Securities and Exchange Board of India (SEBI) has taken strict regulatory action against Scient Capital Pvt and DGS Capital Management, two portfolio management services (PMS) firms, for failing to maintain the mandatory minimum net worth requirement of ₹5 crore. As a result, both firms have been barred from onboarding new clients and accepting additional funds or securities from existing clients until they meet the required financial threshold.
SEBI issued separate interim orders on Monday, February 17, after finding that both firms had been operating as registered portfolio managers without fulfilling the net worth requirement for over two years. Despite being given ample time to comply, neither Scient Capital nor DGS Capital made any progress.
Scient Capital, which managed assets worth ₹66.8 crore across 86 clients as of December 2024, had submitted misleading compliance reports for the fiscal years 2022-23 and 2023-24, falsely claiming to meet the portfolio management regulations. Additionally, its principal officer lacked the required National Institute of Securities Markets (NISM) certification since September 2023, violating SEBI’s qualification norms.
Similarly, DGS Capital, with assets under management (AUM) rising from ₹99.12 crore in January 2023 to ₹201.03 crore in December 2024, failed to submit key regulatory reports, including net worth certifications and compliance documents for both FY23 and FY24. It also violated the NISM certification requirement for its principal officer from September 7, 2023, to October 13, 2024.
SEBI emphasized that maintaining the minimum net worth is an ongoing obligation for portfolio managers, and failure to comply poses risks to investors’ funds. In light of these violations, SEBI has directed both firms to meet the net worth requirement within 15 days. If they fail to comply, they will continue to face restrictions on taking on new clients and accepting additional investments.
In its order, SEBI stated that Scient Capital had 124 clients with AUM of ₹92.44 crore at the start of the examination period, which dropped to ₹66.8 crore by December 2024. Despite this decline, the firm’s failure to comply with regulatory requirements and its submission of false reports triggered the regulatory action.
Both firms must now take immediate steps to meet the net worth requirements and adhere to SEBI regulations to avoid further penalties.
