SEBI Circular

SEBI’S New Guidelines on Mobile and E-mail Alerts for Investors

SEBI, which stands for The Securities and Exchange Board of India (SEBI), is a regulatory body for the securities market in India. It protects the interest of investors, enhances transparency, and ensures the smooth functioning of the capital markets.

A new circular was issued by the Securities and Exchange Board of India (SEBI) on December 3, 2024, to enhance the communication mechanism. The circular clarifies the updated rules about SMS and email alerts for investors. This circular is followed by the earlier guidelines in SEBI Circular No. CIR/MIRSD/15/2011 and the Master Circular for Stock Brokers to ensure that stock brokers send SMS and email alerts to investors.

This article explores the details of the recently revised circular by SEBI on mobile and email alerts, its implications for stock brokers and investors, and what impact it will have on the market.   

Background of the Guidelines

 Initially, guidelines on the use of SMS and email alerts for investors were introduced by SEBI in 2011 to ensure that stock brokers communicate transaction details, account activities, and market updates to investors. This was an important initiative by SEBI to combat fraud and miscommunication. It lets investors stay updated on their investments, track irregularities, and respond to suspicious activities in their accounts.

With the growth of digital trading systems, it became necessary to update and revise the guidelines. This need led to the issuance of a recently updated circular. This provides clarity to the instructions and ensures better coverage of the evolving market landscape.

Key Changes in SEBI’s 2024 Circular

The guidelines issued on 3rd December 2024 brought several significant updates. The following are the key provisions of the circular:

Uploading of Mobile Numbers and Email Addresses by Stock Brokers

It is the responsibility of Stock Brokers to keep their client’s contact details like mobile numbers and email addresses, accurate and up-to-date. These saved contacts come into use at the time of sending important alerts and information to clients. Stockbrokers are required to inform the client about any important market-related news. This ensures clients are always informed about the status of their investments.

The new/revised guidelines clarify stockbrokers now must upload each client’s mobile number and email address separately in their systems. This way, alerts and updates are sent directly to each individual client about the status of their investments without anyone being left out. Clients can receive personalized communication related to trade alerts or margin calls via phone or email.  

Family Members and Authorized Persons: The Exception

The allowance for family members and authorized persons of non-individual clients to share the same mobile number or email address is one notable change in the revised clarification of 2024. Recognizing the interconnected financial dealings within families, this rule allows stock brokers to upload the same mobile number or email address for multiple clients. This rule strictly applies only if the multiple clients are family members. This makes it easy for families or businesses to manage their accounts in an organized manner.    

The definition of family has been extended and includes:

• For Individual Clients: Includes the person, their spouse, dependent children, and dependent parents.
• For Hindu Undivided Families (HUFs): The Karta or any Co-parcener
• For Partnership Firms: Partners of the firm
• For Trusts: Trustees and Beneficiaries
• For Companies: Authorized Individuals of the company (like employees or managers)

This clarifies the confusion faced by brokers when following SEBI’s rules. It simplifies how contact details can be shared by families, businesses, and trusts while ensuring everyone stays within the law.

Immediate Implementation

The revised circular is in effect immediately. Every market participant including stock brokers and stock exchanges is required to take immediate action to implement the new guidelines by updating their system. Investors will then start getting clearer and more personalized information from their brokers.

Impact on Stock Brokers and Stock Exchanges

Responsibility of Stock Brokers

A major role of stock brokers in the introduction of revised SEBI guidelines is:

• Uploading accurate mobile numbers and email addresses for each customer.
• Ensuring that family members and authorized persons from a non-individual entity can share details according to rules.
• Keeping records up to date such that alerts are sent to the right people.
• Obtaining written consent from clients to share their contact details, especially those included with family members or authorized entities.

To meet updated requirements, stock brokers need to ensure their systems can accommodate them. They will also need to develop procedures where written requests for members of the family or authorized persons to share their contact details can be uploaded.

Role of Stock Exchanges

The stock exchanges have to inform their members (stock brokers) about the new directives and have their rules, bylaws, and regulations be in consonance with the coming into force of that circular. This again implies that exchanges shall update their internal systems and provide support to brokers regarding new provisions.

The stock exchanges further have an important role to play in the supervision of the SEBI regulations concerning their members. It puts on the onus of ensuring that to the broker that the guidelines mentioned above are being followed and any breaches are addressed promptly.

Legal Basis and Regulatory Framework

The Circular has been issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, which grants powers to SEBI to undertake measures for the protection of investors and the regulation of securities markets. This legal foundation reflects SEBI’s commitment to market integrity and investor protection.

SEBI additionally endorses a clear, standardized set of communications to avoid possible misinformation, scams, or divergence to put investors at risk. The amended guidelines further consolidate the authority of SEBI to keep financial markets transparent, safe, and accessible to all investors.

In a Nutshell

Revising the guidelines related to mobile and email alerts calls for investors’ attention and marks a great leap toward greater transparency, communication, and accountability in the Indian securities market. By requiring stock brokers to update their systems and send alerts to every individual associated with that broker, as well as allowing families and authorized persons from non-individual clients to share contact information for alerts, SEBI has streamlined the process, making it much easier to remain updated for the investors on their trades and account activity.

The immediate implementation of these provisions would enhance the clarity of the entire investor and provide a safeguard against possible cheating. As stock brokers and stock exchanges align their operations with the new SEBI guidelines, so do Indian capital markets, which continue to evolve in a form that keeps the needs of the investor as prime and strengthens the integrity of the market. To get expert assistance in SEBI’s regulatory matters, visit https://enterslice.com/.

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