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Sebi News: Capital markets regulator Sebi on Monday barred Cyient Capital and DGS Capital Management from adding new clients and accepting additional funds or securities from existing clients after they failed to maintain a minimum net worth. In two separate interim orders, the regulator said Cyient Capital and DGS Capital Management acted as registered portfolio managers without fulfilling the minimum net worth of Rs 5 crore mandated under the portfolio managers' regulations.

"...despite lapse of more than two years since the end of the timeline for meeting the regulatory requirement of net worth (i.e, January 15, 2023), the entities (Scient Capital and DGS Capital Management) has shown no progress towards compliance," Sebi said.

The regulator found that Cyient Capital had submitted false and misleading compliance reports to Sebi for FY23 and FY24 as per the portfolio managers' regulations as its net worth did not meet the regulatory threshold for both years.

Additionally, the order stated that a key officer of Cyient Capital had not obtained the required National Institute of Securities Markets (NISM) certification from September 2023 till date.

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As per SEBI regulations, a portfolio manager should have a professional qualification in Finance, Law, and Accountancy from a recognized university or institution or a professional qualification by completing a Post Graduate Programme in Securities Markets (Portfolio Management) from NISM.

Similarly, Sebi found that DGS Capital was negligent in filing mandatory periodic reports (Net Worth Certification, Corporate Governance Report and Portfolio Managers Regulation Compliance Report) with the regulator for FY23 and FY24.

Furthermore, DGS Capital also violated the statutory requirement regarding NISM certification of the Principal Officer, a violation that has been extended from September 7, 2023, to October 13, 2024, Sebi said.

The regulator said that the obligation to maintain the minimum required net worth is on an ongoing basis and both the firms failed to do so and put investors' funds at risk. While Cyient Capital had assets under management (AUM) of Rs. 66.8 crore as of December 2024 with 86 clients, DGS Capital's AUM doubled from Rs. 99.12 crore in January 2023 to Rs. 201.03 crore as of December 2024.

Sebi has directed Cyient Capital and DGS Capital Management to meet the minimum net worth norms within 15 days. They are also prohibited from onboarding new clients and accepting additional funds or securities from existing clients until they meet the applicable net worth.

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(With Inputs From PTI)