SEBI cautions investors against fake portfolio managers promising fixed returns

The Securities and Exchange Board of India (SEBI) on October 3 warned investors against falling prey to fake portfolio managers who are promising fixed or assured returns.

The market regulator said it has found that some entities are luring the public with a promise of high returns, through pamphlets and social media
platforms. "Some of the entities have names similar to that of SEBI registered intermediaries, misleading the public, as though the fund raising is genuine and done by entities registered with SEBI," a press release noted.

In such fraudulent schemes, the entities have been mobilising money in "relatively smaller amounts and promising assured returns", it said, adding that a bulk of such schemes are run akin to a Ponzi scheme without any real investment made in the securities market.

"SEBI, therefore, cautions investors not to fall prey to such unauthorised money collection. While investing in securities market, investors are advised to deal only with SEBI registered intermediaries," the release stated.

Further, SEBI-registered intermediaries including portfolio managers cannot offer products with assured or fixed return on investment, it added.

Also Read | Social media scam artists prey on India’s amateur investors

As per SEBI (Portfolio Managers) Regulations, 2020, a portfolio manager shall be a body corporate, registered with SEBI and shall have a contract/agreement with a client to undertake management or administration of a portfolio of securities or funds of the
client.

According to the norms, a portfolio manager cannot accept funds or securities worth less than Rs 50 lakh from the client and cannot promise any guaranteed or assured return, either directly or indirectly.

"Public is advised to do proper due diligence before trusting their money in such unauthorized schemes," SEBI stressed.