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Sebi cautions public against unregistered PMS

The regulator said Sebi-registered intermediaries  including Portfolio  Managers  (who manage  Portfolio  Management Schemes)  cannot  offer products  with assured  or  fixed return on  investment.Premium
The regulator said Sebi-registered intermediaries  including Portfolio  Managers  (who manage  Portfolio  Management Schemes)  cannot  offer products  with assured  or  fixed return on  investment.

  • This comes after Sebi noticed that some entities are collecting money from the public to provide PMS. This is being done by luring the public, with an assurance of high returns through pamphlets and some social media platforms

The Securities and Exchange board of India (Sebi) on Monday cautioned public against unauthorized money mobilization by entities claiming to provide Portfolio Management Services(PMS). 

This comes after Sebi noticed that some entities are collecting money from the public to provide PMS. This is being done by luring the public, with an assurance of high returns through pamphlets and some social media platforms. 

The regulator observed that in such schemes, the entities have been mobilizing money in a relatively smaller amounts and assuring high returns. Adding that some of  the entities have names similar to that of Sebi registered intermediaries, misleading the public, as though the fund raising is genuine and done by entities registered with Sebi. 

It was on 22 July, that the regulator banned certain individuals from accessing the securities markets for three years for falsely promising unrealistic assured investment returns and “fraudulently extracting money" from investors in the name of subscription fee. 

“Sebi,  therefore,  cautions investors  not  to fall  prey  to such  unauthorised  money collection. While investing in securities market, investors are advised to deal only with Sebi-registered  intermediaries", the regulator said in its circular.   

More important, the regulator said Sebi-registered  intermediaries  including Portfolio  Managers (who  manage  Portfolio Management  Schemes)  cannot offer products  with  assured or  fixed  return on  investment.  Many such  unauthorised schemes  are run  like  Ponzi schemes  without  any real  investment  made in  the securities market.  

Further, a Portfolio Manager cannot accept funds or securities worth less than 50 lakhs from the client and cannot promise any guaranteed or assured return, either directly or indirectly, it said.

ABOUT THE AUTHOR

Priyanka Gawande

Priyanka Gawande is a senior legal correspondent at Mint. She has worked as legal reporter for four years with both television and digital mediums. Based in Mumbai, she reports on disputes across sectors including banking, corporates and finance. This also includes insolvency and bankruptcy cases and intellectual property rights (IPR) litigation. Her focus also comprises tracking capital markets and disputes relating to securities law. Previously, Priyanka worked with Informist Media for 2.5 years covering major insolvency and bankruptcy cases and corporate developments. She started her career in journalism with Business Television India (BTVi) where she reported on primary markets, banking, finance and insurance companies.
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