Sebi warns investors about fake portfolio managers offering assured returns

Even registered portfolio managers cannot offer products with fixed returns, and are not allowed to accept funds or securities worth less than Rs 50 lakh from a client

The Securities and Exchange Board of India (Sebi) has cautioned investors to not fall prey to unauthorised money collection being done by entities claiming to be providing portfolio management services.

The market regulator has noticed cases in which entities are mobilising money from investors in small amounts while assuring them high returns. Even registered portfolio managers are not permitted by Sebi to offer products with assured or fixed returns on investment. Moreover, a portfolio manager is not allowed to accept funds or securities worth less than Rs 50 lakh from a client.

“Some of the entities have names similar to that of Sebi registered intermediaries, misleading the public, as though the fund raising is genuine,” stated the regulator.

Sebi cautioned the investors that money mobilized through such schemes could be used to run Ponzi schemes without any real investment in securities.

As of August 31, assets being managed by portfolio managers registered under Sebi have grown to Rs 25.62 trillion from Rs 20.16 trillion a year ago. The market regulator has 382 registered intermediaries as portfolio managers.

Portfolio managers are required to be registered with Sebi under PMS Regulations. In a recent circular, the regulator asked portfolio managers to put in place a written policy by April 1, 2023, detailing the specific activities, roles and responsibilities of various teams, compliance, risk management, order placement, trade allocation with regard to client’s funds and securities management.