The Securities and Exchange Board of India, or SEBI, on Monday cautioned investors against conducting transactions on unregistered online platforms.
According to an official release, the markets regulator has found that unregistered online platforms are offering unlisted debt securities to investors.
As mentioned earlier, "such platforms apparently are offering avenues for acquiring such unlisted debt securities of others. No regulatory or supervisory oversight is present herein as well, and there's no basic investor protection nor investor grievance redress mechanism, either," added SEBI in its release.
The activities conducted by the unregistered online platforms or issuers of the unlisted debt securities are violating the 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 contravenes because offering securities to more than 200 investors makes it a "deemed to be public issue" under Companies Act, 2014. All these activities may attract legal, regulatory or enforcement action against anyone involved in such activities.
SEBI had advised investors not to deal with such platforms.
Late last year, SEBI had issued an interim order against certain entities running such unregistered platforms.
The markets regulator emphasized that investors should consider using Online Bond Platforms operated by SEBI registered stock brokers authorized by the Bombay Stock Exchange or the National Stock Exchange to become online bond platform providers for listed debt securities' investment.
The SEBI is cautioning that it is issuing this advisory warning investors not to get in touch with or carry out any investment or trading through unregistered intermediaries, web applications, platforms, or apps.
The regulator further informed that these platforms are neither authorized nor recognized, and investors trading with such platforms would not have a right to essential protections which include investor protection under jurisdictions of SEBI or stock exchange, access to grievance redressal mechanisms under exchanges and dispute resolution services provided by authorized entities.
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