Description

SEBI introduces framework allowing Portfolio Managers to transfer PMS business within same group or to different groups, subject to prior approval and specific conditions.

Summary

SEBI has introduced a new framework allowing Portfolio Managers (PMs) to transfer their PMS business to other Portfolio Managers. This initiative aims to facilitate ease of doing business and simplification in the portfolio management industry. Transfers can occur within the same group (with options for partial or complete transfer) or between different groups (complete transfer only), subject to prior SEBI approval and compliance with specified conditions.

Key Points

  • Portfolio Managers can now transfer PMS business after obtaining prior approval from SEBI
  • Intra-group transfers: PMs can transfer select Investment Approach(es) or complete PMS business within the same group
  • Inter-group transfers: Only complete PMS business transfer permitted (no partial transfers)
  • Transferor must surrender registration certificate within 45 working days if entire business is transferred
  • Transferee assumes all acts, deeds, pending actions/litigations, and obligations of the transferor
  • Joint application by both transferor and transferee required for approval
  • Transfer process must be completed within two months from approval date
  • Transferor cannot onboard new clients during the transfer process
  • Provisions effective immediately from October 24, 2025

Regulatory Changes

New Transfer Framework:

  • SEBI has enabled PMS business transfers, which were previously not explicitly permitted
  • Two transfer routes established: intra-group and inter-group transfers with different conditions

Intra-Group Transfers:

  • Portfolio Managers within the same group can transfer select Investment Approach(es) or complete PMS business
  • If entire business transferred, registration certificate must be surrendered within 45 working days
  • Partial transfers (select Investment Approaches) allow transferor to retain registration

Inter-Group Transfers:

  • Only complete PMS business transfers permitted (no partial transfers)
  • Requires joint application by transferor and transferee
  • Transferee must fulfill all regulatory requirements
  • Transferee assumes complete responsibility for transferor’s obligations, pending actions, and litigations

Compliance Requirements

For All Portfolio Managers:

  • Must obtain prior SEBI approval before transferring PMS business

For Intra-Group Transfers:

  • Submit application demonstrating group relationship
  • If complete transfer: Surrender registration certificate within 45 working days of transfer completion

For Inter-Group Transfers:

  • Submit joint application by both transferor and transferee to SEBI
  • Transferee must:
    • Submit undertaking as per Annexure-I accepting liability for transferor’s acts, deeds, pending actions/litigations, and obligations
    • Fulfill all regulatory requirements
  • Transferor must:
    • Submit undertaking as per Annexure-II
    • Not onboard any new clients during transfer process
    • Surrender registration certificate upon completion or at end of two months, whichever is earlier
    • Follow the surrender process as prescribed

Timeline:

  • Complete transfer process within two months from date of SEBI approval
  • Until completion, transferor continues as Portfolio Manager but with restrictions on new client onboarding

Important Dates

  • Effective Date: October 24, 2025 (immediate effect)
  • Transfer Completion Timeline: Maximum 2 months from date of SEBI approval
  • Registration Surrender (Complete Transfer): Within 45 working days from completion of transfer (intra-group) or upon completion/2 months whichever is earlier (inter-group)

Impact Assessment

Industry Impact:

  • Provides operational flexibility to Portfolio Managers for business consolidation and restructuring
  • Facilitates group rationalization of PMS operations
  • Enables exit strategies for Portfolio Managers wishing to wind down operations through business transfer rather than closure
  • May lead to consolidation in the PMS industry as smaller players transfer business to larger entities

Client Impact:

  • Ensures continuity of portfolio management services during business transitions
  • Protects client interests through regulatory oversight of transfer process
  • Transferee assumes all obligations, ensuring no gap in service or accountability

Regulatory Impact:

  • SEBI maintains oversight through mandatory prior approval requirement
  • Clear accountability framework with transferee assuming all liabilities
  • Structured timelines prevent prolonged uncertainty during transfer process

Operational Considerations:

  • Portfolio Managers must ensure smooth client transition within prescribed timelines
  • Documentation and undertakings (Annexure-I and II) create legal framework for transfer
  • Restriction on new client onboarding during transfer protects existing clients and ensures focus on smooth transition

Impact Justification

Enables operational flexibility for Portfolio Managers to restructure business through transfers, subject to regulatory oversight. Affects PMS industry structure but does not impact market operations or investor protections significantly.