The Securities and Exchange Board of India (SEBI) has introduced the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024, effective from August 26, 2024. This amendment introduces a new Chapter VIA into the existing regulations, imposing restrictions on stock exchanges and clearing corporations regarding their associations with unregulated entities. Specifically, these entities are prohibited from associating, directly or indirectly, with persons who provide securities-related advice or make claims about securities’ performance without SEBI’s authorization. The regulation also defines “association” broadly to include transactions, referrals, IT interactions, and similar activities. Exceptions are made for associations through specified digital platforms with preventive measures. SEBI retains the authority to take action against violations of these provisions. This amendment builds upon previous changes to the 2018 regulations, continuing SEBI’s efforts to enhance market integrity and investor protection by ensuring that all market participants operate within a regulated framework.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 26th August, 2024
SECURITIES CONTRACTS (REGULATION) (STOCK EXCHANGES AND CLEARING CORPORATIONS) (FOURTH AMENDMENT) REGULATIONS, 2024
No. SEBI/LAD-NRO/GN/2024/202.- In exercise of the powers conferred by sections 4, 8A and 31 of the Securities Contracts (Regulation) Act, 1956, read with sections 11 and 30 of the Securities and Exchange Board of India Act, 1992, the Board hereby makes the following regulations to further amend the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, namely, ±
1. These regulations may be called the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, after Chapter VI and before Chapter VII, the following Chapter shall be inserted, namely,±
“CHAPTER VIA
RESTRICTION IN DEALING WITH UNREGULATED ENTITIES
Restriction in having association with certain persons
44B. (1) No recognized stock exchange or recognized clearing corporation or their agent, shall 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:
Provided that the provisions of this sub-regulation shall not apply in respect of an association through a specified digital platform.
(2) The recognized stock exchange or recognized clearing corporation shall ensure that any person associated with them or their agent does not engage in the activities mentioned in clauses (i) or (ii) of sub-regulation (1) without the necessary permission.
Explanation 1. – For the purposes of this regulation, the expression “association” shall mean-
(a) a transaction involving money or money’s worth;
(b) referral of a client;
(c) interaction of information technology systems;
(d) any other association of a similar nature or character.
Explanation 2. – For the purposes of this regulation, the expression “specified digital platform” shall mean a 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 clause (i) or (ii) of sub-regulation (1).
Explanation 3. – For the removal of doubts, it is clarified that the term “another person” in this regulation 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 clause (i) or (ii) of sub-regulation (1) without the necessary permission.
44C. The Board may, in case of violation of any of the provisions of regulation 44B, take such action as it may deem fit including action as provided under regulation 49.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./443/2024-25]
Footnote:
1. The Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 were published in the Gazette of India on 3rd October 2018 vide No. SEBI/LAD-NRO/GN/201 8/41.
2. The Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 were subsequently amended on-
(a) 4th June, 2019, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/201 9/21.
(b) 17th April, 2020, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020vide No. SEBI/LAD-NRO/GN/2020/1 0.
(c) 8th October, 2020, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/32.
(d) 23rd March, 2021, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/202 1/12.
(e) 13th August, 2021, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Second Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/44.
(f) 12th August 2022, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/93.
(g) 1 5th November, 2022, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Second Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/104.
(h) 28th February, 2023, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/124.
(i) 24th July, 2023, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Second Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/1 39.
(j) 22nd August, 2023, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Third Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/148.
(k) 26th April, 2024, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2024 vide No. SEBI/LAD-NRO/GN/2024/1 71.
(l) 10th May, 2024, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Second Amendment) Regulations, 2024 vide No. SEBI/LAD-NRO/GN/2024/174.
(m) 29th July, 2024, by the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Third Amendment) Regulations, 2024 vide No. SEBI/LAD-NRO/GN/2024/196.
