The Securities and Exchange Board of India (SEBI) has introduced amendments to the SEBI (Intermediaries) Regulations, 2008, through a notification issued on August 26, 2024 by notifying Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024. The amendments, which took effect upon their publication in the Official Gazette, primarily introduce a new Chapter IIIA that imposes restrictions on associations between regulated entities and unregistered persons providing securities advice or making claims about returns. Specifically, entities regulated by SEBI, including mutual funds and alternative investment funds, are prohibited from engaging in transactions, referrals, or any form of association with individuals or entities that provide securities-related advice or claims without SEBI’s authorization. The amendment also clarifies that associations through specified digital platforms are exempt from these restrictions, provided these platforms have robust mechanisms to prevent unauthorized activities. The regulation includes detailed definitions of what constitutes “association” and outlines potential SEBI actions for non-compliance, emphasizing the importance of adhering to these guidelines to maintain market integrity.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 26th August, 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) (AMENDMENT) REGULATIONS, 2024
No. SEBI/LAD-NRO/GN/2024/201 .─In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Intermediaries) Regulations, 2008,namely: –
1 These regulations may be called the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, after Chapter III and before Chapter IV, the following Chapter shall be inserted, namely, –
“CHAPTER IIIA
RESTRICTION IN DEALING WITH OTHER ENTITIES
Restriction in having association with certain persons
16A. (1) No person regulated by the Board or the agent of such a person 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 person regulated by the Board shall ensure that any person associated with it or its 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 “person regulated by the Board” shall mean –
(a) a person registered with the Board under section 12 of the Act;
(b) an asset management company of a mutual fund registered with the Board;
(c) investment manager of an alternative investment fund or infrastructure investment trust registered with the Board;
(d) manager of a real estate investment trust registered with the Board.
Explanation 2. – 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 3. – 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 4. – 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.
16B. The Board may, in case of violation of any of the provisions of Regulation 16A, take such action as it may deem fit including action under Chapter V of these regulations.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./442/2024-25]
Footnote:
1. The Securities and Exchange Board of India (Intermediaries) Regulations, 2008 was published in the Gazette of India, Part III Section 4 on May 26, 2008 vide notification No. LAD-NRO/GN/2008/11/126538.
2. The Securities and Exchange Board of India (Intermediaries) Regulations, 2008 was subsequently amended on: –
a) August 11, 2008 by the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2008, vide notification No. LAD-NRO/GN/2008/20/134766.
b) July 14, 2009 by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2009, vide notification no. LAD-NRO/GN/2009-10/12/169546.
c) January 7, 2014 by the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, vide notification no. LAD-NRO/GN/2013-14/36/12.
d) May 25, 2016 by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2016, vide notification no. SEBI/LAD-NRO/GN/2016-17/006.
e) November 21, 2017, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2017, vide notification no. SEBI/LAD-NRO/GN/2017-18/021.
f) April 17, 2020, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020, vide notification no. SEBI/LAD-NRO/GN/2020/10.
g) January 21, 2021, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/07.
h) May 5, 2021, by the Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2021,vide notification no. SEBI/LAD-NRO/GN/2021/20.
i) August 3, 2021, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/30.
j) November 17, 2021,by the Securities and Exchange Board of India (Intermediaries) (Third Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/59.
k) August 1, 2022, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2022, vide notification no. SEBI/LAD-NRO/GN/2022/91.
