SEBI directs regulated entities to scrap ties with unregistered advisors

Mumbai: Entities regulated by the Securities and Exchange Board of India (Sebi) and their agents have been instructed to sever ties with individuals offering investment advice or recommendations without being registered with the regulator, as well as with those making performance or returns claims without regulatory approval.

IBNS • 22 Oct 2024, 02:25 pm

In a circular issued by Sebi on Friday, October 22, all regulated entities and their agents were directed to terminate existing contracts with such individuals within three months.

Sebi's Board approved these restrictions on June 27, leading to amendments in the regulator's rules, which were notified on August 26, 2024.

Under the amended regulations, entities regulated by Sebi—such as recognized stock exchanges, clearing corporations, and depositories—and their agents are prohibited from directly or indirectly associating with individuals who:

(i) provide advice or recommendations related to securities without being registered with or permitted by Sebi, or

(ii) make claims about returns or performance related to securities without authorization from the regulator.

Sebi reiterated in the latest circular, "the persons regulated by the Board (including recognised stock exchanges, clearing corporations and depositories), 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."

Regulated entities must ensure that neither they nor their agents engage in activities outlined in clauses (i) or (ii) without the necessary regulatory approval.