SEBI-registered intermediaries are prohibited from making or receiving payments, or sharing client information with individuals or entities involved in providing unauthorised advice or making unapproved claims about returns, the regulator clarified on Wednesday, January 29, 2025.
SEBI explained in a detailed set of frequently asked questions (FAQs) that sharing client information is considered similar to “referring a client.” Therefore, any payment transactions, client referrals, or exchange of information with such individuals or entities would constitute an “association” under the regulations, which is not permitted.
The term “association” encompasses any monetary transactions, client referrals, sharing of information between systems, or any similar type of relationship.
However, SEBI noted that regulated persons and their agents are allowed to engage with others for branding, marketing, or promotional purposes, as long as the other party is not involved in prohibited activities, such as providing unauthorized advice or making unapproved return claims.
On August 29, SEBI updated the Securities and Exchange Board of India (Intermediaries) Regulations, 2024, along with related rules. These updates stipulate that SEBI-regulated entities like stock exchanges, clearing corporations, depositories, and their agents must not have any direct or indirect associations with individuals or entities that provide securities advice or recommendations without SEBI approval, or make claims about guaranteed returns or performance unless approved by the regulator.
To assist regulated entities and their agents in understanding these provisions, SEBI issued clarifications through the FAQs. This move aims to protect investors and ensure compliance with the new rules, further regulating the securities market.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Jan 30, 2025, 11:03 AM IST
Sachin Gupta
Sachin Gupta is a Content Writer with 6+ years of experience in the stock market, including global markets like the US, Canada, and Australia. At Angel One, Sachin specialises in creating financial content that simplifies complex market trends. Sachin holds a Master's in Commerce, specialising in Economics.
Know MoreWe're Live on WhatsApp! Join our channel for market insights & updates