SEBI Warns Investors against Platforms Offering Unlisted Debt Securities
Moneylife Digital Team 06 December 2024
Market regulator Securities and Exchange Board of India (SEBI) has 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'.
 
"The activities undertaken by the unregistered online platforms or issuers of the unlisted debt securities are in violation of Companies Act, 2013, SEBI Act, 1992, SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. This violation occurs because offering unlisted securities to more than 200 investors makes it a 'deemed to be public issue' under the Companies Act, 2014. These activities could result in legal, regulatory or enforcement action against those involved in such activities," it added.
 
The market regulator advised investors to use online bond platforms operated by SEBI-registered stockbrokers authorised by the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) to act as online bond platform-providers (OBPPs) for investing in listed debt securities. The list of BSE and NSE-authorised OBPPs can be found at https://www.sebi.gov.in/online-bond-platform-providers.html
 
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.
 
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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