Association of persons regulated by the Board and their agents with certain persons
Summary
SEBI has notified amendments to regulations prohibiting regulated entities and their agents from associating with unregistered persons providing investment advice or performance claims. An exception exists for associations made through a 'specified digital platform' that meets SEBI's preventive and curative action standards. Regulated entities are required to terminate existing non-compliant contracts within three months of the circular's issuance.
Text
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.
persons regulated by the Board... and agents of such persons shall not have any direct or indirect association with another person who provides advice or any recommendation... 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
persons regulated by the Board... and agents of such persons shall not have any direct or indirect association with another person who 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... 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
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
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
the persons regulated by the Board... 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
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
Source: SecMarx — Association of persons regulated by the Board and their agents with certain persons. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.