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.