Capital Market Regulator in India, SEBI in its board meeting held on 20th Nov. 2019 has finally hiked the minimum ticket size for investment in Portfolio Management Services (PMS) to Rs. 50 lakh from Rs. 25 lakh earlier. The speculation was on in the market in this regard for quite some time which has become a reality now. The regulator has also increased the minimum net worth requirement for PMS Managers from Rs. 2 crores to Rs. 5 crores.
Some of the other changes which the regulator has made are listed below. All these new norms will come into force from 1st of the new calendar year, i.e. Jan 1, 2020.
- Discretionary PMS Managers must invest only in listed securities, money market instruments and mutual funds and other such securities specified by SEBI. However, NDPMS managers may invest in unlisted securities up to a maximum of 25% of its AUM.
- SEBI has also cut the timeline to complete the Rights Issue to T+31 days from T+55 days earlier.
- The regulator also announced the introduction of dematerialized rights entitlement and trading of these on the stock exchanges to boost efficiency.
- To enhance transparency, SEBI extended the Business Responsibility Reporting (BPR) to 1,000 listed firms from 500 earlier. It is now mandatory for the top 1,000 listed companies by market capitalization to include BPR as part of their annual reports.
- Now the default in bank loan for 30 days must be disclosed to stock exchanges. Listed firms would need to make this disclosure within 24 hours after the 30th day of the default.
SEBI move aimed at protecting the interest of retail investors
By making the PMS investment route more stringent, SEBI aims to secure the retail investor as PMS is a sophisticated and tailor-made investment service offered to cater to the investment objective of High Networth Investors. PMS is a relatively High Risk-High Reward investment vehicle compared to mutual funds. It is a more customized and concentrated portfolio which aims to generate alpha over the benchmark and mutual funds in the same category. Therefore, SEBI has made the regulations pertaining to PMS investment more stringent so that the retail investors could be discouraged and their interest remains protected. SEBI’s decision to increase the ticket size will ensure only well informed HNI and the serious players will participate in the high-risk product offerings like PMS.
Mutual Funds to benefit from hike in PMS investments limit
With this move of the watchdog, ALTwealth believes that it is a big positive for the Indian Mutual Fund Industry. Retail investors will be discouraged to take exposure to the PMS space now and as a result, there will be incremental mobilization in the mutual fund schemes across the category, particularly in the equity schemes. This will also boost AMFI vision to take the MF AUM to Rs 100 trillion (Rs.100 lakh cr from existing Rs 25 lakh cr), and a five-fold rise in investor base to 10cr (from existing 2cr) over the next decade.
Please connect with the ALTwealth team for any support/advisory required with regards to PMS, AIF, MF, Structures investments…