Sebi Warns Investors Regarding Trades On Unregistered Online Bond Platforms

The Securities and Exchange Board of India (Sebi) Wednesday urged investors to exercise caution and avoid any transactions through unregistered online bond platforms, it said in a public notice. The markets regulator warned investors of such platforms, which lack regulatory oversight and mechanisms for providing protection to investors.

“Such unregistered platforms lack regulatory or supervisory oversight and do not provide for any mechanisms for investor protection or grievance redressal,” it said.

Sebi said that these unregistered entities, which include certain fintech companies and stock brokers, offer services in the nature of Online Bond Platform Providers (OBPPs). The regulator said investors must verify the registration status of the OBPPs before transacting, and deal only with Sebi-registered entities to safeguard their interests.

While online platforms have increased accessibility for retail investors to trade in corporate bonds, Sebi said that not all players which offer these services are following the regulatory framework for the same.

Sebi last year had banned certain platforms from offering securities for operating without proper registration. These platforms were found to be offering to sell unlisted non-convertible debentures while structuring their offerings, which appeared as private placements to circumvent proper regulatory requirements.

“Investors are urged to exercise caution and avoid transacting on unregistered online bond platforms,” Sebi said.

In the notice, Sebi also provided links to help investors verify which online platforms have proper registration and come under the purview of OBPPs. Currently, a total of 61 entities are listed by Sebi, among which 18 OBPPs allow transactions of corporate bonds online.

Investors can also check on the website of the online platform where they wish to trade by checking the disclosures page to check whether the entity has a proper registration to operate as an OBPP.

OBPPs have aided the involvement of ordinary investors in the Indian bond market by making the product more accessible. Retail investors can now purchase bonds with the same ease and transparency as trading stocks. The Reserve Bank of India (RBI), on the other hand, provides retail investors with the RBI Retail Direct platform to increase accessibility of government securities to these individual investors.