NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Manager

SEBI Portfolio Managers Regulations 2020 Explained

Updated 11 October 2026 · Fact-checked

The SEBI (Portfolio Managers) Regulations, 2020 govern who can manage client portfolios in India. A portfolio manager must be a body corporate registered with SEBI, keep a net worth of at least ₹5 crore, and accept at least ₹50 lakh per client. To solve questions, match the rule to its exact condition.

Understand SEBI Portfolio Managers Regulations

A portfolio manager manages a client's money or securities under a contract. The client pays fees and the manager invests the money. The business is called Portfolio Management Services (PMS). Because clients trust the manager with large sums, SEBI regulates who may do this work.

The governing law is the SEBI (Portfolio Managers) Regulations, 2020, made under the SEBI Act. They replaced the 1993 regulations. You must hold a certificate of registration from SEBI before you act as a portfolio manager. Only a body corporate can apply, so an individual cannot be registered as a portfolio manager in their own name.

SEBI checks three things before registration: the applicant is a fit and proper person, it has the required infrastructure and qualified staff (including a principal officer), and it meets the net worth requirement. Net worth, as the regulations define it, is paid-up capital and free reserves, less accumulated losses, deferred revenue expenditure, miscellaneous expenditure not written off and similar items. The regulations set the minimum at ₹5 crore, and the portfolio manager must keep it at all times, not only on the day of registration.

There is also a minimum on the client side. A portfolio manager must accept a minimum of ₹50 lakh from a client, either in funds or securities or both, at the time of onboarding. This keeps PMS a service for larger investors.

PMS is of two kinds. In discretionary PMS, the manager takes investment decisions on the client's behalf. In non-discretionary PMS, the client decides and the manager executes. A portfolio manager may also offer investment advisory services. This is a separate service, governed by its own conditions under the regulations, and it is not a third kind of PMS. Other rules cover client agreements, keeping client funds separate, and a ban on promising guaranteed returns.

Key formulas to remember

Who can be registered: Portfolio manager = body corporate holding a SEBI certificate of registration; An individual cannot be registered as a portfolio manager. Watch for options that say individuals can.
Minimum net worth: Net worth ≥ ₹5 crore; Must be maintained at all times. Earlier regulations had a lower figure, so reject older numbers such as ₹2 crore.
Net worth composition: Net worth = paid-up capital + free reserves − accumulated losses − deferred revenue expenditure − miscellaneous expenditure not written off − similar items; Use the regulation's definition. Do not add or exclude items on your own.
Minimum client investment: Funds + securities (or either) accepted from a client at onboarding ≥ ₹50 lakh; The minimum is tested at the time of onboarding. Funds, securities or both can make up the amount.
Types of PMS: Discretionary = manager decides | Non-discretionary = client decides; Identify the type by who takes the investment decision. Investment advisory services are a separate service a portfolio manager may offer, not a third kind of PMS.
Returns: No guaranteed returns may be promised; Any promise or assurance of returns is prohibited. Past performance is not a guarantee.

How to solve SEBI Portfolio Managers Regulations questions

Use this method for any question on registration, eligibility, net worth or client minimums under the Portfolio Managers Regulations.

1Read the question and decide what is being tested: who can register, a money limit, a service type, or a prohibition.
2For eligibility questions, check the applicant is a body corporate. Reject any option that lets an individual register.
3For money limits, recall the number: ₹5 crore net worth for the manager, ₹50 lakh per client.
4Check who the limit applies to. Net worth applies to the manager. The ₹50 lakh applies to what the client brings at onboarding.
5For the client minimum, add the funds and the value of securities the client brings at onboarding, then compare with ₹50 lakh.
6For service-type questions, find who takes the investment decision and match it to discretionary or non-discretionary. Treat investment advisory services as a separate service.
7Remove options with absolute words like 'guaranteed' or 'any individual'. Pick the option that matches the rule exactly.

Quickest way: Two numbers and one test

When to use it: Use this when you have under a minute for a regulation MCQ.

Remember two numbers: ₹5 crore (manager net worth) and ₹50 lakh (client minimum).
Remember one test: body corporate, with a SEBI certificate.
Ask 'who decides?' to classify discretionary or non-discretionary.
Eliminate any option with the ₹2 crore figure or a promise of assured returns.

Common mistakes in SEBI Portfolio Managers Regulations

Choosing ₹2 crore as the minimum net worth.
Older books and notes quote an earlier, lower figure.
Fix: For the 2020 regulations, use ₹5 crore. Treat ₹2 crore as an outdated figure.
Counting only cash towards the ₹50 lakh client minimum.
Students assume the minimum must be paid in money.
Fix: The minimum can be met in funds, securities or both at onboarding. Add them together and compare with ₹50 lakh.
Mixing up the net worth limit and the client minimum.
Both are money figures in the same regulations.
Fix: Net worth is about the manager's own strength. The client minimum is about the client's investment.
Thinking an individual can register as a portfolio manager.
Investment advisers can be individuals, so students assume the same here.
Fix: Remember portfolio managers must be body corporates.
Confusing discretionary and non-discretionary PMS.
Both involve the manager handling the account.
Fix: Ask who takes the decision. Manager means discretionary. Client means non-discretionary.
Treating net worth as a one-time check at registration.
Students think of it as an entry condition only.
Fix: The net worth requirement must be maintained continuously after registration.

Worked examples

Example 1

Under the SEBI (Portfolio Managers) Regulations, 2020, the minimum net worth required of a portfolio manager is: (a) ₹1 crore (b) ₹2 crore (c) ₹5 crore (d) ₹10 crore

Show the solution

The question tests the manager's net worth, not the client minimum.
The 2020 regulations set the minimum net worth at ₹5 crore.
₹2 crore is not the 2020 figure, so option (b) is a trap.
₹1 crore and ₹10 crore are not the prescribed figure.

Answer: (c) ₹5 crore

Example 2

A client onboards with a portfolio manager by bringing ₹30 lakh in funds and securities worth ₹25 lakh. Does the client meet the minimum investment requirement?

Show the solution

The minimum is ₹50 lakh, which can be in funds, securities or both at onboarding.
Add funds and securities: ₹30,00,000 + ₹25,00,000 = ₹55,00,000.
Compare with the minimum: ₹55,00,000 is greater than ₹50,00,000.
Neither the funds nor the securities meet ₹50 lakh alone, but together they do.

Answer: Yes. The total of ₹55 lakh in funds and securities is above the ₹50 lakh minimum.

Exam tips

Memorise the two figures: ₹5 crore for the manager's net worth and ₹50 lakh for the client minimum. Many questions are only a number check.
Check which regulation version a question refers to. The 2020 regulations replaced the 1993 ones, so reject old figures.
Read options for absolute words such as 'guaranteed', 'any individual' or 'only once'. These are usually wrong.
In X-A, wrong answers carry negative marking of 25% of the marks for the question, so guess only after you have removed at least two options.
For service-type questions, find the decision-maker in the stem before looking at the options.

Practice questions from Portfolio Manager

SEBI Portfolio Managers Regulations in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

SEBI Portfolio Managers Regulations: frequently asked questions

What is the minimum net worth for a portfolio manager under SEBI rules?

The SEBI (Portfolio Managers) Regulations, 2020 require a minimum net worth of ₹5 crore. The portfolio manager must maintain it at all times, not just at registration.

What is the minimum investment amount in PMS?

A portfolio manager must accept a minimum of ₹50 lakh from a client, either in funds or securities or both, at the time of onboarding.

Who can be registered as a portfolio manager?

Only a body corporate can be registered, and it must hold a certificate of registration from SEBI. SEBI also checks that the applicant is a fit and proper person with adequate infrastructure and a qualified principal officer.

What is the difference between discretionary and non-discretionary PMS?

In discretionary PMS the manager takes investment decisions on the client's behalf. In non-discretionary PMS the client decides and the manager only executes. A portfolio manager may also offer investment advisory services, but these are a separate service and not a type of PMS.