On 02-09-2022, the Securities and Exchange Board of India (‘SEBI') issued a circular on performance/ return claimed by unregulated platforms offering algorithm strategies for trading to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

SEBI noticed some unregulated platforms and some of the stock-brokers are offering algorithmic trading services to investors for automated execution of trades. These services are being marketed claiming high returns on investment. The investors are being lured by the “ratings” assigned to these services.

Key Points:

  1. To prevent this act of mis- selling, Stock-brokers can neither make any reference to the past or future return algorithm nor to associate with any platform doing so. In case, the brokers who are making such reference will have to remove it from their website and disassociate themselves from the platforms providing such reference by 09-09-2022.

  2. Stock-brokers are required to monitor the compliance of this circular and submit a compliance report to SEBI before 01-11-2022.

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