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TMI BlogDetails/clarifications on provisions related to association of persons regulated by the Board, MIIs, and their agents with persons engaged in prohibited activitiesX X X X Extracts X X X X X X X X Extracts X X X X ..... ard, MIIs (stock exchanges, clearing corporations, depositories), and agents of such persons/MIIs shall not have any direct or indirect association with another person who - (i) provides advice or any recommendation, directly or indirectly, in respect of or related to a security or securities, unless the person is registered with or otherwise permitted by the Board to provide such advice or recommendation; or (ii) 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. The person regulated by the Board (including recognised stock exchanges, clearing corporations and depositories) is required to ensure that any person associated with it or its agent does not engage in the activities mentioned in clauses (i) or (ii) above. It has been clarified that the term "another person" shall not include a person who is engaged solely in investor education, provided that such a person does not, directly or indirectly, indulge in any activity as referred to in clauses (i) or (ii) above. 3. In this regard, the details/clarifications on the provisions are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on association with another person, as in Intermediaries Regulations, for recognised stock exchanges, clearing corporations and registered depositories (MIIs) respectively. In this circular, hereinafter, for the ease of reference, person regulated by Board as defined under Intermediaries Regulations and MIIs are collectively referred to as "persons regulated by the Board." 3. Who is an agent of persons regulated by the Board? As per section 182 of the Indian Contract Act, 'agent' is a person who is employed to do any act for another, or to represent another in dealings with third persons. Whether a person is an agent of another person regulated by the Board is fact specified. Some examples of agent are: Employees, Mutual Fund Distributors, Authorised Persons of stock brokers etc. 4. What are the restrictions on persons regulated by the Board and their agents on their association with another person? Persons regulated by the Board and their agents shall not have any direct or indirect association with another person who is engaged in any of the two activities not permitted by the Board. These two prohibited activities are: (i) providing advice or any recommendation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity in his/her talk/speech, video, ticker, screen share etc. indicating the future price, advice or recommendation related to security or securities. 9. Whether the professional services provided by the person regulated by the Board to another person (e.g. an unregistered IA), like opening of his personal demat account or trading account, amount to association of such person with such another person? There is no restriction on any person in availing the professional services offered by persons regulated by the Board, or their agents such as demat account or trading account services provided that such services/accounts are not used for any of the abovementioned two prohibited activities, directly or indirectly. Example: Any person can avail demat account services from any depository participant without any restriction. Such demat account of a person with DP shall not amount to association of a DP with that person. However, in case such demat account is used to engage in aforesaid two prohibited activities, directly or indirectly, depository participant shall take appropriate necessary action to deactivate/discontinue the services for such demat account. 10. Whether stock broker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology systems; (d) any other association of a similar nature or character. 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. Thus, such intermediaries are prohibited to make any payment or receive payment or share any client information from or with another person engaged in any of the abovementioned two prohibited activities, directly or indirectly. 14. Whether persons regulated by the Board and their agents are allowed to associate for their branding/marketing/promotional activities with another person? The persons regulated by the Board and their agents are allowed to associate for their branding/marketing/promotional activities with another person provided that such another person is not engaged in any of the abovementioned two prohibited activities, directly or indirectly. 15. Can SEBI regulated entities and their agents associate with another person who is promoting consumer products from the sectors such as banking, financial services, and insurance, which are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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