SEBI warns investors against trading in unlisted debt securities

Mumbai, Dec 9: The Securities and Exchange Board of India (SEBI) on Monday warned investors against performing transactions on unregistered online platforms.

The markets regulator said that unregistered online platforms are offering unlisted debt securities to investors.

“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,” SEBI said in a statement.

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 Companies Act, 2014. These activities could result in legal, regulatory or enforcement action against those involved in such activities.

SEBI recommended investors to not engage with such platforms.

Recently, SEBI issued an interim order against some entities operating such unregistered platforms.

“Investors should consider utilising Online Bond Platforms operated by SEBI registered stock brokers authorised by the Bombay Stock Exchange (BSE) and/or the National Stock Exchange (NSE) to act as online bond platform providers (OBPPs) for investing in listed debt securities,” the markets regulator emphasised.

SEBI is issuing this caution, advising investors to not engage with or undertake investment or trading activities through un-registered intermediaries, web applications, platforms and apps.

The regulator also said that these platforms are neither authorised nor recognised, and investors engaging in such activities would not be entitled to essential protections, such as investor protection under SEBI’s or stock exchanges’ jurisdiction, access to grievance redressal mechanisms administered by exchanges and dispute resolution services offered by authorised entities.