SEBI Warns against Trading in Unlisted Public Limited Companies on Electronic Platforms
Moneylife Digital Team 09 December 2024
Securities and Exchange Board of India (SEBI) has issued a caution to investors not to engage with and undertake investment and trading activities through unregistered web applications and electronic platforms. 
 
In a release, the market regulator says it noticed that certain electronic platforms and websites are facilitating transactions in unlisted securities of public limited companies. "Such activities are in violation of the Securities Contract (Regulation) Act, 1956 and SEBI Act, 1992, which are laws designed to regulate and protect the interest of investors in the securities market."
 
Further, SEBI says investors may note that for any disputes relating to such activity, investors cannot take benefits of recourses like investor protection under SEBI and exchange jurisdiction, including SCORES and investor grievance redressal mechanism administered by exchanges or the online dispute resolution mechanism administered by exchanges and depositories through smartodr.in.
 
"Public is invited to share details of any unregistered entities or platforms offering unlisted debt securities via the market intelligence (MI) portal of SEBI at https://mi.sebi.gov.in/ ," the market regulator says.
 
Earlier, SEBI warned investors about using unauthorised virtual trading platforms that offer virtual trading, paper trading, and fantasy games, as well as unregistered online platforms that offer unlisted debt securities.
 
On 6th December, SEBI warned investors against using unregistered online platforms offering unlisted debt securities. 
 
In a statement, SEBI says, "Such platforms appear to provide an avenue for investors to acquire unlisted debt securities. These platforms are not subject to any regulatory or supervisory oversight and lack basic investor protection or investor grievance redress mechanisms. The public is urged to exercise caution in undertaking transactions on such unregistered platforms."
 
According to the market regulator, offering unlisted securities to more than 200 investors violates the Companies Act, 2013, and SEBI regulations, making it a 'deemed public issue'. (Read: SEBI Warns Investors against Platforms Offering Unlisted Debt Securities)
 
Last month, SEBI ordered four unregistered online platforms (UOPs) to halt their operations involving the public subscription of unlisted securities on their platforms. The UOPs are: AI Growth Pvt Ltd (owner of altGraaf), Texterity Pvt Ltd (operator of altGraaf), Purple Petal Invest Pct Ltd (owner and operator of Tap Invest) and Berkelium Technologies Pvt Ltd, the owner and operator of Stable Investments.
 
SEBI says these entities facilitated the public sale of privately placed unlisted non-convertible debentures (NCDs) which is a violation of regulatory guidelines and potentially puts public investments at risk. (Read: SEBI Asks altGraaf, Tap Invest and Stable Investments To Stop Offering Unlisted Debentures on their Platforms)
 
In the same month, the market regulator also cautioned investors against trading through virtual trading or gaming platforms and asked them to deal only through registered intermediaries.
 
The advisory statement came after the market regulator noticed that some apps, web applications and platforms offer virtual trading services, paper trading, or fantasy games to the public based on stock price data of listed companies. (Read: SEBI Warns Investors about Unauthorised Virtual Trading, Gaming Platforms)
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