SEBI Clarifies Optional Status of Specified Digital Platforms (SDPs)

The Securities and Exchange Board of India (SEBI) clarified on Wednesday that digital platforms, utilized by registered or regulated entities to collaborate with third parties, are not required to obtain recognition as Specified Digital Platforms (SDPs).

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SEBI further stated that there is currently no regulatory framework in place for overseeing SDPs.

SDPs refer to digital platforms approved by SEBI that implement mechanisms to prevent and address prohibited activities, including unregulated financial advice or misleading claims.

In a recent announcement, SEBI emphasized that obtaining SDP recognition is entirely optional for digital platforms.

This clarification follows questions raised in various reports regarding whether digital platforms are mandated to seek recognition as an SDP.

“It is not mandatory for any digital platform to be designated as an SDP, nor are these platforms regulated by SEBI. Any corrective actions taken by certain platforms are consistent with legal requirements. Preventive measures necessary for becoming an SDP are optional, leaving it up to the platform to decide whether or not to seek SDP status,” SEBI stated.

In August, SEBI updated its regulations, stipulating that entities under its purview—such as stock exchanges, clearing corporations, depositories, and their representatives—are prohibited from associating with individuals or entities providing securities advice or performance claims without proper SEBI registration. However, this restriction does not apply if the collaboration occurs through an SDP.

SEBI explained that the SDP framework provides assurance to regulated entities that working with an SDP protects them from violations of certain norms, including the Intermediaries Regulations, SECC Regulations, and Depository Participants Regulations.

Regulated entities are still permitted to collaborate with platforms that are not designated as SDPs. However, in such scenarios, they must ensure compliance with SEBI's regulatory requirements.

Sebi's clarification highlights the optional nature of becoming an SDP while detailing the responsibilities of regulated entities when partnering with both SDP-designated and non-SDP platforms. This guidance ensures that all stakeholders are aware of their obligations under the existing regulatory framework.