Authority: Securities and Exchange Board of India (SEBI) Nodal Co-ordination Cell

Order Date: 22 June 2026 (Request Submission Date)

Case Overview

Share India Securities Limited (CIN: L67120GJ1994PLC115132), a SEBI registered Portfolio Manager (INP000009427), has submitted a formal Request for Informal Guidance under the SEBI (Informal Guidance) Scheme, 2025. The request specifically concerns the permissibility and regulatory treatment of clients pledging securities that are held in their demat accounts under the Discretionary Portfolio Management Services (DPMS) framework.

The company provides DPMS where clients open demat accounts with approved custodians, and trading is executed through empanelled brokers. Clients grant Power of Attorney (POA) to the Portfolio Manager to facilitate transactions. The securities purchased under DPMS remain in the client's beneficial ownership and are held in the client's name in the demat account.

The query arises because a prospective client sought clarification on whether they can pledge securities held in their demat account (purchased through DPMS). Share India Securities states that upon reviewing the SEBI (Portfolio Managers) Regulations, 2020 and related circulars, they could not find explicit regulatory guidance on this matter.

The company seeks guidance on six specific points regarding client-initiated pledging of DPMS securities:

1. Whether the Portfolio Manager may permit the client to pledge these securities, either directly by the client or through instructions routed via the Portfolio Manager to the Custodian, given that the securities are the client's property and remain in the client's beneficiary account, and such pledge is initiated solely at the client's discretion for the client's own benefit.

2. Whether such a pledge by the client would be construed as "borrowing of funds or securities by the portfolio manager on behalf of the client," which is restricted under Regulation 23(8) of the SEBI (Portfolio Managers) Regulations, 2020.

3. Whether the market value of securities pledged by the client should continue to be included in the Portfolio Manager's Assets Under Management (AUM) and reflected in regulatory reporting, given that the beneficial ownership of the securities remains with the client and pledging does not alter such ownership.

4. Whether any specific disclosures or risk warnings are required to be provided by the Portfolio Manager to the client regarding the risks associated with pledging securities, including but not limited to the risk of invocation of pledge and loss of securities.

5. Whether the Portfolio Manager is required to intimate SEBI or the Custodian regarding such pledging arrangements entered into by the client.

6. Any other precautions which need to be taken to ensure compliance with SEBI Regulations.

The company has paid a fee of Rs. 59,000 (Rs. 50,000 + 18% GST) for this request for a No-action Letter, which was paid on 19-Jun-2026 through online transaction reference number DKTSZZSINCO0Z3D and bank reference id 617051210034.

Final Outcome

This document represents a request for guidance rather than a final order or decision. The final outcome from SEBI is pending. The guidance sought will assist Share India Securities in ensuring their operations remain fully compliant with the SEBI (Portfolio Managers) Regulations, 2020 regarding client-initiated pledging of DPMS securities.

Topics: Portfolio Management Regulations, Securities Pledging, Regulatory Compliance