The Securities and Exchange Board of India (SEBI) on Monday cautioned the public against unauthorized raising of funds by entities claiming to provide portfolio management services (PMS).
It has been observed by SEBI that some entities are collecting money from the public for providing PMS. This is being done by luring the public with the assurance of high returns through pamphlets and some social media platforms.
The regulator observed that in such schemes, the entities are raising relatively small amounts of money and are assured of higher returns. It misleads the public by saying that the names of some entities are similar to SEBI registered intermediaries, as if the fundraising is genuine and done by entities registered with SEBI.
This was on July 22, when the regulator banned certain individuals in the securities market for three years for making false promises of unrealistic assured investment returns and “fraudulently extorting money” from investors in the name of membership fees.
“Therefore, SEBI cautions investors not to fall prey to such unauthorized collection of funds. While investing in the securities market, investors are advised to deal only with SEBI-registered intermediaries”, the regulator said in its circular.
More important, the regulator said SEBI-registered intermediaries, including portfolio managers (who manage portfolio management schemes), cannot offer products with assured or fixed return on investment. Many such unauthorized schemes are run in the securities market without any actual investment like Ponzi schemes.
In addition, a portfolio manager cannot accept funds or securities of lesser value than 50 lakhs from the customer and cannot promise any guaranteed or assured return, directly or indirectly.
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