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A recent circular by SEBI says that MFDs cannot associate with those who break two prohibited activities.
People who fall into this category include:
- Those who give advice or recommendations on securities without being registered by the SEBI board
- Make claims of returns or performance without SEBI approval
The term association includes financial transactions, client referrals, technology system interactions, sharing of client information, joint marketing or promotional activities, among others.
Who MFDs can associate with:
- Investor education providers who solely focus on education and don't give specific security recommendations or make performance claims
- Marketing/advertising agencies that aren't engaged in the prohibited activities
- Other SEBI-registered entities operating within their permitted scope
- Entities promoting non-SEBI regulated products (like banking or insurance) but only if these entities are not simultaneously engaged in the prohibited activities
MFDs cannot associate with anyone who:
- Uses market price data from the last 3 months to discuss specific securities
- Claims to be "only doing education" but actually provides specific security recommendations
MFDs not abiding could face penalty, suspension/cancellation of registration, debarment, among other actions, clarified SEBI.