Not obligatory for platforms to be registered with SEBI; board clarifies on specified digital platforms

Market regulator Securities and Exchange Board of India (SEBI) has clarified that digital platforms used by regulated entities to associate with third parties are not required to be registered with SEBI. SEBI clarified, “It's not obligatory for any digital platform to be registered as Specified Digital Platform (SDP) and there is no regulation of these digital platforms by SEBI”. Digital platforms include Meta, Google, and others.
 
SEBI clarification further added that curative actions currently being carried out by some digital platforms are in accordance with law. Preventive steps are 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.
 
Seeing huge jumps in complaints against unregulated entities, SEBI tweaked the regulation in August this year, which mandated SEBI-registered entities not to associate directly or indirectly with unregistered entities, who provide any advice or recommendation about securities, unless the person is registered with SEBI. Similarly regulated entities are prohibited to associate with any person who 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.
 
SEBI said 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 regulations. Hence, in case of any violation of Regulation 16A of Intermediaries Regulations, Regulation 44B of SECC Regulations, and Regulation 82B of DP Regulations, it shall be a valid defense for the regulated entity that it has associated with a digital platform which is an SDP.
 
The clarification noted is that it is not expected that a regulated entity shall 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.
 
SEBI issued the clarification after, various queries from the media and also concerns raised by some big digital media companies and industry associations.