Deependra Moitra (name changed) had agreed to pay Assan Investment Services, a sub-broker in Mumbai’s Chembur, a cheque of Rs 4 lakh on Monday. He was promised mouth-watering monthly returns of 5-7 per cent under the portfolio management service (PMS) scheme.
Fortunately for him, Moitra decided to cross-check with Securities and Exchange Board of India (Sebi) if the sub-broker was really a registered entity with the market regulator. It was not.
This may be one instance of truth will out. Anyway, the market regulator believes there is more than what meets the eye.
Assan Investment Services, a sub-broker of Jhaveri Securities, is running its PMS without Sebi registration. “The problem is that they claim they are a registered body for PMS, while they are not," said a Sebi official requesting anonymity.
The copy of Assan Investment Services' PMS application form, which is available with Hindustan Times, says, “Assan Investment Services a company incorporated …. Is duly authorised by the Securities and Exchange Board of India to provide portfolio management services and the client has agreed to avail the same …”
Sebi has not received complaints about any other fake PMS managers so far. Even in this case, the enquirer did not dare to file a complaint for fear of threats. “We have decided to take up the matter on our own,” the official said. “But since that is without a complaint, it will take some time.”
When contacted, Assan Investment Services director Sachin Eknath Magar said, “We are shutting down PMS operations.”
While Sebi-registered PMS managers need to be body corporates, having a minimum net worth of Rs 2 crore and collect a minimum amount of Rs 5 lakh from a single client to be managed, entities running such services without the regulator's recognition are doing so without meeting any of these parameters.
Further, before giving a PMS license, the market regulator vouches for previous experience of the applicant in related activities and managing funds. A registration fee of Rs 1 lakh and a processing fee of Rs 10 lakh are to be then paid for procuring a Sebi license for PMS activities.