The Securities and Exchange Board of India (SEBI) has recently issued a caution notice to alert investors about the risks of engaging with unregistered online platforms offering unlisted debt securities. These platforms operate outside regulatory oversight, exposing investors to significant risks and depriving them of essential protections. Here's how you can protect yourself and your investments from these unregulated entities.
Table of Contents
- Understanding the Risks
- How to Protect Yourself
- Why Registered Platforms Matter
- Conclusion
Understanding the Risks
Unregistered online platforms offering unlisted debt securities may seem like an attractive investment opportunity. However, they operate in violation of the law and lack essential safeguards, including:
- No Regulatory Oversight:
- These platforms are not regulated or supervised by SEBI, leaving investors vulnerable to fraudulent activities.
- Lack of Investor Protection:
- Transactions through these platforms do not qualify for protections under SEBI or stock exchange jurisdictions.
- Absence of Grievance Redress Mechanisms:
- Investors using these platforms cannot access SEBI's grievance redress systems, such as SCORES, or dispute resolution mechanisms administered by exchanges.
How to Protect Yourself
To safeguard your investments and avoid legal or financial troubles, follow these essential steps:
1. Verify the Platform's Registration
Investors should ensure they are dealing with SEBI-registered platforms. SEBI authorises Online Bond Platforms operated by stock brokers of BSE and NSE to act as providers for listed debt securities.
- Check the list of authorised platforms on SEBI's official
website:
SEBI Online Bond Platform Providers.
2. Avoid Unregistered Platforms
Unregistered platforms offering unlisted debt securities violate:
- Companies Act, 2013
- SEBI Act, 1992
- SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003
- SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021
Engaging with such platforms can lead to legal and regulatory consequences for investors.
3. Understand the Law
Offering unlisted securities to more than 200 investors qualify as a "deemed public issue" under the Companies Act, 2013. Such offerings require compliance with specific regulations that unregistered platforms fail to meet.
4. Monitor SEBI Notices
Stay updated with SEBI's enforcement actions. SEBI's recent interim order against certain unregistered platforms is available at: SEBI Enforcement Order.
5. Report Suspicious Platforms
SEBI encourages the public to report unregistered platforms offering unlisted debt securities. You can share details via the SEBI Market Intelligence Portal: SEBI Market Intelligence.
Why Registered Platforms Matter
By using SEBI-authorised platforms, investors gain access to:
- Regulatory protections and compliance.
- Transparent operations adhering to SEBI guidelines.
- Grievance redress systems, including SCORES and online dispute resolution mechanisms.
Conclusion
Investing in unlisted securities through unregistered platforms exposes you to significant risks, including legal violations, financial losses, and lack of investor protection. To secure your financial future, always verify the registration of platforms, use authorised services, and stay informed about regulatory updates. By making informed decisions, you can safeguard your investments while contributing to a more transparent and secure financial ecosystem.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
