SEBI’s Latest Take on Transfer of PMS business

SEBI | Transfer of portfolios of clients (PMS business) by Portfolio Managers.

On October 24, 2025, SEBI released a circular on Transfer of portfolios of clients (PMS business) by Portfolio Managers [Circular No. SEBI/HO/IMD/RAC/CIR/P/2025/0000000138] in line with its objectives of enhancing transparency, investor protection, compliance obligations, and operational efficiency for market intermediaries such as asset management companies, mutual funds, and portfolio managers.

SEBI’s latest circulars often introduce revisions to reporting requirements, risk management procedures, and disclosure norms, aiming to strengthen the governance and accountability within Indian securities markets and this one is no different.

What is PMS business?

Portfolio Management Services (“PMS”) business under SEBI Regulations refers to professional services offered by registered entities with the Securities and Exchange Board of India (“SEBI”) to manage and administer portfolios of securities or funds on behalf of clients. A PMS provider constructs, monitors, and manages a tailored investment portfolio for each client, according to their investment objectives, risk appetite, and preferences. This is distinct from mutual funds, as PMS offers personalised investment strategies and typically requires higher minimum investments.

The SEBI (Portfolio Managers) Regulations, 2020 regulate the Portfolio Management Services. Key Points Under SEBI (Portfolio Managers) Regulations:

i) Only SEBI-registered Portfolio Managers can offer PMS in India.

ii) The minimum investment amount for clients is INR 50 Lakhs (Fifty Lakhs).

iii) Portfolio Managers can provide either discretionary (where the manager takes investment decisions on behalf of the client) or non-discretionary (where the client approves decisions) services.

iv) PMS providers must comply with disclosure and reporting obligations, risk management practices, and client asset segregation requirements as specified by SEBI.

What is a PMS Group?

Before deep diving into the contents of the Circular, it is essential we understand what PMS business within same groups and different groups means.

Think of a classroom where students are assigned different projects — science, maths and history — all supervised by the same teacher. If students swap projects amongst themselves, the teacher still overseas all the work, ensuring rules are followed. Similarly, in a PMS group, different investment strategies are like different projects but are managed under the same group, making internal transfers smooth as long as protocols are followed.

Now, imagine several classrooms in a school, each with its own teacher and set of projects. Every classroom represents a different PMS group — perhaps managed by separate teams within a larger institution or by related but distinct entities. Each classroom has its unique style and way of managing its projects. If a student (client or their investments) wants to move from one classroom (PMS group) to another—for example, from the science classroom to the maths classroom — they need permission from both teachers, and the school’s administration must ensure the process is fair and transparent. The teachers make sure the student’s progress and materials are transferred properly, all rules are followed, and nothing is lost in transition.

Transferring between classrooms is more complex than moving projects within a single classroom, because each classroom may have its own processes, record-keeping, and expectations. The school (regulator, e.g., SEBI) sets guidelines to make sure all transfers between classrooms protect students’ interests and maintain proper standards, including getting parental consent (client’s agreement), keeping records, and ensuring no student is unfairly disadvantaged.

Therefore, it can be said that "PMS business belonging to the same group" generally refers to portfolios or accounts managed within the same PMS entity or under the same controlling or promoter group. In the context of SEBI regulations and financial services, it means that the various PMS accounts, investment strategies, or divisions in question all belong to the same legal entity, or to entities under common control or ownership.

SEBI’s Circular

SEBI’s latest Circular [Circular No. SEBI/HO/IMD/RAC/CIR/P/2025/0000000138] now provides for transfer of PMS business by Portfolio Managers. This circular aims at simplifying PMS business by allowing transfer of client portfolios from one Portfolio Manager to another.

A close examination of SEBI’s latest circular on PMS business transfer reveals a structured approach for Portfolio Managers. Transfers within the same group allow for partial handover of investment strategies, while inter-group transfers demand a wholesale transfer of PMS business, approved through a joint SEBI application. The transferor remains responsible until the process is finalised and cannot onboard new clients during this transitional phase. Robust regulatory safeguards are embedded, including mandatory undertakings from both parties and a strict 2 (two) month timeline. The transferee inherits all legal and financial responsibilities, ensuring a smooth shift of obligations and compliance within the regulated environment.

Key Takeaways from the SEBI Circular No. SEBI/HO/IMD/RAC/CIR/P/2025/0000000138

The core insights of this Circular are as follows:

1. Transfer of PMS business requires SEBI Approval

   Such transfer of PMS business can be done only after obtaining prior approval of SEBI as per the process provided in this Circular.

2. Partial or complete transfers of PMS business allowed within same group

   In case of transfer of PMS business within Portfolio managers belonging to the same group, select or complete PMS business may be transferred.

3. Only complete transfers of PMS business allowed in inter-group transfers

   In case of transfer of PMS business within Portfolio managers not belonging to the same group, only complete transfer of PMS business is permitted.

4. Inter-group transfers require application from both the Transferor & Transferee

   In case of transfer of PMS business within Portfolio managers not belonging to the same group, both transferee and transferor are required to make an application to SEBI for approval of the transaction.

5. Registration certificate to be surrendered post transfer of complete business

   In case of complete transfer of PMS business, the certificate of PMS registration of the transferor will have to be surrendered within 45 days of such transaction of transfer.

Conclusion

To conclude, the new SEBI circular lays out a practical and efficient framework for the transfer of PMS business, whether within the same group or outside it. By setting deadlines and clarifying the responsibilities of both transferor and transferee, SEBI seeks to remove barriers and instil confidence among stakeholders. Portfolio Managers and clients alike stand to gain from these enhanced standards, which prioritise investor protection and regulatory compliance.

Overall, SEBI’s latest initiative reflects its commitment to evolving regulatory practices and keeping pace with the changing needs of the securities market. The provisions for PMS transfers set a precedent for smoother, more secure client portfolio transitions, promising a future where efficiency and investor interests remain at the forefront of the industry’s growth.