Sebi warns investors against PMS frauds

The Securities and Exchange Board of India (Sebi) on Thursday warned investors against dealing with unauthorised portfolio management schemes (PMS).

“It has come to the notice of Sebi that some entities are soliciting the general public to entrust their funds and securities to them and offering portfolio management and advisory services without obtaining certificate of registration from Sebi to act as a portfolio manager. Investors should not deal with such unauthorized service providers,” Sebi said in a release.

Recently, upon coming across one complaint, it was observed by Sebi that one entity, viz. KE Consulting Group was offering unauthorised portfolio management services through its website. To protect the interest of investors and to prevent such unauthorised services from being offered to investors, Sebi has passed an order against the entity and its proprietor Manish Thakkar. 

EXERCISE PRECAUTION

• Check whether the entity is registered with Sebi as a portfolio manager
• Before taking up an assignment of portfolio management, the portfolio manager must enter into an agreement in writing with the client clearly defining inter se relationship and setting out mutual rights, liabilities and obligations
• Ensure that the portfolio manager provides a disclosure document to the client, giving details about the services offered at least two days prior to entering into the agreement
• No Sebi-registered portfolio manager can accept any initial investment of less than Rs 25 lakh from clients 
• The portfolio manager cannot guarantee or assure the returns on client investment

“The entities have been directed to cease and desist from undertaking the portfolio management activities, directly or indirectly, in any manner whatsoever. Further, they have been restrained from accessing the securities market in any manner. They have also been directed to resolve all pending complaints against them,” Sebi said.