‘We always believed this was confined to mutual funds’: SEBI’s AI finds it in PMS too

For years, India’s securities regulator treated front-running as a problem largely confined to mutual funds. That assumption is now being revised. Speaking at the Association of Portfolio Managers in India’s (APMI) PMS Leadership Conclave 2026 in Chennai on Friday, SEBI executive director Manoj Kumar said the regulator’s own AI systems have begun generating alerts showing similar patterns inside the portfolio management services (PMS) industry.

‘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 told the gathering. ‘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 was careful to draw a line between unintended lapses and deliberate misconduct. He said SEBI’s current posture towards the PMS industry is a ‘handholding’ one: firms that commit unintended violations while operating in good faith will find the regulator accommodative and willing to hear their side. Deliberate wrongdoing is a different matter — he warned that anyone choosing to engage in practices that could be seen as even remotely impermissible would eventually face regulatory scrutiny and enforcement.

The disclosure comes as SEBI works on a broader rewrite of the rules governing PMS providers. Kumar confirmed a consultation paper is expected soon, with the stated intent of making regulations easier to understand, improving ease of doing business, and enabling firms to participate more actively under their licences.

APMI chairman Biharilal Deora, speaking to TOI on the sidelines of the conclave, said the review would support the industry’s continued expansion. The PMS regulatory framework, first introduced in 1993, was last given a comprehensive review in 2020 — and is now up for another one within a noticeably shorter interval. The industry’s assets under management currently stand at Rs 42.5 lakh crore, a figure SEBI and APMI both expect to rise significantly in the years ahead.

Wikimedia Commons/by Rakesh from Bangalore