Sebi Cracks Down on Non-Compliant Portfolio Managers

Sebi has barred Scient Capital and DGS Capital Management from onboarding new clients and accepting additional funds due to failure in maintaining the requisite minimum net worth. Both firms acted as registered portfolio managers without meeting mandated financial standards, posing risks to investors, amid further compliance shortcomings.

The Securities and Exchange Board of India (Sebi) has taken stringent action against Scient Capital and DGS Capital Management. On Monday, the capital markets regulator barred both firms from onboarding new clients and accepting additional funds from existing ones due to failing to maintain the minimum required net worth of Rs 5 crore as stipulated by Sebi’s rules for portfolio managers.

In separate interim orders, Sebi highlighted that despite over two years since the deadline to meet this regulatory standard, neither company has shown progress towards compliance. Scient Capital submitted misleading compliance reports, while its principal officer lacked the necessary NISM certification. Similarly, DGS Capital failed to submit crucial reports and was also non-compliant in terms of certification.

Sebi’s directives include a 15-day deadline for both firms to reach the required net worth, during which period they are prohibited from onboarding new clients or accepting additional funds. With significant assets under management, their non-compliance presented notable risks to investor funds.