Markets regulator -- the Securities and Exchange Board of
India (SEBI) has clarified that Sebi-registered intermediaries are not allowed
to make or receive payments or share client information with anyone engaged in
providing unauthorised advice or making unapproved return claims. The move is
aimed at protecting investors and regulating the securities market by ensuring
compliance with these new rules. Sebi in a detailed frequently asked questions
(FAQs) said ‘Sharing client information is of similar nature as of 'referral of
a client'. Hence, making any payment or receiving payment or sharing any client
information from or with any person shall amount to 'association' under these
regulations, and is not permitted’.
It said the term ‘association’ includes any money
transaction, referring a client, sharing information between systems or any
similar type of relationship. However, the regulator said that persons
regulated by Sebi and their agents can associate with others for branding,
marketing, or promotional activities, as long as the other person is not
involved in the prohibited activities, including providing unauthorised advice
or making unapproved return claims.
On August 29, the regulator published updates to the Securities and Exchange Board of India (Intermediaries) Regulations, 2024, and related rules. According to the updates, the persons regulated by Sebi like stock exchanges, clearing corporations, and depositories, as well as their agents, must not have any direct or indirect links with individuals or entities that provide advice or recommendations on securities without the approval of the regulator and make claims of guaranteed returns or performance related to securities unless approved by it.
Source: Ace Equity
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