On 21st October, the Securities and Exchange Board of India (SEBI) announced that investment advisors are barred from advising on unregulated instruments. This effectively bans the investment advisors from advising on cryptocurrencies, digital gold and other unregulated products.
"It has come to the notice of SEBI that some registered investment advisers are engaged in unregulated activity by providing platform for buying/ selling/ dealing in unregulated products including digital gold," SEBI said.
Offering advisory, distribution, execution or implementation services in unregulated instruments is not in accordance of with the provisions of Section 12(1) of the SEBI Act, 1992, the market regulator added.
"Investment Advisers are, hereby, advised to refrain from undertaking such unregulated activities," SEBI noted, further stating that any dealing in unregulated activities may lead to action under the SEBI Act, 1992.
This comes within a month of stock exchanges prohibiting stock brokers from dealing in digital gold. On 26th August, exchanges had prohibited stock brokers from dealing in digital gold by 10th September.
Experts view it as an investor-friendly move as in case of any mishappening, there is no regulatory recourse available to retail investors.
Fintech firms registered as investment advisors with SEBI have been offering digital gold services, wherein customers could buy small quantities of digital gold on the apps and the gold would be stored with partner firms. In some cases, the platforms were referring clients to partner firms instead of offering the product directly.
The product is similar to gold exchange-traded fund (ETF) units. But, unlike ETFs launched by fund houses and regulated by Sebi, digital gold receipts are yet to get the regulatory nod.
On 10th September, Paytm Money, which is registered as an investment advisory, had in a blog post said that digital gold will only be available on the ‘Paytm’ app and not on Paytm Money.
“Digital gold is a product offered by Paytm, which is not a stockbroker or investment advisor. Due to which, our services will remain unaffected and you can continue to buy/sell or track your digital gold seamlessly on the Paytm app," the company had said in the blog post.