Sebi warns investors against platforms facilitating transactions in unlisted securities
Dec 9, 2024
Synopsis
Sebi has warned investors against using unauthorized electronic platforms for transactions in unlisted securities, citing violations of its rules. Such dealings forfeit investor protection, grievance redressal mechanisms, and online dispute resolution, risking sensitive personal information.
Market regulator Securities and Exchange Board of India (Sebi) has cautioned investors against electronic platforms and websites which are facilitating transactions in unlisted securities of public limited companies. It recommended investors to not engage with them.
It said that any engagement with the unregulated entities is a violation of Sebi rules.
"Investors are advised not to conduct any transactions on such electronic platforms or share any sensitive personal details on the same as these platforms are neither authorized nor recognized by SEBI," a Sebi release issued on Monday, said.
The regulator further said that investors will not be able to avail benefits of investor protection under SEBI/ Exchange(s) Jurisdiction if they indulge with these electronic platforms. Moreover, they will also lose out on investor grievance redressal mechanisms administered by exchange(s) or the online dispute resolution mechanism administered by exchanges and depositories (smartodr.in).
The warning comes after Sebi came to know about cases of investors engaging with such entities.
Last week, the market watchdog issued a stern warning to investors about unregistered online platforms offering unlisted debt securities. While highlighting the risks associated with such platforms, the regulator cautioned investors against using these platforms.
It said that unregistered online platforms operate outside Sebi's regulatory framework and lack essential investor protections.
To protect themselves, investors should consider utilising online bond platforms operated by SEBI-registered stockbrokers authorized by the BSE or NSE. These platforms offer investor protection and grievance redressal mechanisms under SEBI's jurisdiction.
Key concerns:
Lack of Regulatory Oversight: These platforms are not subject to SEBI's regulatory oversight, which could expose investors to significant risks.
Absence of Investor Protection: Investors who engage with these platforms may not have access to the same level of protection as those who invest through registered intermediaries.
Potential Legal and Regulatory Consequences: The activities of these unregistered platforms and issuers may be in violation of the Companies Act and other relevant regulations, leading to potential legal and regulatory actions.
Meanwhile, BSE on Friday also cautioned investors against subscribing to any scheme/product offered by any person/entity offering indicative or guaranteed returns in the stock market as the same is prohibited by law. Moreover, it has asked investors not to share their trading credentials such as user id/password with anyone for trading in their account/handling of the portfolio.
[The Economic Times]
