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“Sharing client information is of similar nature as of ‘referral of a client’. Hence, making any payment or receiving payment or sharing any client information from or with any person shall amount to “association” under these regulations, and is not permitted,” Sebi said in a detailed frequently asked questions (FAQs).
The term “association,” it said, includes any money transaction, referring a client, sharing information between systems or any similar type of relationship.
However, the regulator said that persons regulated by Sebi and their agents can associate with others for branding, marketing, or promotional activities, as long as the other person is not involved in the prohibited activities, including providing unauthorised advice or making unapproved return claims.
On August 29, the regulator published updates to the Securities and Exchange Board of India (Intermediaries) Regulations, 2024, and related rules.
According to the updates, the persons regulated by Sebi like stock exchanges, clearing corporations, and depositories, as well as their agents, must not have any direct or indirect links with individuals or entities that provide advice or recommendations on securities without the approval of the regulator and make claims of guaranteed returns or performance related to securities unless approved by it.
To help regulated entities and their agents understand these provisions better, Sebi on Wednesday provided clarification in the form of frequently asked questions.
The move is aimed at protecting investors and regulating the securities market by ensuring compliance with these new rules.
