A Portfolio Management Service (PMS) is a structured investment management solution offered by qualified professionals who manage and administer clients’ securities or funds according to a contractual agreement. Unlike mutual funds, PMS provides customized portfolios tailored to each investor’s risk appetite, objectives, and financial goals. The service aims to optimize returns through expert research, active monitoring, and disciplined investment strategies.

To operate legally in India, a PMS provider must be registered with the Securities and Exchange Board of India (SEBI). This registration ensures that the firm meets SEBI’s prescribed standards of governance, financial strength, and professional competence. It enhances investor confidence and brings credibility to the organization. Furthermore, registration mandates ongoing compliance obligations such as regular reporting, transparent disclosures, independent custody of client assets, and periodic audits. These requirements safeguard investors’ interests and help maintain integrity and professionalism in the portfolio management industry.

In this article, CA Manish Mishra talks about  How to Become a SEBI Registered PMS Provider.

Who can apply (basic eligibility)

Becoming a SEBI-registered Portfolio Management Service (PMS) provider requires fulfilling certain eligibility conditions that ensure only credible and financially sound entities manage investor funds. Below is a detailed explanation of each point:

The Applicant Must Be a Corporate Entity (Company or LLP)

SEBI mandates that only corporate bodies, such as a private limited company, public limited company, or limited liability partnership (LLP), can apply for PMS registration.
This requirement ensures that the applicant has a legal structure, audited financial records, and accountability under the Companies Act or LLP Act.

Individuals or proprietorship firms are not eligible to apply, as PMS activities involve managing large-scale investments and require strong institutional governance, compliance systems, and dedicated professional teams.

Key Personnel Must Meet “Fit and Proper” Requirements

The PMS must appoint qualified individuals as Principal Officer and Compliance Officer who are responsible for managing investment operations and regulatory compliance.
These professionals must possess:

• Relevant experience in the capital market or fund management, demonstrating their ability to make sound investment decisions.

• Recognized qualifications such as a CFA, MBA (Finance), or a degree in commerce, economics, or a related field.

• A clean regulatory record, meaning no disciplinary actions or penalties imposed by SEBI or other financial regulators.
  This ensures that only competent and ethical professionals handle investor portfolios.

The Firm Must Satisfy Minimum Net-Worth / Capital Adequacy Standards

Financial soundness is a key requirement for PMS registration. The applicant must maintain a minimum net worth as prescribed by SEBI to demonstrate financial stability and the ability to sustain business operations.

Maintaining adequate capital ensures that the portfolio manager can bear business risks, invest in technology and infrastructure, and handle client funds responsibly.
This standard also prevents financially weak entities from entering the market and protects investors from potential defaults or mismanagement.

No Adverse Regulatory or Criminal History for the Firm or Its Key Persons

SEBI places great emphasis on integrity and reputation. Therefore, neither the applicant firm nor its promoters, directors, or key managerial persons should have:

• Any criminal convictions or pending charges involving fraud, financial irregularities, or moral turpitude.

• Any past regulatory violations or penalties imposed by SEBI, RBI, or other financial authorities.
  This background check ensures that only entities with a clean record and strong ethical standing are allowed to operate as PMS providers, thereby preserving trust in the financial system.

Pre-registration preparations (what to build first)

Before applying to SEBI for registration as a Portfolio Management Service (PMS) provider, it is essential to have a strong foundation in place. These preparatory steps ensure the organization is well-structured, compliant, and ready to operate professionally once registration is granted. Below is a detailed explanation of each component:

Business Plan & Strategy

A well-defined business plan is the backbone of a successful PMS.
The applicant must decide what type of PMS service will be offered:

• Discretionary PMS: where the portfolio manager makes all investment decisions on behalf of the client.

• Non-Discretionary PMS: where decisions are made with the client’s prior consent.

• Advisory PMS: where the portfolio manager only advises the client without executing trades.

The business plan should clearly outline the investment philosophy, target clients (such as HNIs, family offices, or institutional investors), types of products (like equity, debt, hybrid, or thematic portfolios), fee structure, and go-to-market strategy. This clarity helps SEBI evaluate the fund’s focus, risk management approach, and long-term sustainability.

Organizational Structure & Key Roles

A sound organizational structure ensures proper governance and accountability within the PMS.
The applicant must appoint:

• A Principal Officer, who leads the PMS operations, ensures regulatory compliance, and oversees portfolio performance.

• A Compliance Officer, responsible for monitoring adherence to SEBI regulations and internal policies.

Additionally, a core team must be established comprising:

• Portfolio Managers for investment management,

• Research Analysts for market analysis,

• Operations and Back-Office staff for reconciliation and reporting,

• Risk and Compliance personnel for oversight, and

• Client Servicing executives for communication and support.

This structure ensures operational efficiency and regulatory readiness.

Back-Office & Systems

A robust back-office setup and technological infrastructure are vital for smooth PMS operations.
The systems should include:

• Trade execution and reconciliation processes to ensure accuracy and transparency in transactions.

• Accounting systems for maintaining detailed books of each client’s portfolio.

• Independent custodian arrangements for the safekeeping of securities, ensuring separation between client and firm assets.

• Client reporting tools and secure digital portals for real-time access to investment statements.

• Data security measures to protect sensitive financial and personal information.

This infrastructure not only ensures compliance but also enhances investor confidence through transparency and reliability.

Policies & Manuals

Comprehensive internal policies and procedural manuals demonstrate the organization’s preparedness and commitment to compliance. Essential documents include:

• Compliance Manual – outlining SEBI regulations and firm-specific compliance responsibilities.

• Code of Conduct – setting ethical and professional standards for employees.

• Anti-Money Laundering (AML) and KYC Policy – ensuring adherence to regulatory requirements for verifying clients.

• Conflict of Interest Policy – preventing unfair practices or misuse of insider information.

• Valuation Policy – detailing how illiquid or unlisted securities are valued.

• Order Execution Policy – ensuring fair, transparent, and efficient trade execution for all clients.

Having these policies ready before applying signals a mature governance framework to SEBI.

Custody & Audit

Custody and audit arrangements are crucial to protecting investor assets and ensuring financial integrity.
The PMS applicant must:

• Appoint a registered custodian or Depository Participant (DP) for holding clients’ securities and cash separately from the firm’s assets. This prevents misuse or commingling of client funds.

• Engage a qualified auditor experienced in asset management or financial services to perform periodic audits, verify compliance, and certify financial statements.

These steps guarantee independent oversight, promote transparency, and strengthen investor protection — essential aspects of SEBI’s regulatory framework.

The application process — step by step

Obtaining registration as a SEBI-Registered Portfolio Management Service (PMS) Provider involves a detailed and structured process. Each stage is designed to ensure that the applicant has the competence, infrastructure, and financial soundness to manage investor funds responsibly. Below is a step-by-step explanation of the process:

Prepare Application Dossier

The first step is to gather and organize all necessary documents that demonstrate the firm’s eligibility and readiness to operate as a PMS provider. The application dossier must include:

• Company Incorporation Documents such as Certificate of Incorporation, Memorandum and Articles of Association, and PAN details.

• Board Resolution authorizing the commencement of PMS business.

• A comprehensive business plan outlining services, strategies, target clients, and projected financials.

• Audited financial statements and a net-worth certificate confirming compliance with SEBI’s financial requirements.

• KYC details of promoters and directors for background verification.

• Profiles, CVs, and qualification proofs of key personnel, including the Principal Officer and Compliance Officer.

• Copies of policies and manuals (compliance, risk, AML, valuation, and governance).

• Client agreement templates and technology/system details showing operational readiness.

Preparing a well-structured dossier ensures a smooth review process and reduces the likelihood of SEBI requesting additional documents.

Submit Application

Once the dossier is complete, the applicant must file the prescribed SEBI application form (commonly Form A under SEBI PMS Regulations) along with the application fee. The submission is generally done through SEBI’s intermediary portal or other designated channels.

At this stage, completeness and accuracy are crucial. Missing or inconsistent information may cause delays or rejections, so the firm must carefully verify every document before submission.

Regulatory Review

After submission, SEBI conducts a detailed examination of the application. The regulator verifies:

• The “fit and proper” status of the company and its key personnel.

• The adequacy of the infrastructure, including office space, technology systems, and human resources.

• The strength of the compliance and risk management frameworks.

• The experience, education, and track record of the Principal Officer and other key executives.

During this stage, SEBI may seek clarifications or additional documents, and the applicant must respond promptly to avoid delays. This review process ensures only credible and capable entities receive registration.

Grant of Registration

If SEBI is satisfied with the firm’s compliance, infrastructure, and governance framework, it will grant a Certificate of Registration. This certificate authorizes the firm to start offering PMS services in India.

The registration is subject to initial and ongoing conditions, such as maintaining minimum net worth, employing qualified staff, and ensuring investor protection through proper disclosures and systems.

Pay Registration / Renewal Fees

Once approval is granted, the firm must pay the registration fee prescribed by SEBI. The certificate typically remains valid for a few years (usually three), after which the firm must apply for renewal by submitting updated documents and paying the renewal fee.

Compliance with all initial conditions, including maintaining the required capital and governance standards, is essential to retain the registration.

Documents typically required (clean checklist)

When applying for SEBI registration as a Portfolio Management Service (PMS) provider, having a complete and accurate set of documents is essential. Each document serves a specific purpose in establishing the applicant’s legitimacy, financial stability, operational readiness, and compliance preparedness. Below is a detailed explanation of each item in the checklist:

Certificate of Incorporation, MOA/AOA, or LLP Agreement

These documents legally establish the applicant’s existence as a corporate entity.

• The Certificate of Incorporation confirms that the company or LLP is registered under the Companies Act or LLP Act.

• The Memorandum and Articles of Association (MOA/AOA) or LLP Agreement define the entity’s objectives, powers, and internal rules, ensuring that PMS activities are within its authorized scope of business.

Board Resolution Authorising PMS Business

A board resolution passed by the company’s directors is mandatory to formally authorize the start of PMS operations.
It serves as evidence that the company’s governing body has approved the decision to apply for SEBI registration and is aware of the associated financial and regulatory responsibilities.

Detailed Business Plan and Projected Financials

The business plan outlines the firm’s operational model, strategy, investment approach, target market, and revenue projections.
SEBI reviews this plan to evaluate the firm’s preparedness, business viability, and long-term sustainability.
Including projected financial statements such as profit and loss forecasts and capital adequacy statements demonstrates the applicant’s financial soundness and operational feasibility.

Audited Financial Statements and Net-Worth Certificate

The audited financial statements (typically for the last three years, if available) verify the applicant’s financial position and compliance with accounting standards.
A Net-Worth Certificate issued by a Chartered Accountant confirms that the firm meets SEBI’s minimum capital requirement. This ensures the applicant has the financial strength to bear business risks and fulfill investor obligations.

KYC Documents of Promoters, Directors, and Key Personnel

Know Your Customer (KYC) documents such as PAN, Aadhaar, address proofs, and identity verification are required for all promoters, directors, and key managerial staff.
These documents help SEBI conduct background checks to confirm the integrity, authenticity, and eligibility of individuals associated with the firm.

CVs, Qualification Proofs, and Experience Letters of Principal Officer and Compliance Officer

SEBI evaluates the competence and professionalism of the Principal Officer and Compliance Officer.
Hence, detailed curriculum vitae (CVs), educational qualification certificates (such as CFA, MBA, or finance degrees), and experience letters demonstrating relevant exposure to portfolio management or capital markets must be submitted.

Client Agreements and Disclosure Documents

These documents outline the relationship between the PMS provider and its clients.

• The Disclosure Document lists risks, fees, and rights of investors.

• The Investment Management Agreement (IMA) defines the scope of discretionary or non-discretionary services.

• Mandate Forms specify transaction authority and client preferences.
  These documents assure SEBI that the firm will operate transparently and protect investor interests.

Policies and Manuals

Comprehensive policy documents demonstrate the firm’s governance and compliance culture. Key policies include:

• Compliance Manual: Procedures for adhering to SEBI regulations.

• AML/KYC Policy: Framework for preventing money laundering and ensuring client verification.

• Conflict of Interest Policy: Measures to prevent misuse of confidential information.

• Valuation Policy: Methodology for valuing illiquid or unlisted securities.

• Grievance Redressal Policy: Mechanism for resolving investor complaints promptly.

These policies reflect the firm’s commitment to ethical practices and regulatory integrity.

Details of Systems and Technology Infrastructure

The applicant must describe the technological systems used for PMS operations, including:

• Trade and Order Management Systems for executing and tracking trades.

• Reporting Platforms for client and regulatory reporting.

• Investor Portals for real-time access to portfolio statements.

• Cybersecurity Arrangements to safeguard sensitive investor data and ensure data integrity.
  This demonstrates operational capability and digital transparency.

Custodian/DP and Auditor Appointment Letters

SEBI requires PMS providers to maintain client assets with an independent custodian or Depository Participant (DP) to prevent misuse of funds or securities.
Additionally, the appointment of a qualified auditor is necessary for conducting regular audits and verifying compliance.
These appointments ensure third-party oversight and enhance investor protection.

Post-registration obligations

After obtaining SEBI registration, a Portfolio Management Service (PMS) provider must adhere to a series of post-registration obligations designed to maintain transparency, investor protection, and regulatory compliance. These ongoing responsibilities ensure that the PMS operates ethically, manages risks efficiently, and provides full disclosure to both investors and the regulator. Below is a detailed explanation of each key obligation:

Client Onboarding and Minimum Investments

Once registered, a PMS provider must follow a structured client onboarding process that includes:

• KYC (Know Your Customer) verification: Collecting and verifying identity, address, and financial details of clients.

• Suitability and Risk Profiling: Assessing the client’s risk appetite, investment goals, and financial position to ensure that the PMS products offered align with the client’s objectives.

• Enforcing Minimum Investment Limits: SEBI mandates a minimum investment amount for PMS clients, ensuring that only sophisticated or high-net-worth investors access these services.
  Proper onboarding establishes trust, ensures legal compliance, and prevents financial misconduct such as money laundering.

Periodic Reporting

Transparency in reporting is a fundamental SEBI requirement. PMS providers must:

• Submit periodic returns to SEBI, usually on a quarterly or monthly basis, detailing assets under management, client portfolios, and compliance with investment restrictions.

• Provide regular reports to investors, including:

  • Monthly or quarterly NAV (Net Asset Value) updates.

  • Performance metrics showing returns against benchmarks.

  • Audited annual statements summarizing financial performance and expenses.
    Timely and accurate reporting builds investor confidence and demonstrates operational integrity.

Compliance and Audits

PMS providers are required to establish a robust compliance framework to ensure continuous adherence to SEBI regulations. This includes:

• Internal Compliance Monitoring: The Compliance Officer must track all transactions, monitor reporting accuracy, and verify adherence to investment limits and policies.

• Annual Statutory Audits: Independent auditors must review the PMS operations, accounting, and internal controls to confirm transparency and accuracy.

• Audit Trail Maintenance: Every transaction, client instruction, and communication must be properly recorded and stored for future reference or regulatory inspection.
  Regular audits prevent errors, detect irregularities early, and uphold professional governance standards.

Disclosure and Conflicts of Interest

Transparency in communication is critical to maintaining investor trust. PMS providers must:

• Disclose all fees, expenses, and charges clearly in client agreements and periodic reports.

• Provide complete visibility on the valuation methodology, especially for unlisted or illiquid assets.

• Identify and disclose conflicts of interest, such as personal holdings, related-party transactions, or situations where the manager’s interests might diverge from those of the client.
  Addressing conflicts proactively ensures that investors receive fair and unbiased service.

Grievance Redressal

A PMS provider must operate a formal grievance redressal system to handle investor complaints efficiently and transparently.

• Maintain a documented complaint-handling policy, detailing timelines, escalation procedures, and resolution responsibilities.

• Publish an Investor Charter outlining the rights, obligations, and service standards applicable to clients.

• Regularly review complaint trends to identify and resolve systemic issues.
  Effective grievance redressal enhances investor satisfaction and reflects a commitment to accountability.

Client agreements & disclosures (what to include)

Client agreements and disclosure documents are among the most important elements of a Portfolio Management Service (PMS) setup. They establish the legal and operational framework governing the relationship between the PMS provider and the client. These agreements ensure transparency, protect both parties’ rights, and fulfill SEBI’s regulatory disclosure requirements. Below is a detailed explanation of what must be included in these documents:

Clear Scope Discretionary vs Non-Discretionary

The agreement must clearly specify the type of PMS service being offered:

• Discretionary PMS: The portfolio manager makes all investment decisions on behalf of the client without seeking prior approval for each transaction.

• Non-Discretionary PMS: The manager provides investment advice, but the client makes the final decision on each transaction.
  The scope section should also include details of fee structure management fees, performance-linked fees, and any other charges along with the billing frequency (monthly, quarterly, or annually). This clarity helps avoid disputes and ensures clients understand how their funds are managed and billed.

Investment Mandate and Limitations

This section outlines the investment objectives, asset allocation strategy, and restrictions applicable to the client’s portfolio. It should specify:

• The investment mandate, including asset classes (equity, debt, hybrid, etc.) and diversification policies.

• Any limitations or exclusions, such as restricted sectors or maximum exposure to a single asset.

• The benchmark index used to evaluate performance.

• The reporting frequency for example, monthly or quarterly statements detailing portfolio holdings and performance.
  By defining these parameters, the agreement ensures alignment between the client’s expectations and the manager’s strategy.

Valuation Basis, Corporate Actions, and Custody Arrangements

Clients must know how their portfolio’s value is determined.

• The agreement should explain the valuation basis for instance, mark-to-market valuation for listed securities and independent valuation for unlisted instruments.

• It must describe the treatment of corporate actions, such as dividends, rights issues, and bonus shares, ensuring clients understand how these are credited to their accounts.

• The document should also specify custody arrangements, including details of the independent custodian responsible for holding client assets. This separation of ownership guarantees the security of investor funds.

Termination, Exit Procedures, and Dispute Resolution

The agreement should include clear provisions for:

• Termination conditions: Circumstances under which either party can terminate the PMS contract.

• Exit procedures: Notice period, calculation of final NAV, and liquidation of holdings upon closure.

• Liability clauses: Define each party’s responsibilities and limits of liability.

• Dispute resolution mechanisms: Methods for resolving disagreements (such as arbitration or mediation) and the jurisdiction of courts where disputes will be addressed.
  Including these terms helps prevent misunderstandings and ensures a smooth exit process for both parties.

Risk Disclosures and Non-Guarantee of Returns

SEBI requires PMS providers to include complete risk disclosures outlining all possible risks market volatility, liquidity risk, regulatory risk, and concentration risk.
The agreement must also explicitly state that returns are not guaranteed, even in discretionary portfolios. This clause protects investors from unrealistic expectations and safeguards the PMS provider from liability for market-driven losses.
Additionally, it should highlight that past performance is not indicative of future results, reinforcing a fair and transparent advisory approach.

Governance, risk and operational controls

A strong governance and risk management framework is essential for every SEBI-registered Portfolio Management Service (PMS) provider. It ensures that all investment activities are conducted ethically, transparently, and in alignment with investor interests. Effective governance minimizes operational risks, protects client assets, and enhances regulatory compliance. Below is a detailed explanation of each key control element:

Maintain an Investment Committee

Every PMS provider should establish an Investment Committee (IC) to oversee the fund’s portfolio strategy, asset allocation, and key investment decisions.

• The committee should include senior management, portfolio managers, research heads, and compliance officers.

• Its primary role is to review investment performance, approve strategy changes, and monitor adherence to client mandates and SEBI guidelines.

• Regular IC meetings ensure that investment decisions are made through collective expertise rather than individual discretion, promoting accountability and consistency.
  A well-functioning Investment Committee enhances governance, prevents concentration risk, and ensures that investment policies align with the firm’s ethical and regulatory standards.

Segregation of Roles and Responsibilities

Clear separation of duties among different functions is critical to prevent conflicts of interest and operational errors.

• Research and trading teams should operate independently to ensure unbiased analysis and fair trade execution.

• The compliance department must monitor adherence to internal and SEBI regulations without interference from investment staff.

• Client servicing functions should be separated from decision-making roles to avoid influencing portfolio strategies.
  This segregation of duties strengthens internal controls, enhances transparency, and maintains objectivity in investment operations. It also reduces the risk of fraud or misuse of confidential information.

Periodic Stress Tests, Trade Reconciliations, and Counterparty Due Diligence

Robust risk management requires constant evaluation of both internal and external factors:

• Stress Testing: PMS providers must regularly perform scenario-based stress tests to analyze how adverse market conditions—such as volatility spikes or liquidity crunches—could affect portfolio performance.

• Trade Reconciliation: Daily and periodic reconciliations between trading systems, custodians, and accounting records help detect discrepancies early and ensure transaction accuracy.

• Counterparty Due Diligence: PMS firms must evaluate the creditworthiness, reputation, and operational reliability of brokers, custodians, and other intermediaries before engaging with them.
  These practices reduce financial exposure, maintain operational accuracy, and build resilience against market disruptions.

Robust Cybersecurity, Data Backup, and Disaster Recovery Plans

In today’s digital environment, data protection and operational continuity are vital for PMS firms handling sensitive financial and personal information.

• Cybersecurity Controls: Implement multi-layered security systems, encryption, firewalls, and access controls to prevent unauthorized data breaches.

• Data Backup: Maintain regular backups of all critical data—client portfolios, transaction records, compliance reports—to secure servers or cloud-based repositories.

• Disaster Recovery Plan (DRP): Develop a tested framework to restore systems and resume operations swiftly in case of system failures, natural disasters, or cyberattacks.
  Strong cybersecurity and backup measures not only safeguard client information but also ensure uninterrupted business continuity and compliance with SEBI’s digital governance standards.

Common pitfalls & how to avoid them

While applying for or operating as a SEBI-registered Portfolio Management Service (PMS) provider, several common mistakes can lead to regulatory delays, penalties, or reputational damage. Recognizing these pitfalls and addressing them proactively helps ensure compliance, transparency, and investor trust. Below is a detailed explanation of each pitfall and the best ways to avoid them:

Incomplete Applications: Use a Pre-Submission Checklist

One of the most frequent causes of delay in SEBI registration is the submission of incomplete or inconsistent applications. Missing documents such as net-worth certificates, compliance policies, or client agreement templates can result in repeated regulatory queries.

How to avoid it:

• Prepare a complete pre-submission checklist covering all required documents and forms.

• Cross-verify every attachment for accuracy, consistency, and signatures.

• Ensure that company details, policies, and financials are up to date and aligned across documents.
  A well-organized and complete application package not only speeds up SEBI’s review process but also reflects professionalism and readiness.

Insufficient Compliance Infrastructure: Invest Early in Compliance Personnel and Systems

A weak compliance framework can expose the firm to regulatory violations and investor complaints. Many applicants focus primarily on investment operations while neglecting compliance staffing and systems.

How to avoid it:

• Hire a dedicated Compliance Officer with prior experience in PMS or asset management.

• Implement compliance management software to track reporting deadlines, regulatory updates, and audit trails.

• Conduct regular internal audits and employee training on SEBI regulations and ethical standards.
  Strong compliance infrastructure safeguards the firm against penalties, reputational risks, and regulatory scrutiny.

Misleading Marketing: Avoid Promises of Guaranteed Returns

Promising or implying guaranteed returns is strictly prohibited under SEBI regulations and can lead to severe penalties or license suspension. PMS is a market-linked investment product where returns depend on market performance and the investment strategy.

How to avoid it:

• Ensure that all marketing materials, presentations, and websites use accurate and transparent language.

• Include disclaimers such as “Past performance is not indicative of future results.”

• Educate sales and relationship managers about compliance boundaries in investor communications.
  Maintaining honesty and transparency in marketing builds long-term credibility and aligns with SEBI’s investor protection principles.

Poor Documentation: Maintain Pristine Records of Client Mandates, Communications, and Approvals

Inadequate documentation can create legal and compliance issues, especially during SEBI inspections or client disputes. Missing records of client instructions, investment decisions, or fee agreements weaken the firm’s defense.

How to avoid it:

• Maintain digital and physical records of all client-related documents, including signed mandates and correspondence.

• Store communication logs, emails, and approvals in a secure, searchable format for easy retrieval.

• Conduct periodic record-keeping audits to ensure no missing or outdated files.
  Proper documentation ensures accountability, aids in audits, and provides evidence of compliance during regulatory reviews.

Weak Valuation Practices: Adopt Transparent Valuation Policies and Auditor Oversight

Valuation errors or inconsistencies can misrepresent portfolio performance, leading to investor mistrust and regulatory intervention. This is especially critical for illiquid or unlisted securities.

How to avoid it:

• Establish a documented valuation policy specifying methodologies for different asset classes.

• Use independent valuers for unlisted or complex instruments.

• Conduct periodic valuation reviews and reconciliations under auditor supervision.
  Transparency in valuation not only ensures fair reporting but also strengthens investor confidence and regulatory compliance.

Practical timeline & estimated costs (indicative)

Setting up a SEBI-registered Portfolio Management Service (PMS) is a structured process that involves detailed preparation, regulatory review, and significant financial investment. The total time and cost depend on the applicant’s readiness, quality of documentation, and compliance infrastructure. Below is a detailed explanation of each stage and cost component:

Preparation (Policies, Systems, and Documentation): 2–6 Weeks

Before applying for registration, the applicant must prepare all internal systems, policies, and documents required by SEBI.
This phase includes:

• Drafting and finalizing key policies and manuals such as compliance, AML/KYC, risk management, and valuation policies.

• Setting up operational systems for trade execution, reporting, accounting, and client servicing.

• Preparing application documents, including business plans, audited financial statements, net-worth certificates, and client agreements.
  The duration of this stage largely depends on how organized and compliant the applicant already is. Well-prepared firms can complete this step in 2–3 weeks, while new applicants may take up to 6 weeks.

Regulator Review: Few Weeks to Several Months

Once the application is submitted, SEBI conducts a thorough review of the firm’s qualifications, infrastructure, and governance framework.

• The regulatory review process typically involves document scrutiny, clarifications, and sometimes site inspections.

• The duration depends on the completeness and accuracy of the submission. Incomplete or inconsistent applications may lead to multiple queries, extending the review timeline.

• On average, the process can take anywhere between 8 to 16 weeks, but complex applications may require more time.
  Timely responses to SEBI’s queries and proactive communication can significantly speed up the approval process.

Initial Costs: Setup and Registration Expenses

Launching a PMS requires substantial upfront investment to ensure regulatory and operational compliance.
Key components of initial costs include:

• Incorporation and legal expenses for company registration and drafting foundational agreements.

• Regulatory and compliance advisory fees for preparing and reviewing SEBI application documents.

• Infrastructure and technology setup, including trade platforms, reporting tools, and cybersecurity systems.

• Custodian and depository participant arrangements for safekeeping client assets.

• Staffing costs for hiring key personnel such as the Principal Officer, Compliance Officer, analysts, and support staff.

• Working capital to cover at least the first few months of operations.

Since SEBI mandates a minimum net worth, the applicant must ensure sufficient capital reserves. In total, firms should expect a meaningful capital outlay at the setup stage, which can vary depending on the scale and business model.

Ongoing Costs: Operational and Compliance Expenditure

Once operational, PMS providers must bear recurring costs to maintain compliance and service quality.
These include:

• Salaries for compliance and operations staff.

• Annual audits (statutory, compliance, and internal control reviews).

• Regulatory reporting costs, including SEBI filings and data management.

• Custodian and depository fees for client asset management.

• Technology maintenance, including periodic system updates, cybersecurity monitoring, and backup solutions.

• Client servicing and communication expenses, such as investor reports, grievance handling, and marketing.
  These recurring costs are essential to sustain compliance and maintain investor confidence.

Note on Fees and Regulatory Charges

The exact application fee, registration fee, renewal charges, and minimum net-worth requirement are determined by SEBI and may be revised periodically through official circulars.
Applicants must verify the latest figures directly from SEBI before initiating the registration process to ensure compliance with current financial thresholds.

Final checklist before launch

Before launching a Portfolio Management Service (PMS) business or applying for SEBI registration, the applicant must ensure that every legal, operational, and compliance requirement is in place. This “final checklist” acts as a pre-launch audit to confirm readiness for regulatory scrutiny and smooth business operations. Each point in the checklist is explained below:

Incorporation and Board Resolution Passed

The first step is to establish the applicant entity as a legally recognized body either a private limited company, public limited company, or LLP under Indian law.

• Once incorporated, the Board of Directors must pass a formal resolution authorizing the company to commence Portfolio Management Services (PMS).

• This resolution empowers designated officers to file the SEBI application and undertake related legal or financial steps.
  Having this resolution ensures that PMS registration is a board-approved business activity, not an individual decision, thereby reinforcing corporate accountability.

Principal Officer & Compliance Officer Appointed with Documented Credentials

SEBI mandates the appointment of two key personnel before registration:

• The Principal Officer, who leads the PMS function, oversees investment decisions, and ensures compliance with regulations.

• The Compliance Officer, responsible for monitoring regulatory adherence, handling reporting obligations, and maintaining audit trails.
  Both officers must have relevant educational qualifications (e.g., CFA, MBA, or commerce degree) and proven experience in financial markets.
  All credentials such as resumes, experience letters, and qualification certificates must be documented and included in the application dossier to verify competence and eligibility.

Net-Worth Requirement Satisfied and Funds Available

To demonstrate financial soundness, the applicant must meet SEBI’s minimum net-worth requirement for PMS registration.

• A net-worth certificate from a Chartered Accountant should confirm compliance with this threshold.

• Adequate funds must be maintained to cover infrastructure costs, employee salaries, compliance functions, and technology expenses.
  This ensures that the firm has the financial stability to operate sustainably and manage investor assets responsibly.

Custodian & Auditor Appointed, Operational Systems in Place

Every PMS provider must appoint:

• An independent custodian or Depository Participant (DP) registered with SEBI for safekeeping of client securities.

• A qualified auditor to conduct statutory and compliance audits of financial statements and internal controls.
  In addition, the firm must have operational systems in place for trade execution, order management, portfolio valuation, reconciliation, and investor reporting.
  These arrangements demonstrate that the firm is operationally equipped to handle clients’ funds securely and transparently.

Client Agreements and Disclosure Documents Finalised

Before launch, the PMS provider must finalize legally compliant client agreements and disclosure documents.
These include:

• Investment Management Agreements (IMAs) specifying the scope of service (discretionary or non-discretionary), fees, and reporting obligations.

• Disclosure Documents outlining investment risks, valuation methods, and conflict-of-interest policies.
  Finalizing these documents ensures transparency and clarity in the relationship between the PMS provider and the investor, meeting SEBI’s disclosure norms.

Compliance Manual, AML/KYC, and Grievance Mechanisms Documented

The firm must have well-documented policies to demonstrate its commitment to governance and investor protection.
This includes:

• A Compliance Manual detailing internal processes for adhering to SEBI regulations.

• AML/KYC Policy to prevent financial fraud and ensure identity verification of clients.

• A Grievance Redressal Mechanism to handle investor complaints promptly, supported by an Investor Charter outlining service standards.
  These policies collectively build a culture of compliance, ethics, and transparency within the organization.

Application Dossier Complete and Filed

Finally, after verifying all the above steps, the applicant must ensure that the application dossier submitted to SEBI is complete, accurate, and up to date.
The dossier should include all supporting documents such as incorporation papers, board resolutions, financial statements, policies, agreements, and proof of infrastructure readiness.
Submitting a comprehensive and well-organized dossier minimizes SEBI’s queries, speeds up the approval process, and reflects professionalism.

Conclusion

Becoming a SEBI-registered Portfolio Management Service (PMS) provider is not just a business opportunity but also a significant regulatory responsibility. It demands comprehensive planning, a solid governance framework, efficient technology systems, and an unwavering commitment to compliance. Firms must establish transparent processes, maintain accurate client documentation, and ensure every operation from risk assessment to reporting is aligned with SEBI’s regulatory framework.

To succeed in this competitive industry, PMS providers must balance investment expertise with operational discipline and transparency. Building investor trust through open communication, ethical conduct, and timely reporting is key to long-term growth. A firm that combines financial intelligence with strong internal controls and client-centric practices can establish a credible reputation and sustain profitability in the evolving financial market. Such an approach not only ensures compliance but also positions the firm as a trusted and professional investment manager under SEBI’s supervision.

Frequently Asked Questions (FAQs)

Q1. What is a Portfolio Management Service (PMS)?

Ans. A Portfolio Management Service (PMS) is a professional investment service offered by registered portfolio managers who manage or advise on securities and funds on behalf of clients. PMS providers create customized portfolios aligned with each investor’s goals, risk appetite, and investment horizon.

Q2. Why is SEBI registration mandatory for PMS providers?

Ans. SEBI registration ensures that PMS providers meet prescribed standards of integrity, competence, and financial strength. It brings accountability, safeguards investor interests, and ensures that the PMS operates transparently under the Securities and Exchange Board of India’s regulatory framework.

Q3. Who can apply to become a SEBI-registered PMS provider?

Ans. Only a corporate entity such as a company or LLP can apply. Individual applicants are not eligible. The firm must appoint a qualified Principal Officer and a Compliance Officer with relevant experience in portfolio management or the securities market.

Q4. What are the key eligibility requirements for PMS registration?

Ans. The main requirements include adequate net worth (as prescribed by SEBI), experienced key personnel, robust infrastructure, proper risk management systems, and clean regulatory records. The firm must also be “fit and proper” as defined under SEBI regulations.

Q5. How can one apply for PMS registration with SEBI?

Ans. Applicants must submit the prescribed application form with supporting documents such as company incorporation papers, business plans, audited financials, key personnel details, and compliance manuals. After review, SEBI grants registration upon payment of the registration fee.

Q6. What documents are required during the registration process?

Ans. Essential documents include the company’s Memorandum and Articles of Association, board resolution authorizing PMS activity, net worth certificate, client agreement drafts, KYC of promoters, compliance manual, and custodian and auditor details.

Q7. What are the post-registration compliance obligations?

Ans. Once registered, PMS providers must comply with SEBI’s ongoing requirements maintaining client records, filing periodic reports, disclosing performance data, appointing independent custodians, ensuring transparent valuations, and addressing investor grievances promptly.

Q8. Can a PMS provider offer guaranteed returns to clients?

Ans. No. SEBI strictly prohibits PMS providers from offering or promising guaranteed or assured returns. Returns depend on market performance, investment strategy, and risk factors disclosed in the client agreement.

Q9. What is the minimum investment required for PMS clients?

Ans. Clients investing in PMS must contribute a minimum amount as stipulated by SEBI at the time of onboarding. The limit is designed to ensure that PMS caters to high-net-worth or sophisticated investors.

Q10. How long does the PMS registration process usually take?

Ans. The registration timeline depends on the completeness of the application and SEBI’s review process. Typically, it can take anywhere from two to three months, provided all documents and eligibility criteria are met.