Digital Platforms Not Required To Obtain SDP Status: SEBI
Moneylife Digital Team 05 December 2024
Market regulator Securities and Exchange Board of India (SEBI) has clarified that digital platforms used by registered or regulated entities to associate with third parties are not obligated to seek recognition as specified digital platforms (SDPs). SEBI also stated that, at present, there is no regulatory framework in place to govern SDPs.
 
An SDP is a digital platform approved by SEBI with mechanisms to prevent and address prohibited activities, such as unregulated advice or claims.
 
In a notification on 29 August 2024, the market regulator mandated that persons regulated by SEBI, market infrastructure institutions (MIIs), including stock exchanges, clearing corporations, depositories and agents of such persons or MIIs, should not have any direct or indirect association with another person who provides advice, recommendation or claim of return or performance.
 
These provisions, however, will not apply to an association through an SDP. A specified digital platform or SDP has been defined to mean a digital platform as specified by SEBI which has a mechanism in place to take preventive as well as curative action to the satisfaction of the market regulator to ensure that such a platform is not used for indulging in any of the prohibited activities.
 
SEBI says it has been receiving queries about the obligation of digital platforms to get recognition as a specified digital platform -SDP. 
 
Following media reports, the market regulator clarified that it is not obligatory for any digital platform to be notified as SDP and there is no regulation of these digital platforms by SEBI.
 
It says, "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."
 
"The purpose of this provision in these 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 Regulation 16A of Securities and Exchange Board of India (Intermediaries) Regulations, 2008, Regulation 44B of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and Regulation 82B of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018." 
 
"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 defence for the regulated entity that it has associated with a digital platform which is an SDP," SEBI says.
 
Further, the market regulator clarified that it is not expected that a regulated entity will associate only with or through an SDP. "It can also associate with or 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," it added.
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