SEBI introduces Chapter on ‘Restriction in Dealing with Unregulated/Other Entities’ in Regulations for Securities Contracts, Depositories and Participants, and Intermediaries

On 26-08-2024, the Securities and Exchange Board of India (‘SEBI’) notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024, the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2024, and the SEBI (Intermediaries) (Amendment) Regulations, 2024 to amend the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, the SEBI (Depositories and Participants) Regulations, 2018, and the SEBI (Intermediaries) Regulations, 2008. They came into force on 29-08-2024.

Key Points:

1. Through the Amendment Regulations, 2024, SEBI has inserted a Chapter dealing with ‘Restriction in dealing with unregulated/other entities’ in all three aforementioned Regulations.

2. Chapter VIA, inserted through the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Fourth Amendment) Regulations, 2024 lays down restrictions on recognized stock exchanges and clearing corporations or their agents from having any direct or indirect association with another person who provides advice or recommendation related to securities, or makes claims of returns or performance of securities unless the person is either registered or permitted by the Board. Explanations 1, 2, and 3 are also mentioned which provide the meaning of ‘association’, ‘specified digital platform’, and ‘another person’ respectively.

3. Chapter VIIA, inserted through the SEBI (Depositories and Participants) (Second Amendment) Regulations, 2024 lays down restrictions on depositories and their agents from having any direct or indirect association with another person who provides advice or recommendation related to securities, or makes claims of returns or performance of securities unless the person is either registered or permitted by the Board. Explanations 1, 2, and 3 are also mentioned which provide the meaning of ‘association’, ‘specified digital platform’, and ‘another person’ respectively.

4. Chapter IIIA, inserted through the SEBI (Intermediaries) (Amendment) Regulations, 2024 lays down restrictions on persons regulated by the Board and their agents from having any direct or indirect association with another person who provides advice or recommendation related to securities, or makes claims of returns or performance of securities unless the person is either registered or permitted by the Board. Explanations 1, 2, and 3 are also mentioned which provide the meaning of ‘association’, ‘specified digital platform’, and ‘another person’ respectively.