SEBI Restricts Two Portfolio Managers Over Net Worth Non-Compliance
SEBI Restricts Two Portfolio Managers Over Net Worth Non-Compliance
The Securities and Exchange Board of India (SEBI) has barred Scient Capital and DGS Capital Management from onboarding new clients and accepting additional funds or securities from existing clients after they failed to maintain the minimum required net worth.
In two separate interim orders, SEBI stated that both firms continued to operate as registered portfolio managers despite not meeting the mandated net worth requirement of ₹5 crore under portfolio management regulations. The deadline for compliance had lapsed on January 15, 2023, yet the firms showed no progress toward meeting the requirement, the regulator noted.
SEBI observed that Scient Capital submitted incorrect and misleading compliance reports for FY23 and FY24, as its net worth did not meet the regulatory threshold for both years. Additionally, the firm’s principal officer failed to obtain the mandatory National Institute of Securities Market (NISM) certification from September 2023 to date.
Under SEBI regulations, a portfolio manager must possess a professional qualification in finance, law, or accountancy from a recognized institution or complete a postgraduate program in securities market portfolio management from NISM.
Similarly, SEBI found that DGS Capital failed to submit mandatory periodic reports, including net worth certification, corporate governance reports, and portfolio manager compliance reports, for FY23 and FY24. The firm was also in violation of the NISM certification requirement for its principal officer, with non-compliance spanning from September 7, 2023, to October 13, 2024.
SEBI emphasized that maintaining the minimum required net worth is a continuous obligation and that failure to do so poses risks to investor funds. As of December 2024, Scient Capital had 86 clients with assets under management (AUM) of ₹66.8 crore, while DGS Capital’s AUM surged from ₹99.12 crore in January 2023 to ₹201.03 crore in December 2024.
The regulator has directed both firms to meet the minimum net worth requirement within 15 days. Until compliance is achieved, they are prohibited from onboarding new clients and accepting additional funds or securities from existing clients.
