NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers

SEBI Portfolio Managers Regulations and Eligibility for NISM PMS Exam

Updated 11 October 2026 · Fact-checked

SEBI (Portfolio Managers) Regulations, 2020 decide who can run a PMS. A portfolio manager must be a SEBI-registered body corporate with net worth of at least ₹5 crore, and each client must invest at least ₹50 lakh. To solve questions, spot the rule being tested, recall the exact figure, and reject near-miss options.

Understand SEBI Portfolio Managers Regulations and Eligibility

A portfolio manager manages a client's money or securities under a contract with that client. In India this business is regulated by SEBI under the SEBI (Portfolio Managers) Regulations, 2020. These replaced the older 1993 regulations. No one can offer PMS without a SEBI registration certificate.

The regulations exist to protect clients. SEBI sets entry conditions so that only capable, well-funded and honest firms can manage other people's money. The main entry tests are: the applicant must be a body corporate (a company, not an individual), meet fit and proper standards, have suitably qualified key personnel, and hold the required net worth.

The two numbers you must know cold are ₹5 crore and ₹50 lakh. The ₹5 crore is the minimum net worth of the portfolio manager. Net worth is broadly paid-up capital plus free reserves. The ₹50 lakh is the minimum amount a client must place with the portfolio manager, which can be in funds, securities, or a mix of both. This is why PMS is aimed at larger investors, unlike mutual funds.

The regulations recognise three types of service: discretionary (the manager takes decisions on the client's behalf), non-discretionary (the manager acts only with the client's consent for each decision) and advisory (the manager only advises, and the client executes). Each client is covered by a written portfolio management agreement and the manager must give a disclosure document.

Other core protections: the manager cannot guarantee returns, must keep client funds and securities separate from its own, and must use a custodian for client securities. Questions in the exam mostly test the numbers, the definitions and these do's and don'ts.

Key formulas to remember

Minimum net worth of portfolio manager: Net worth ≥ ₹5 crore (₹5,00,00,000); Net worth is broadly paid-up capital plus free reserves. It must be maintained, not just shown at registration. The older 1993 limit was lower, so do not pick ₹2 crore.
Minimum client investment: Funds + market value of securities ≥ ₹50 lakh (₹50,00,000); The amount can be cash, securities or both. Count the total value. The limit is per client with the portfolio manager.
Who can be a portfolio manager: SEBI-registered body corporate only; An individual cannot hold the registration. Registration is granted by SEBI after checking eligibility.
Types of portfolio management service: Discretionary | Non-discretionary | Advisory; Discretionary means the manager decides. In non-discretionary, the client's consent is needed for each decision. In advisory, the client carries out the advice.
Core conduct rules: No guaranteed returns; client assets kept separate; custodian for securities; written agreement and disclosure document; Use these to eliminate wrong options on conduct questions.

How to solve SEBI Portfolio Managers Regulations and Eligibility questions

Most questions on this topic are fact recall or scenario checks. Use the same method each time so you do not get tricked by similar-looking figures.

1Read the question stem and decide what is being tested: registration, net worth, client minimum, service type or conduct.
2Recall the matching rule: ₹5 crore for net worth, ₹50 lakh for client investment, body corporate for registration.
3Check the words: 'at least', 'minimum', 'maximum', 'not less than'. A minimum means the figure or more is allowed.
4For scenarios, add up the client's funds and securities value into one total before comparing with ₹50 lakh.
5Identify the service type if the question mentions who takes the decision: manager alone, client's consent, or only advice.
6Eliminate options that break a core rule, such as guaranteed returns, mixing client and own funds, or registration of an individual.
7Choose the option that matches the rule exactly. If two options look right, pick the one that uses the exact regulatory wording.

Quickest way: Two numbers and three words

When to use it: Use when you have under a minute per question and the question is clearly a recall or numerical check.

Fix in memory: net worth ₹5 crore, client minimum ₹50 lakh.
Fix the three service words: discretionary, non-discretionary, advisory.
Convert any scenario amounts to lakh or crore: ₹1 crore = ₹100 lakh.
Add funds and securities, then compare with ₹50 lakh.
Strike out any option that guarantees returns or allows an individual to register.

Common mistakes in SEBI Portfolio Managers Regulations and Eligibility

Choosing ₹2 crore as the minimum net worth.
That figure belonged to the earlier 1993 regulations and appears in old notes.
Fix: Remember the 2020 Regulations: ₹5 crore. Cross out any note that still says ₹2 crore.
Mixing up ₹50 lakh and ₹5 crore.
Both are PMS limits and both contain a 5, so they blur together.
Fix: Link ₹5 crore to the firm's net worth and ₹50 lakh to the client's investment. Ask: who is the limit about?
Thinking the ₹50 lakh must be only in cash.
Students think of 'investment' as money deposited.
Fix: Remember it can be funds, securities or both. Count the value of securities in the total.
Believing an individual can register as a portfolio manager.
Investment advisers can be individuals, so students assume the same applies here.
Fix: Portfolio managers must be body corporates. Treat the individual option as a trap.
Confusing discretionary and non-discretionary services.
Both involve the manager acting on the client's portfolio, and the names sound similar.
Fix: Ask who decides. Manager decides alone: discretionary. Client's consent needed for each decision: non-discretionary. Only advice given: advisory.
Accepting an option where the manager promises assured returns.
Marketing language in real life makes 'target returns' sound normal.
Fix: Under the regulations, returns cannot be guaranteed. Any option promising assured returns is wrong.

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) ₹50 crore

Show the solution

The question asks about the portfolio manager's own net worth, not the client's investment.
The rule in the 2020 Regulations is a minimum net worth of ₹5 crore.
₹2 crore is the older 1993 limit, so (B) is the trap.
₹1 crore and ₹50 crore do not match any rule, so (A) and (D) are out.

Answer: (C) ₹5 crore

Example 2

A new client opens a PMS account by depositing ₹32 lakh in cash and transferring listed shares worth ₹21 lakh at current market value. Does the client meet the minimum investment requirement of ₹50 lakh? Choose: (A) No, as cash alone is below ₹50 lakh (B) No, as securities cannot be counted (C) Yes, the total of ₹53 lakh is at least ₹50 lakh (D) Yes, but only if the portfolio manager is discretionary

Show the solution

The minimum can be met through funds, securities or both, so you add them.
Total = ₹32 lakh + ₹21 lakh = ₹53 lakh.
Compare: ₹53 lakh is greater than ₹50 lakh, so the requirement is met.
Option (A) wrongly looks at cash alone. Option (B) wrongly excludes securities. Option (D) wrongly links the limit to the service type; the minimum applies regardless.

Answer: (C) Yes, the total of ₹53 lakh is at least ₹50 lakh

Exam tips

Memorise ₹5 crore and ₹50 lakh with the subject attached: firm's net worth and client's minimum investment.
Watch for options that use old or invented numbers, such as ₹2 crore. They are deliberate distractors.
In this paper, a wrong answer costs 10% of the marks for the question, so a careful guess after removing two options is usually worth it.
Use conduct rules to eliminate options fast: no guaranteed returns, separate client assets, written agreement, disclosure document.
If a question asks for a specific regulation detail you do not recall, rely on the principle of client protection to pick the strictest, safest option.

Practice questions from Role of Portfolio Managers

SEBI Portfolio Managers Regulations and Eligibility in other exams

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

CS ExecutivePortfolio Managers, Mutual Funds and Investment Advisers

SEBI Portfolio Managers Regulations and Eligibility: frequently asked questions

What is the minimum investment for PMS under SEBI rules?

The minimum investment per client is ₹50 lakh. It can be in funds, securities or a combination of both. It applies to the client's relationship with the portfolio manager.

What net worth does a portfolio manager need?

Under the SEBI (Portfolio Managers) Regulations, 2020, a portfolio manager must have a net worth of at least ₹5 crore. Net worth is broadly paid-up capital plus free reserves. It must be maintained while the registration continues.

Can an individual register as a portfolio manager?

No. The applicant must be a body corporate and must meet SEBI's fit and proper standards. SEBI grants the registration after checking eligibility.

What are the types of portfolio management services?

There are three: discretionary, non-discretionary and advisory. In discretionary, the manager takes decisions for the client. In non-discretionary, the client's consent is needed for each decision. In advisory, the manager only advises.

How is this topic tested in NISM-Series-XXI-A?

Expect direct MCQs on the numbers, the service types and conduct rules, plus short scenario questions. The exam has 100 one-mark MCQs, takes 2 hours, needs 60% to pass and carries 10% negative marking.