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Informist, Friday, Dec. 6, 2024

MUMBAI – The Securities and Exchange Board of India has sought comments on a draft circular to provide clarity on provisions related to association of regulated entities, market infrastructure institutions, and their agents with unregistered people who give advice related to securities or make a claim of returns directly or indirectly.

Transactions involving money, money's worth, referral of a client, or interaction of information technology systems with persons involved in prohibited activities will be considered as association under the regulations, SEBI said in the consultation paper. Violation of these regulations will result in a penalty, suspension of registration, and debarment.

Opening of a dematerialised account or trading account by regulated entities in their personal capacity or association with a person engaged in investor education by the regulated entities are not restricted. Regulated entities and their agents are allowed to associate with another person for promotional activities provided that the person is not giving advice related to securities or making any claim of returns, the regulator said.

The regulations pertaining to the association of regulated entities with persons carrying out prohibited activities came into effect on Aug. 29. In a circular dated Oct. 22, SEBI had asked regulated entities and their agents to terminate their existing contracts, if any, with persons engaged in prohibited activities, directly or indirectly, by Jan. 21.

SEBI defines regulated entities as a person registered with it under Section 12 of the SEBI Act, 1992, asset management company of a mutual fund, investment manager of an alternative investment fund or infrastructure investment trust, and manager of a real estate investment trust. The entities regulated by SEBI should also ensure that no person associated with it or its agent are engaged in the prohibited activities.  End

Reported by Arya S. Biju

Edited by Ashish Shirke

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