Sebi asks all regulated entities to terminate contracts with unregistered advisors within three months

Regulated entities have to ensure that any person associated with it or its agent does not engage in the activities mentioned in clauses (i) or (ii) without the necessary permission.

Entities regulated by Sebi and the entities' agents have been asked to end all associations with persons who give investment advice/recommendation without being registered with the regulator and with persons who makes claims of returns/performance without permission from the regulator to do so.

A circular issued by the Securities and Exchange Board of India (Sebi)  on October 22, Friday, has asked all regulated entities and their agents to terminate their existing contracts with such persons within three months.

The regulator's Board had given the go ahead for the restricting such associations on June 27. Following that, amendments were made to Sebi regulations these were notified on August 26, 2024.

These amended regulations now say that persons regulated by the Board (including recognised stock exchanges, clearing corporations and depositories), and agents of such persons shall not have any direct or indirect association with another person who-

(i) provides advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendation;

or

(ii) makes any claim, of returns or performance expressly or impliedly, in respect of or related to a security or securities, unless the person has been permitted by the Board to make such a claim.

In the latest circular, Sebi has said, "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 have to ensure that any person associated with it or its agent does not engage in the activities mentioned in clauses (i) or (ii) without the necessary permission.