SEBI’s Warning on Unregulated Online Platforms

The Securities and Exchange Board of India (SEBI) issued a warning on December 5 regarding the risks associated with unregulated online platforms offering unlisted debt securities. These platforms operate without proper regulatory oversight, putting investors at risk due to the lack of investor protection and grievance redress mechanisms.

Legal Violations by Unregulated Platforms

SEBI highlighted that these unregulated platforms violate several key laws, including the Companies Act, 2013, and SEBI’s regulations concerning non-convertible securities and market practices. The regulator emphasised that offering unlisted securities to more than 200 investors is considered a “deemed public issue,” which triggers the need for compliance with stringent regulatory requirements.

SEBI’s Action Against Unregistered Platforms

As part of its ongoing efforts to protect investors, SEBI took action against three unregistered online bond platforms — altGraaf, Tap Invest, and Stable Investments — through an interim order issued on November 18. These platforms were banned from selling securities due to the significant risks they posed to public investors.

SEBI strongly advised investors to transact only through SEBI-registered stockbrokers and use authorised online bond platforms that are approved by the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). Investors were also reminded that disputes arising from transactions on unregulated platforms would not have the same legal recourse as those conducted through regulated entities.

SEBI’s Proposal for Market Improvement

In addition to addressing the issue of unregulated platforms, SEBI also suggested implementing a call auction session for stock closing prices as an alternative to the current Volume-Weighted Average Price (VWAP) system. This proposal aims to enhance market transparency and improve the price discovery process.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.