The Securities and Exchange Board of India (SEBI) issued a circular on October 22, 2024, detailing new regulations regarding associations between persons regulated by the Board, including stock exchanges, clearing companies and depositories. As per the amended regulations, such entities and their agents are prohibited from associating with persons who provide investment advice or make performance representations 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 persons performing unauthorized advisory functions within three months of the issuance of the circular. The circular aims to safeguard the interests of investors and ensure compliance with the rules on 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

HAS,
All registered intermediaries
All recognized scholarships
All recognized clearing companies
All registered depositories
BSE Limited (Administrative and supervisory body for investment advisors and
Research Analysts (IAASB/RAASB)

Sir/Madam,

Under: Association of persons regulated by the Commission and their agents with certain persons

1. Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024, Securities Contracts (Regulations) (Exchanges and Clearing Corporations) (Fourth Amendment), 2024 and Securities and Exchange Board of India (Depositories and Participants) ( Second Amendment), 2024 was notified by SEBI on August 26, 2024.

2. These regulations provide in particular that persons regulated by the Council (including recognized stock exchanges, clearing companies and depositories) and agents of such persons must not have any direct or indirect association with any other person who:

(i) provides advice or recommendations, directly or indirectly, regarding or relating to one or more securities, unless the person is registered with or otherwise authorized by the Council to provide such advice or recommendations; Or

(ii) makes a claim regarding returns or performance, expressly or impliedly, with respect to or relating to one or more securities, unless the person has been authorized by the Board to make such a claim.

The aforementioned provisions are not applicable to an association via a “specific digital platform”.

The person regulated by the Council (including recognized stock exchanges, clearing companies and depositories) is required to ensure that any person associated with it or its agent does not engage in the activities referred to in clauses (i ) or (ii) above without authorization.

3. For the purposes of this Regulation, a “specified digital platform” means a digital platform as specified by the Council, which has a mechanism in place to take preventive and curative measures, to the satisfaction of the Council, in order to ensure that such a platform is not used to engage in any activity referred to in clause (i) or (ii) of paragraph 2 of this circular.

4. It has been clarified that the term “another person” does not include a person engaged in investor education, provided that such a person does not engage, directly or indirectly, in an activity referred to in clauses ( i) or (ii) of paragraph 2 of this circular.

5. Although the guidelines on preventive and curative measures for digital platforms for their recognition as a specified digital platform are specified separately, persons regulated by the Council (including recognized stock exchanges, clearing companies and depositaries) and their agents are hereby informed to terminate their existing contracts, if any, with persons carrying out the activities mentioned in clause (i) or (ii) of paragraph 2 of this circular, within three months from from the date of publication of this circular.

6. This circular is issued in exercise of the powers conferred under section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 16A of the Securities and Exchange Board Regulations of India (Intermediaries), 2008, Securities Regulation 44B. Contracts (Regulation) (Exchanges and Clearing Corporations) Rules, 2018 and Regulation 82B of the Securities and Exchange Board of India (Depositories and Participants) Rules, 2018, to protect the interests of investors in the securities market and promote development 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
Such. No. 022-26449633
(email protected)