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Khushi Agarwal

Associate in Funds practice at the Mumbai office of Cyril Amarchand Mangaldas. Khushi can be reached at  khushi.agarwal@cyrilshroff.com

Summary: SEBI has recently proposed an overhaul of the Portfolio Managers Regulations, opening doors that have stayed shut until now. Discretionary portfolio managers may soon be allowed to invest in pre-IPO securities and unlisted debt, while portfolio managers more broadly may be permitted to invest in overseas markets. A new, low-entry “MF-PMS” category is proposed for mutual-fund-only portfolios, alongside looser derivative limits for discretionary portfolio management and a fresh route for independent fund managers to operate under registered PMS players. But it’s not just about new investment avenues, Principal Officer qualifications, net worth requirements, and even the definition of “related party” are all set to change too. If implemented, these reforms could reshape how discretionary and non-discretionary portfolio management services operate in India, making the industry more innovative and investor-friendly.

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Procuring Investor Consent by AIFs: SEBI’s New Playbook for Voting and Conflict Management

Summary: On June 30, 2026, SEBI released a consultation paper proposing a standardised consent mechanism and an expanded conflict-of-interest framework for Alternative Investment Funds.

The AIF Regulations mandate investor consent for material decisions but are silent on methodology, resulting in inconsistent market practices. SEBI now proposes a framework offering AIFs a choice among three voting methods – Deemed Consent, Present and Voting, and Express Voting. Further, the current “associate” definition, anchored to a 15% shareholding threshold, fails to capture transactions where conflict is self-evident. SEBI proposes introducing a “related party” definition adapted from Section 2(76) of the Companies Act, 2013, deployed specifically within conflict provisions. This widens the net of transactions requiring 75% investor approval.

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SEBI Order Penalises Outsourcing of Core Functions: Structuring Lessons for Asset Management Industry

Summary: This blog analyses a recent SEBI order dated May 26, 2026, which penalised a portfolio manager for outsourcing core investment functions to a technology company under the guise of “technology consulting”. SEBI held that the prohibition on outsourcing core activities under the Outsourcing Circular and Applicable Laws is absolute, and that “investment decisions” extend beyond model portfolio approval to include all downstream steps such as quantities, timing, and client-level trade execution. The portfolio manager and its key personnel were restricted from onboarding new clients for 21 days and were collectively penalised Rs 42,00,000. The article draws broader structuring lessons for the asset management industry, cautioning that SEBI will look at substance over form, that fee structures linked to performance fees signal participation in the investment process, and that individuals in control will face personal liability.

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