SEBI Orders PMS Firm DGS Capital Management to Stop Onboarding New Clients Over Net Worth Issue

SEBI has halted new client onboarding by PMS firm DGS Capital Management for failing to meet the ₹5 crore net worth requirement. The firm, with ₹201 crore AUM, must comply within 15 days to avoid further action.

Impact on Investors as SEBI Bars DGS Capital Management

Market regulator Securities and Exchange Board of India (SEBI) on Monday barred DGS Capital Management Pvt Ltd from onboarding new clients and from accepting additional funds or securities from its existing clients after the Portfolio Management Service (PMS) company failed to maintain the minimum net worth requirement of ₹5 crore.

The regulator has also given the company 15 days to comply with the regulatory requirements regarding the maintenance of the minimum net worth.

If DGS Capital fails to do so, SEBI may take action, including proceedings for the cancellation or suspension of its registration. As of December 2024, DGS Capital Management manages assets worth ₹201 crore from 19 clients.

SEBI’s Examination Reveals Non-Compliance

According to the 11-page order, DGS Capital failed to file its net worth certificate, certified by a qualified chartered accountant, for the financial years 2022-23 and 2023-24.

The filings from the Ministry of Corporate Affairs (MCA) revealed that DGS Capital’s net worth as of March 31, 2023, and March 31, 2024, was only ₹1.64 crore and ₹1.6 crore, respectively.

The decision came after SEBI conducted an examination of the company’s operations between January 1, 2023, and December 31, 2024. The Portfolio Managers Regulations, 2020, which came into effect on January 16, 2020, allowed PMS companies granted certification before the regulation’s commencement to comply with the net worth requirement within 36 months.

DGS Capital was registered as a portfolio manager by SEBI on October 5, 2015, meaning the company was required to raise its net worth to ₹5 crore by January 15, 2023.

Conclusion

The action taken by SEBI against DGS Capital Management highlights the importance of regulatory compliance in the PMS industry.

By failing to meet the required net worth threshold, DGS Capital now faces potential consequences that could affect its operations. For investors, the move underscores the need for vigilance regarding the financial health and regulatory adherence of the firms managing their assets.

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