Five Inevitable Legal Compliances for Platforms giving Share Trading Advice & Tips | Corporate Attorney for Stock Brokers in Delhi NCR | Corporate Lawyer for Stock Brokers in Delhi NCR |

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Legal Compliances for Platforms It has been time and again established that there have been certain websites and individuals which allegedly offer unregistered investment advisory services but in reality, they run the operation without obtaining a proper SEBI registration as an Investment Advisor. All the online portals who have been providing with the share trading tips and advice should take into consideration certain compliances on their behalf to ensure the smooth functioning and to avoid any legal complications in the future.

Securities and Exchange Board of India (SEBI) Regulations
Under section 3(1), Chapter II of SEBI (Investment Advisers) Regulations 2013 it has been provided that no person can act as an investment advisor unless he has taken a SEBI Registration before providing with their investment services. In case the investment advisor makes any kind of default, he will be liable to be dealt in the manner which is provided under the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. The same has been provided under section 29 of the above-mentioned regulations. Therefore any investment advisor whether online portals or firms should comply with this requirement before providing their services in the investors.

Intellectual Property Right Registrations
Another significant compliance to be undertaken by the online share trading websites is the Intellectual Property Rights Regulations. The process for intellectual property rights protection works in a two-fold manner. Firstly the protection of your own rights and secondly non-infringement of the others’ intellectual property rights.

For the first case, the online portals should register their trademarks for the protection of their logos and brands. However, before the registration, the share trading firms should make sure that they are not infringing on anyone else’s trademark and that the logo is not similar to someone else’s. The easiest way for this can be due diligence conducted by the lawyers who can make sure that the brand or logo is not similar to that of the other.

In similar ways, the share trading firms or websites can make sure for the registration of their work under the Copyright Act. If the firms or websites are working with any third parties who write their marketing copy or text for them, the websites have to ensure that their work is checked for plagiarism. Also, such website should not infringe on someone else’s copyrighted work when sending out emails or newsletters. Hence, it is the foremost compliance to set the intellectual property use expectation in the Terms of Services of the firms. Also, the online share trading websites, who are using the developed software should apply for the registration of patent which can avoid the misuse of the same in the future instances.

Data Protection Laws & Privacy Policy
The online share trading advisories should take into consideration the existing data protection policy as necessary legal compliance for avoiding any future legalities. The right to privacy is considered as the fundamental right under Article 21 of the Constitution. The same has been with the landmark judgment of K.S. Puttaswami and Another vs. Union of India, 2017 10 SCC 1.

The simplest way to comply with this is to set up a Privacy Policy on the advisory’s website that will require customers or website users to agree to it when portals will collect information from them. To make sure that the customer’s or user’s agreement will stand up legally, a clickwrap method could be used. A clickwrap method is where any user has to click “I Agree” to the Privacy Policy which has been provided on the website. This could be when the users sign up to receive your marketing messages or when they make a purchase on the website. Also, for the purpose of protection from any further legalities, the websites should include the clause for the limitation of liability in their terms and conditions.

Forms & Agreements
The portals can also draft an online agreement form for the users containing all the terms and conditions before asking for the subscription fees. In this way, the share trading portals can safeguard themselves from any future complications as the buyer would have already agreed with all the conditions.

Advertisement Policy
The foremost thing on which these online advisory portals work, are exclusive advertisements done by them to attract the consumers. As mentioned above, unfair or deceptive advertisements attract penalties. The share trading portals should make sure that all the relevant information has been provided to the consumers. The portals should also be careful when they are involved in comparative advertisements. If the policies of different share trading websites are not compared fairly, it would result in a breach of the advertisement standards. Therefore, these websites should ensure to comply with all the standards and if by any chance, they get into trouble with any legal authority like the Consumer Protection body, they should be prompt and clear in their communication with them. They should aim at working towards the possible solution right away for the purpose of avoiding any further legal prosecutions.

In the case of Re: Mathew Easow vs. The Adjudication Officer, Securities, and Exchange Board of India Appeal No. 137 of 2006, it has been provided that all those entities who are involved in such are involved in providing the investment advice and tips regarding the purchase and sale of the assets should take into consideration the duties which have been cased on them to take the necessary disclosures which could ensure the integrity of the recommendations. Misleading information affects market integrity, as unsuspecting investors fall easy prey to such information while making investment decisions.

All the necessary legal compliances are required to be followed. To comply with the law, the important things to be kept in mind is that proper consent should be taken from the consumers before sending in the marketing materials. It is also required to ensure that the customers are aware of and sign up to the Privacy Policy when the websites originally obtain their information; to protect the intellectual property and websites should avoid infringing on that of others. The online share trading websites should be honest and clear with all marketing messages, and allow the customers to opt-out of your messages if they wish. However, sometimes the customers do not conduct proper due diligence before investing based on the tips shared by the share trading firm and as a result, they can become prey to the losses. Hence, it is required by the customers before making any investments to conduct due diligence and not follow the advice blindly.
Authored By: Adv. Anant Sharma & Bheeni Goyal