SEBI to rewrite PMS rules for the first time since 2020 after AI flags fresh alerts
SEBI says its artificial intelligence systems are generating a growing number of alerts pointing to front-running patterns inside India's portfolio management services industry.
A regulatory rewrite for India’s portfolio management services (PMS) industry is on the way, and it is arriving alongside an unexpected finding from SEBI’s own AI systems. Speaking at the Association of Portfolio Managers in India’s (APMI) PMS Leadership Conclave 2026 in Chennai on Friday, SEBI executive director Manoj Kumar confirmed that a consultation paper to overhaul PMS regulations is expected soon.
The timing follows a discovery the regulator had not anticipated. ‘Recently, we have noticed our AI generating enough alerts, and over a period of time, the patterns emerging from those alerts suggest that a certain amount of front-running is also happening in the PMS industry,’ Kumar said. ‘We always believed this was something largely confined to the mutual fund space. But of late, we have observed that it is happening in PMS as well. We are analysing how it has impacted investors.’
Kumar said SEBI’s current stance is to distinguish carefully between unintended violations and deliberate misconduct. ‘As long as these violations remain unintended, we are very, very accommodative. We will listen to your viewpoint,’ he said, while warning that anyone who knowingly engaged in practices seen as even remotely impermissible would eventually face regulatory scrutiny and enforcement.
On the coming rule change itself, Kumar said the intent was to facilitate active participation under the PMS licence and make regulations easier to understand, alongside improving ease of doing business for firms in the sector.
APMI chairman Biharilal Deora, speaking to TOI on the sidelines of the conclave, noted the pace of change: the PMS framework, introduced in 1993, was last comprehensively reviewed in 2020, and is now being revisited again within a much shorter period. He said the review would support the industry’s growth going forward. The PMS industry’s assets under management currently stand at Rs 42.5 lakh crore and are expected to grow significantly.
Wikimedia Commons/by Rakesh from Bangalore
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