Sebi doubles PMS investment size to Rs 50 lakh, sets 31 days deadline for default disclosure

Securities and Exchange Board of India (SEBI) on Wednesday doubled the minimum investment limit for clients of portfolio management services (PMS) to Rs 50 lakh. Currently, the minimum ticket size for investing in PMS is Rs 25 lakh.

"Existing investments of clients can continue till the end date of the PMS agreement or as specified by the board," SEBI said in a press release.

The market regulator also increased the net worth requirement for PMS to Rs 5 crore from Rs 2 crore earlier, giving the existing portfolio managers 36 months to meet the enhanced requirement.

The latest move can have far-reaching ramifications on portfolio management schemes as it may restrict the entry of dubious operators in the business and curb mis-selling.

"Hiking the investment limit for PMS from Rs 25 lakh to Rs 50 lakh is a bit restrictive. Many potential investors are likely to be denied the benefits of PMS," said V K Vijaykumar, Chief Investment Strategist at Geojit Financial Services.

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The SEBI board in a meeting today also tightened the norms for default disclosure. The regulator has set a deadline of 31 days for listed companies to disclose to the stock exchanges with respect to default. It has set January 1, 20 as the effective date for the change in these provisions.

"In order to address the gaps in availability of information with respect to defaults, the board has, inter alia, decided that in case of any default in repayment of principal or interest on loans from banks or financial institutions which continues beyond 30 days from the pre-agreed payment date, listed entities, shall promptly, but not later than 24 hours from the 30th day, disclose the fact of such default," SEBI said in a statement.

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In a bid to enhance corporate governance, the capital markets regulator extended the Business Responsibility Report (BRR) requirement to top 1,000 companies, from 500 presently. As of now, the top 500 listed entities, based on market capitalisation, have to include BRR as part of their annual reports.

Besides, the Sebi board also tightened the norms for rights issues of listed companies by reducing the timeline for completion of the process to T+31 days from T+55 days. The move is likely to reduce the timeline for the completion of the rights issue. It has introduced dematerialised REs and trading of REs on the stock exchange platform. The regulator also made the ASBA facility mandatory for any investor applying to a rights issue.

SEBI had constituted a Working Group to suggest steps to be taken to safeguard the interest of investors and the development of the investment product. The regulator has taken these decisions after considering the recommendations of the relevant stakeholders, it said.

Edited by Chitranjan Kumar