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Sebi bars investment advisors from dealing in unregulated products, including digital gold

2 min read . Updated: 21 Oct 2021, 06:36 PM IST Neil Borate

This comes within a month of stock exchanges prohibiting stock brokers from dealing in digital gold

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The Securities and Exchange Board of India (Sebi) on Thursday clarified that Sebi Registered Investment Advisors (RIAs) are not allowed to deal in unregulated products including digital gold, via a statement. The release comes within a month of stock exchanges prohibiting stock brokers from dealing in digital gold.

The Sebi release clarified that RIAs are prohibited from advisory, distribution and execution/ implementation services in digital gold. Any dealing in unregulated activities by Investment Advisers may entail action as deemed appropriate under the SEBI Act, 1992 and regulations framed thereunder, the Sebi release said.

Digital gold as a product was offered by several fintechs which were registered as investment advisors with Sebi. Clients were allowed to buy digital gold in small quantities through the fintech apps and the gold would be stored with partner companies of the fintech.

In some cases the platforms were simply referring clients to associated companies rather than offering the product directly. In a blogpost issued on 10th September 2021, Paytm Money which is registered as an investment advisor with Sebi clarified that digital gold will only be available on the parent ‘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 blogpost said.

In an interaction with Mint earlier this month, MMTC-PAMP CEO. Vikas Singh confirmed that clients of entities who have been barred from offering digital gold will still have access to their holdings directly on the MMTC PAMP platform. MMTC PAMP was offering storage and custody for some fintechs offering digital gold. The Sebi clarification may also affect the ability of fintech platforms registered as investment advisors to offer other unregulated products such as international stocks or cryptocurrency.

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