SEBI Cautions Investors Against Trading In Unlisted Securities On Unauthorised Platforms
SEBI said only recognised stock exchanges are authorised to provide a platform for fundraising and trading in securities of 'to be listed' and 'listed' companies.
The Securities and Exchange Board of India on Monday cautioned investors against trading in securities of unlisted companies on unauthorised electronic platforms and websites.
The markets watchdog highlighted that such activities violate the Securities Contracts (Regulation) Act, 1956, and the SEBI Act, 1992, both aimed at safeguarding the interests of investors in the securities market.
"Only recognized stock exchanges are authorised to provide a platform for fundraising and trading in securities of 'to be listed' and 'listed' companies. The details of SEBI recognized stock exchanges are available on the SEBI website," a notice said.
The regulator did not disclose the names of such illegal trading platforms.
SEBI advised investors "not to conduct any transactions on such electronic platforms or share any sensitive personal details on the same as these platforms are neither authorised nor recognised by SEBI".
The regulator warned that if investors engage in such form of trading on unauthorised platforms, they will not be able to seek recourse under SEBI or exchange jurisdiction or investor grievance redressal mechanism.
SEBI also reminded the public of a 2016 advisory, which had warned investors against schemes and competitions involving prize distribution based on securities trading.
Recently, the SEBI raised caution over the rise of unauthorised virtual trading platforms. Several online apps and web platforms are offering these services without proper registration, potentially misleading users by providing unapproved trading advice and virtual stock trading features, the regulator warned in an advisory issued on Nov. 4.
Unlisted shares, or off-market stocks, are not traded on regulated stock exchanges and carry higher risks due to lower liquidity and less transparent valuations.
These shares are traded over-the-counter, with buyers and sellers connecting through intermediaries. Since the trades are not regulated by government entities, they carry significant credit risks.
Typically, unlisted shares are traded between companies, large brokerage houses, and institutional investors or high-net-worth individuals.
