Prime Securities is a stockbroking company in which ‘promoters’ have no shares! It is running a PMS where investors stand to lose money because SEBI’s mulish attempt to keep PMS performance hidden. How much worse can it get?
Prime Securities, a Mumbai-based brokerage, promoted by former Citibank investment banker N Jayakumar, and listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), does not have a single ‘promoter’ holding and is owned ‘public’ i.e. non-institutions hold a whopping 98% of the company. Prime Securities has been in the news recently in connection with market manipulation of shares of Gitanjali Gems. It continues to run its portfolio management services (PMS) whose performance remains hidden from the public, thanks to SEBI’s (Securities and Exchange Board of India) lax enforcement. According to our information, Prime’s portfolios were used for price rigging operations in Gitanjali and other shady small-cap stocks in connivance with the promoters. But while SEBI and the stock exchanges have banned promoters of Prime, Gitanjali Gems and 24 others from the market temporarily, Prime’s PMS remains outside regulatory scrutiny as yet.
PMS is one of the shadiest areas of the capital markets. Mis-selling is rife, performance is patchy and disclosure is non-existent. SEBI had issued a circular to all PMS companies to put up a disclosure document online so that clients can do their homework and make an informed decision BEFORE investing. The SEBI circular IMD/DF/16/2010, dated 2 November 2010, clearly says, “To ensure compliance with Regulation 14(2)(b)(iv) of SEBI (Portfolio Managers) Regulations, 1993, portfolio managers shall disclose the performance of portfolios grouped by investment category for the past three years as per the enclosed prescribed tabular format. Portfolio managers shall also ensure that the disclosure document is given to all clients along with the account opening form at least two days in advance of signing the agreement. In order to ensure that the clients have access to updated information about the portfolio manager, portfolio managers shall place the latest disclosure document on their website, wherever possible.”
However, Prime Securities has not put up its disclosure document on its website which is violation of Regulation 14(2)(b)(iv) of SEBI (Portfolio Managers) Regulations, 1993. This means prospective clients have little idea how it has fared. However, the disclosure document will be given only AFTER you become a client.
In other words, you will need to enroll as a client with a company that has no ‘promoters’, only then you will know whether you made the right decision or not.
Earlier, Prime Securities was hawking a PMS with an indicative return of 12%. We had written an exclusive story here.
This isn’t the first time we’ve written about PMS companies not giving data. We had covered it earlier here. SEBI is has been completely unconcerned about regulating and forcing minimum disclosure of PMS operations. In fact, after getting complaints of widespread losses and massive mis-selling, Moneylife has been consistently attempting to urge the regulator to oversee the PMS but our success has been slow and extremely hard-fought.
Will SEBI at least stir itself now to act in connection with the price rigging operations of Gitanjali Gems and take a peek at what Prime’s PMS has been up to?
A preliminary report on the investigations is likely to be submitted soon by SFIO, but the final report may take little longer, corporate affairs minister Sachin Pilot said
The Serious Fraud Investigation Office (SFIO) is likely to submit its probe report on alleged fraudulent money collection schemes being run by 54 entities, including Kolkata-based Saradha group, in the next 2-3 months.
A preliminary report on the investigations is likely to be submitted soon by SFIO, but the final report may take little longer, corporate affairs minister Sachin Pilot said.
In late April, the government had ordered an SFIO probe into these companies in the wake of alleged swindling of investors money worth thousands of crores by Saradha group.
The investigations are being conducted by a special task force set up by SFIO.
“They (SFIO) will soon be giving me a preliminary report on the investigations so far. They have done enough work, but sometimes they are not getting details. So, it is taking little longer,” Pilot said.
“I think in the next two to three months, we will have the final report,” he said.
The investigations were initiated amid raging public protest over the Saradha case, which came to be known as “chit fund scam” in West Bengal and other Eastern and North-Eastern states, despite the businesses run by those entities not actually being registered chit funds.
Besides Saradha group entities, the SFIO is investigating companies from many other groups such as Rose Valley, Icore E-Services and Sunshine India Land Developers. As per the ministry’s directive to the SFIO, 14 Saradha group entities including Saradha Realty India, Saradha Agro Development, Saradha Exports, Saradha Construction Company and Saradha Garden Resorts and Hotels are under investigation.
Besides, nine entities from the Sunshine India Land Developers group, 11 from the Icore E-Services group and 19 from Rose Valley group would be investigated by SFIO.
While announcing the probe, the corporate affairs ministry had said the decision was taken in view of the larger public interest involved in such cases, “and concerns regarding misuse/laundering by such companies of the ill-gotten wealth and the possibility that the promoters of these companies may strip these companies”.
Capital markets regulator Securities and Exchange Board of India (SEBI) has already ordered strict actions against some entities of Saradha and Rose Valley groups, among others, for running unauthorised collective investment schemes.
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