Every digital platform through which registered/regulated entities (REs) associate with third parties need not seek to be notified as a Specified Digital Platform (SDP), according to a press statement issued by the market regulator on Wednesday. Also, there is no regulatory framework for the governing of these SDPs.
SDPs are platforms through which REs can associate with third parties with easier compliance norms.
In August, the Securities and Exchange Board of India (SEBI) had amended regulations to govern the association of REs with other persons. The regulator has asked the REs to ensure that they do not associate directly or indirectly with people who give investment advice without a requisite registration or with people who share performance metrics without permission from SEBI to do so.
However, the compliance burden of these restrictions would not apply to REs who associate with the third parties through the SDP.
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In the press release issued on December 4, the market regulator said that the provision of associating with a third party through an SDP was given to REs only to assure the REs that they will not be held accountable if there is any violation of the concerned provisions.
If the REs choose to associate with the third-parties through another platform, then the REs would need to ensure that the restrictions are complied with.
The press release said that various queries had been about the obligation of any platform that wants to get recognised as an SDP.
The regulator clarified, "It is not obligatory for any digital platform to be notified as SDP and there is no regulation of these digital platforms by SEBI. Curative actions currently being carried out by some digital platforms are in accordance with law. Preventive steps contemplated for any digital platform to get notified as SDP is not mandatory and it is for the platform to opt or not opt for getting notified as SDP."
It added, "The purpose of this provision in the aforesaid regulations is to give confidence to regulated entities that if the regulated entity is associated with an SDP, it is automatically assured of not being held as violating the provisions of Regulation 16A of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 (‘Intermediaries Regulations’), Regulation 44B of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (‘SECC Regulations’) and Regulation 82B of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 (‘DP Regulations’)."
The press statement said that, in case of any violation of Regulation 16A of Intermediaries Regulations, Regulation 44B of SECC Regulations and Regulation 82B of DP Regulations, it will be a valid defence for an RE that it has associated with a digital platform which is an SDP.
The regulator clarified that it is not expected that an RE should associate only with/through an SDP. It can also associate with/through a digital platform which is not an SDP. However, in that case it has the responsibility to ensure that the provisions of Regulation 16A of Intermediaries Regulations, Regulation 44B of SECC Regulations and Regulation 82B of DP Regulations are complied with.
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