SEBI Bars Portfolio Managers Scient Capital and DGS Capital Management from On-boarding New Clients
Moneylife Digital Team 18 February 2025
Market regulator Securities and Exchange Board of India (SEBI) has prohibited two portfolio management companies, Scient Capital Pvt Ltd and DGS Capital Management Pvt Ltd, from on-boarding new clients or accepting additional funds or securities from existing ones for not maintaining required minimum net worth.  
 
In two separate orders, Amarjeet Singh, whole-time member (WTM) of SEBI, says Scient Capital and DGS Capital Management have been operating as registered portfolio managers without meeting the required minimum net worth of Rs5 crore, as mandated by the Portfolio Managers Regulations. The deadline for compliance was 15 January 2023, yet more than two years later, neither firm has made any progress in meeting this regulatory requirement. Mr Singh emphasised that this continued failure highlights an unacceptable situation.  
 
During its investigation, SEBI found that Scient Capital submitted misleading and incorrect compliance reports for FY22-23 and FY23-24, falsely suggesting that its net worth met regulatory standards. This deceptive reporting undermines the transparency and accountability expected from portfolio managers.  
 
SEBI's investigation also uncovered several other serious violations. Scient Capital's principal officer, Ramesh Rachuri, failed to obtain the mandatory National Institute of Securities Market (NISM) certification from September 2023 onwards, violating SEBI's regulatory norms. 
 
Meanwhile, DGS Capital Management failed to submit essential reports, including net worth certification, corporate governance reports and compliance reports for FY22-23 and FY23-24. Additionally, its principal officer, Ashish Sharma, was non-compliant with the NISM certification requirement from September 2023 to October 2024.  
 
SEBI stressed that maintaining the minimum required net worth is a continuous obligation. Failure to do so not only violates regulatory norms but also poses risks to investor funds. SEBI's actions highlight the importance of strict adherence to compliance standards to maintain transparency, accountability and trust within the investment ecosystem.  
 
During the examination period, Scient Capital had 124 clients with Rs92.44 crore in assets under management (AUM), which decreased to Rs66.8 crore with 86 clients by December 2024. Its clients included corporates, non-corporates, and non-resident foreign clients. 
 
Meanwhile, DGS Capital's AUM doubled from Rs99.12 crore in January 2023 to Rs201.03 crore in December 2024. Given the potential risks to clients, SEBI found it necessary to take immediate preventive action by issuing interim directions against the two firms.  
 
SEBI has given both Scient Capital and DGS Capital Management a 15-day window to meet the minimum net worth requirement and resolve the regulatory violations. Until they comply, neither portfolio manager is allowed to on-board new clients or accept further investments from existing clients.
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