SEBI cautions public against unauthorised portfolio managers

The Securities and Exchange Board of India (SEBI) has cautioned investors against unauthorised money mobilisation by entities claiming to provide portfolio management services.

"It has come to the notice of SEBI that some entities are collecting money from the public claiming to provide portfolio management services. These entities have been luring the public, with a promise of high returns, through pamphlets and social media platforms," the market watchdog says, adding it is observed that in such schemes, the entities have been mobilising money in relatively smaller amounts and promising assured returns.

Some of the entities have names similar to that of SEBI registered intermediaries, misleading the public, as though the fundraising is genuine and done by entities registered with SEBI, warns the capital markets regulator.

While investing in securities market, investors are advised to deal only with SEBI registered intermediaries, SEBI says, cautioning investors not to fall prey to such unauthorised money collection.

"Further, 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," the market regulator says.

As per SEBI (Portfolio Managers) Regulations, 2020, a Portfolio Manager shall be a body corporate, registered with SEBI and shall have a contract or agreement with a client to undertake management or administration of a portfolio of securities or funds of the client.

"A portfolio manager cannot accept funds or securities worth less than ₹50 lakh from the client and cannot promise any guaranteed or assured return, either directly or indirectly. Public is advised to do proper due diligence before trusting their money in such unauthorised schemes," says SEBI.

Last week, the SEBI eased rules and regulations related to Offer for Sale of shares by non-promoters. The SEBI board decided to do away with the requirement of minimum 10% shareholding for the non-promoter shareholders for offering shares through OFS mechanism.

Currently, non-promoter shareholders holding at least 10% of the share capital of an eligible company and willing to offer shares of at least ₹25 crore are eligible to offer their shares through OFS mechanism.

As per the new rules, retail investors have been allowed to bid for the unsubscribed portion of the non-retail segment. The cooling-off period required between two OFSs has been reduced to as less as two weeks from 12 weeks currently.