The market regulator has identified digital platforms through which registered financial market entities can associate with unregistered investment advisors and these will be notified soon, Sebi Chairperson Madhabi Puri Buch said in an interaction with the media recently.
On June 27, the Securities and Exchange Board of India (Sebi) passed a long-awaited directive on association of registered entities with unregistered advisors.
Also read: Sebi restricts association of registered entities with unregistered entities such as finfluencers
While it has restricted the association of registered entities with unregistered ones, the regulator has made two exceptions. One, that the association with an unregistered entity will be permitted if it is exclusively for iinvestor education, and two, if the association is through a digital platform, that is to be notified by Sebi later.
What is this platform?
The Sebi's press release said that it will be specified platform that has a a "mechanism in place to take preventive as well as curative action, to the satisfaction of the Board, to ensure that such a platform is not used by any person for providing advice/ recommendation /claim of return or performance, unless permitted by the Board to provide such advice/ recommendation/claim."
Has the regulator named the platform?
Not yet, but the Chairperson has said it will be notified soon, adding that they are considering a few platforms at this point.
What will qualify a platform for this role?
According to Chairperson Buch, the platform will be picked based on the ability to fulfil the role and their commitment to it.
Buch said, "I am a banker and we used to say that NPAs (non-performing assets) happen because the person either does not have the ability to pay or the willingness to pay. So, (in a similar vein) a platform may have the capability but not the desire to do the preventive and curative (functions)."
Based the platform clearing both these parameters, it will be notified.
The platform once notified can also be denotified, reminded Buch. That is, The regulator isn't conferring it with a permanent status.
Who will fund these platforms?
The platforms themselves through a business model. It will not be funded through any regulatory mechanism.
What do unregistered entities including finfluencers think about this platform?
Right now there is no clarity on what this platform will look like, and they are eagerly waiting to see if the platform will include social media platforms such as X, YouTube or whether it will be a separate privately-run one, under the aegis of a Sebi-registered entity such as a stock broker.
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