Sebi Allows Discretionary PMS Clients to Pledge Securities for Loans
· Business · Economic Times
The Securities and Exchange Board of India has clarified that clients using discretionary portfolio management services (PMS) are permitted to pledge their securities to obtain personal loans. The regulator confirmed that these clients remain the beneficial owners of assets held in their demat accounts, allowing them to use these holdings as collateral. This guidance follows a request from Share India Securities regarding the interpretation of existing regulations. The regulator specified that such pledges are permissible provided they are initiated solely at the client's discretion and for their own benefit. This move clarifies that such arrangements do not constitute borrowing by the portfolio manager, which remains prohibited under Regulation 23(8) of the PMS Regulations, 2020.
Why it matters
This clarification removes regulatory uncertainty for discretionary PMS clients, allowing them to leverage their investment portfolios for personal financing needs without violating portfolio management rules.
Read the original report — Economic Times
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