SEBI Warns Against Unregistered Platforms Offering Unlisted Debt Securities

The market regulator, Securities and Exchange Board of India (SEBI), on Thursday issued a warning to the public about unregistered online platforms offering unlisted debt securities to investors.

These platforms, which are not under any regulatory supervision, pose major risks to investors due to the absence of basic investor protection and grievance redress mechanisms.

SEBI has mentioned in its caution note, uploaded on its website, that such platforms are violating several key regulations, including the Companies Act, 2013; the SEBI Act, 1992; and other rules related to fraudulent trade practices and the issuance of non-convertible securities.

The market regulator has also pointed out that offering unlisted debt securities to more than 200 investors constitutes a "deemed public issue," which makes such activities illegal. The Board has recently taken action against some of these unregistered entities by issuing an interim order, which is available on SEBI's official website.

In its advisory, SEBI urged investors to be cautious and avoid engaging with or making transactions on unregistered platforms.

It also reminded the public that using such platforms could lead to legal, regulatory, or enforcement actions. Additionally, investors are advised to use online bond platforms operated by SEBI-registered stockbrokers authorised by the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). A list of authorised platforms can be found on SEBI's website.

SEBI further informed that investors who engage with unregistered platforms will not have access to the usual investor protections or dispute resolution mechanisms provided by SEBI and the exchanges.

In the event of any disputes, investors will not be able to seek assistance from the Securities Exchange Board of India’s SCORES system or the online dispute resolution mechanisms available through exchanges and depositories.

SEBI has also encouraged the public to report any unregistered entities or platforms offering unlisted debt securities through its Market Intelligence (MI) portal.