Securities and Exchange Board of India (SEBI) released a circular on October 22, 2024, detailing new regulations concerning associations among persons regulated by the Board, including stock exchanges, clearing corporations, and depositories. As per the amended regulations, these entities and their agents are prohibited from associating with individuals who provide investment advice or make performance claims related to securities unless they are registered with SEBI. The restrictions do not apply to associations through specified digital platforms that meet SEBI’s criteria for preventive and curative measures. Additionally, entities are required to terminate contracts with individuals engaged in unauthorized advisory roles within three months of the circular’s issuance. The circular aims to safeguard investor interests and ensure compliance within the securities market. It operates under the authority granted by the SEBI Act, 1992, and related regulations, and the guidelines for digital platforms will be specified separately.
Securities and Exchange Board of India
Circular No. SEBI/HO/MIRSD/ MIRSD-PoD-1/P/CIR/2024/143 Dated: October 22, 2024
To,
All registered Intermediaries
All recognized Stock Exchanges
All recognized Clearing Corporations
All registered Depositories
BSE Limited (Administration and supervisory body for Investment Advisers and
Research Analysts- IAASB/RAASB)
Sir / Madam,
Sub: Association of persons regulated by the Board and their agents with certain persons
1. Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024, Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024 and Securities and Exchange Board of India (Depositories and Participants) (Second Amendment) Regulations, 2024 have been notified by SEBI on August 26, 2024.
2. These regulations inter alia provide that persons regulated by the Board (including recognised stock exchanges, clearing corporations and depositories), and agents of such persons shall not have any direct or indirect association with another person who-
(i) provides advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendation; or
(ii) makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless the person has been permitted by the Board to make such a claim.
The aforesaid provisions are not applicable in respect of an association through a “specified digital platform”.
The person regulated by the Board (including recognised stock exchanges, clearing corporations and depositories) is required to ensure that any person associated with it or its agent does not engage in the activities mentioned in clauses (i) or (ii) above without the necessary permission.
3. In terms of these regulations, a “specified digital platform” shall mean digital platform as specified by the Board, which has a mechanism in place to take preventive as well as curative action, to the satisfaction of the Board, to ensure that such a platform is not used for indulging in any activity as referred to in clauses (i) or (ii) of paragraph 2 of this circular.
4. It has been clarified that the term “another person” shall not include a person who is engaged in investor education, provided that such a person does not, directly or indirectly, indulge in any activity as referred to in clauses (i) or (ii) of paragraph 2 of this circular.
5. While the guidelines on the preventive and curative measures for the digital platforms for their recognition as specified digital platform are being specified separately, the persons regulated by the Board (including recognised stock exchanges, clearing corporations and depositories), and their agents are advised to terminate their existing contracts, if any, with persons engaged in the activities mentioned in clauses (i) or (ii) of paragraph 2 of this circular, within three months from the date of issuance of this circular.
6. This circular is issued in exercise of powers conferred under section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 16A of Securities and Exchange Board of India (Intermediaries) Regulations, 2008, Regulations 44B of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and Regulation 82B of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018, to protect the interests of investors in securities market and to promote the development of, and to regulate the securities market.
7. This circular is available on the SEBI website at www.sebi.gov.in under the category “Legal Circulars”.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No. 022-26449633
[email protected]
