Sebi Clarifies That Digital Platforms Are Not Obligated to Obtain SDP Status

The Securities and Exchange Board of India (Sebi) clarified that digital platforms used by registered entities to collaborate with third parties are not required to be recognised as Specified Digital Platforms (SDPs). Sebi also mentioned that there is no existing regulatory framework for SDPs. These platforms, approved by Sebi, have mechanisms to prevent unregulated activities like unauthorised advice or claims.

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In a recent statement, Sebi emphasised that becoming an SDP is optional for digital platforms. The clarification was issued following queries in news articles about the necessity for digital platforms to gain recognition as SDPs. Sebi reiterated that there is no obligation for any digital platform to be notified as an SDP, nor are these platforms regulated by Sebi.

Regulatory Framework and Responsibilities

Sebi highlighted that preventive measures for digital platforms to become SDPs are not mandatory. It is up to the platform to decide whether or not to opt for SDP notification. Curative actions currently undertaken by some digital platforms comply with existing laws. This voluntary nature allows platforms flexibility in choosing their operational approach.

In August, Sebi amended rules affecting entities it regulates, such as stock exchanges, clearing corporations, and depositories. These entities and their agents cannot associate with individuals or entities offering securities advice without Sebi's registration or making performance claims without its approval. However, these restrictions do not apply if the association is through an SDP.

Implications for Regulated Entities

Sebi's statement on Wednesday aimed to reassure regulated entities that partnering with an SDP automatically shields them from certain norm violations. These include the Intermediaries Regulations, SECC (Stock Exchanges and Clearing Corporations) Regulations, and Depository Participants Regulations. This provision offers a layer of protection for those engaging with SDPs.

Regulated entities can also collaborate with non-SDP platforms. However, in such instances, the responsibility falls on the regulated entity to ensure compliance with Sebi regulations. This requirement underscores the importance of due diligence when associating with non-SDP platforms.

The clarification from Sebi provides clarity on the voluntary nature of becoming an SDP and outlines the responsibilities of regulated entities when associating with both SDP and non-SDP platforms. This ensures that all parties involved understand their obligations under current regulations.