SEBI Clarification: Digital Platforms Not Required to Register as SDPs

The Securities and Exchange Board of India (SEBI) has clarified that digital platforms used by regulated entities (REs) to engage with third parties are not required to register as specified digital platforms (SDPs). SEBI also stated that there is currently no regulatory framework governing SDPs.

Role of SDPs and Exemptions for REs

SDPs are platforms that allow REs to associate with third parties under simplified compliance norms. SEBI introduced amendments in August, mandating REs to avoid working with unregistered individuals offering investment advice or making unauthorized performance claims. However, associations via SDPs are exempt from these compliance burdens, providing a simplified route for REs to engage with third parties.

Voluntary SDP Recognition

SEBI emphasised that it is not mandatory for any digital platform to be notified as an SDP. The recognition of platforms as SDPs is voluntary, depending on the platform’s choice, and SEBI does not regulate these platforms.

In a press statement issued on December 4, SEBI highlighted that the SDP framework aims to reassure REs.

“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 SEBI Intermediaries Regulations, Regulation 44B of SECC Regulations, and Regulation 82B of SEBI Depositories and Participants Regulations,” the statement said.

Compliance Requirements for Non-SDP Platforms

While REs are free to associate with third parties through non-SDP platforms, they must ensure adherence to SEBI’s regulations. However, associations via SDPs provide a valid defence against potential violations of SEBI’s rules.

This clarification addresses concerns regarding the need for platforms to seek SDP recognition and reaffirms SEBI’s intent to simplify compliance for REs without imposing additional regulatory burdens.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.