route within the portfolio-management framework. SEBI has also prescribed provisions relating to fees, including a cap of 1% of client AUM for fixed management fees, while permitting a performance-based fee structure subject to the applicable framework.
FPIs Allowed in Non-Agricultural Commodity Derivatives
SEBI has also approved wider participation by foreign portfolio investors in exchange-traded non-agricultural commodity derivatives. FPIs will be permitted to participate in non-agricultural index derivatives, irrespective of whether the underlying contracts are cash-settled or non-cash-settled, as well as in non-cash-settled non-agricultural commodity derivatives.
The framework includes safeguards to prevent FPIs from entering the physical-delivery process. For non-cash-settled non-agricultural commodity derivatives, FPIs will be required to exit their positions before a delivery obligation arises. They must close their positions before the start of the Tender Period, which begins three days before contract expiry, and cannot increase their positions from T-3.
Before an FPI is enabled to trade, it will also have to enter into an agreement with its trading member or trading-cum-clearing member covering the handling of positions. Residual open positions may be devolved to the trading member or trading-cum-clearing member under the prescribed mechanism before the Tender Period.
The decision follows SEBI's earlier consultation process on widening FPI participation in exchange-traded commodity derivatives.
Changes to Accredited Investor Framework
SEBI has also revised the framework for accredited investors. Under the revised eligibility framework, individuals can qualify based on securities-market assets of at least Rs. 5 crore, in addition to the other applicable eligibility routes. Certain non-residents, including FPIs, will also be recognised as accredited investors under the revised provisions.
The changes are part of SEBI's broader review of the accredited-investor framework and are intended to widen the pool of investors eligible to participate in specified investment products and structures.
REITs, InvITs and Vault Manager Framework
SEBI has approved a framework allowing listed REITs and InvITs to issue depository receipts in permissible overseas jurisdictions, subject to the prescribed conditions. The regulator has also changed the approval threshold for specified REIT and InvIT decisions. Instead of requiring 75% of all outstanding units, the threshold will be calculated based on 75% of the votes cast.
SEBI has also expanded the Vault Manager framework to cover bullion underlying specified exchange-traded funds and bullion derivatives. SEBI has raised the prescribed net-worth threshold for Vault Managers from Rs. 50 crore to Rs. 75 crore.
Settlement Framework and Other Changes
SEBI has approved changes to its settlement framework, including a formula-based settlement mechanism and a fast-track settlement process for eligible cases. The time available for filing settlement applications has been extended from 60 days to 90 days.
The regulator has also approved a one-time 90-day settlement window for specified pending cases and a fourth settlement scheme for eligible illiquid stock-options cases pending before adjudicating authorities, the Securities Appellate Tribunal (SAT) or courts.
These measures are part of a broader effort to streamline regulatory proceedings while providing defined mechanisms for eligible cases.
For investors accessing the broader securities market, understanding these regulatory changes can be useful alongside evaluating the features, charges and services associated with an account. Those planning to open demat and trading account can consider the applicable regulatory and market requirements before proceeding.
Conclusion
The SEBI Board's September 2026 decisions introduced several changes across PMS, commodity derivatives, accredited investors, REITs, InvITs, Vault Managers and settlement proceedings. The revised PMS framework expands the investment universe to include IPOs, primary-market debt, specified overseas securities and direct mutual fund routes through PRIM.
At the same time, FPIs will receive wider access to non-agricultural commodity derivatives, subject to safeguards requiring positions involving delivery obligations to be exited before the prescribed Tender Period. The changes remain subject to the detailed regulatory provisions and implementation requirements prescribed by SEBI.
Investors can review the applicable regulatory framework, account features and charges before selecting a best share trading account for their market participation.
Frequently Asked Questions
What changes has SEBI introduced for PMS in 2026?
SEBI has approved the SEBI (Portfolio Managers) Regulations, 2026, which expand the investment avenues available to portfolio managers. The framework permits investments in IPOs, primary-market debt issuances, specified foreign securities and direct mutual fund plans through the new PRIM route. It also provides specified flexibility for investments in unlisted debt and exchange-traded derivatives.
What is the minimum investment under the new PRIM category?
The minimum investment under the Portfolio Managers Route for Investing in Mutual Fund Units (PRIM) is Rs. 25 lakh. The route covers direct mutual fund plans, including index funds and ETFs, as well as specialised investment funds (SIFs).
Can FPIs invest in commodity derivatives under the revised SEBI framework?
Yes. SEBI has approved wider participation by FPIs in non-agricultural index derivatives and non-cash-settled non-agricultural commodity derivatives. For contracts involving delivery obligations, FPIs must exit their positions before the Tender Period, which begins three days before contract expiry. They will also not be permitted to increase positions from T-3.
What is the new eligibility criterion for accredited investors?
The revised framework introduces securities-market assets as an eligibility criterion, with individuals able to qualify based on securities-market assets of at least Rs. 5 crore. Certain non-residents, including FPIs, will also be recognised as accredited investors under the revised framework.
What other regulatory changes has SEBI approved in 2026?
SEBI has approved changes covering REITs and InvITs, the Vault Manager framework and settlement proceedings. These include a revised 75% voting threshold for specified REIT and InvIT decisions, an increase in the minimum net-worth requirement for Vault Managers from Rs. 50 crore to Rs. 75 crore, and an extension of the settlement-application period from 60 days to 90 days.
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