SEBI: SDP Recognition for Digital Platforms is Voluntary

SEBI clarified that digital platforms are not obligated to register as Specified Digital Platforms While SDP recognition simplifies compliance for regulated entities (REs), platforms can opt out of it. Partnerships via non-SDP platforms require REs to ensure compliance with SEBI’s regulations.

Piyush Shukla Published On December 6th, 2024

The Securities and Exchange Board of India (SEBI) has clarified that digital platforms are not obligated to register as Specified Digital Platforms (SDPs). The framework aims to simplify compliance for regulated entities (REs) while ensuring flexibility for digital platforms. SEBI emphasized that preventive measures for SDP recognition are voluntary, and there is no regulatory framework governing SDPs.

Background and Context

SEBI introduced the SDP framework as part of its compliance strategy to prevent misuse of digital platforms in areas such as unauthorized investment advice and stock market manipulation. While regulated entities must avoid associations with unregistered entities, partnerships via SDPs offer compliance exemptions. SEBI’s clarification comes amid concerns raised by trade bodies like Nasscom and the US-India Strategic Partnership Forum.

Key Clarifications on SDP

Voluntary Recognition: Platforms are free to choose SDP recognition. Preventive steps for recognition are optional.

No Direct Regulation: SEBI does not regulate SDPs but mandates REs to comply with relevant regulations when partnering with non-SDP platforms.

Simplified Compliance for REs: Associating with SDPs ensures compliance with regulations like Regulation 16A of SEBI Intermediaries, Regulation 44B of SECC, and Regulation 82B of SEBI Depositories and Participants.

SEBI’s Statement and Current Measures

SEBI reiterated that associations with SDPs reassure REs of compliance assurance. However, REs can also partner with non-SDP platforms, provided all regulatory provisions are met. This approach aims to streamline processes without overburdening platforms or compromising regulatory integrity.

Summary of the news

Key Points	Details
Why in News	SEBI clarified that digital platforms are not mandated to register as Specified Digital Platforms (SDPs).
SDP Framework Purpose	Simplifies compliance for regulated entities (REs) associating with third parties.
Voluntary Registration	Digital platforms can choose whether to register as SDPs; it is not mandatory.
Compliance Assurance	Associating with SDPs assures compliance with Regulation 16A (Intermediaries), Regulation 44B (SECC), and Regulation 82B (Depositories).
Regulated Entities’ Responsibility	REs partnering with non-SDP platforms must ensure compliance with SEBI’s regulations.
Trade Bodies’ Concern	Clarification follows concerns raised by Nasscom and US-India Strategic Partnership Forum.
Draft Consultation Paper	SEBI floated the paper in October; feedback collection phase completed, awaiting final circular.
Introduced Amendments	August 2024: SEBI mandated REs to avoid associations with unregistered entities providing unauthorized advice or claims.