SEBI cautions against unregistered online bond platforms: How to identify registered providers

The Securities and Exchange Board of India (SEBI) has issued a strong warning regarding entities, including fintech companies and stock brokers, offering services as Online Bond Platform Providers (OBPPs) without proper registration with stock exchanges, as mandated under SEBI Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2022/154 dated November 14, 2022.

Such entities are considered “unregistered platforms” and operate outside the regulatory oversight of SEBI.

According to SEBI, “Such unregistered platforms lack regulatory oversight and do not provide mechanisms for investor protection or grievance redressal.” The regulator further notes that the activities of these platforms “may potentially violate the Companies Act, 2013, the SEBI Act, 1992, and regulations framed thereunder.”

The November 2022 circular highlights that while OBPPs offer non-institutional investors easier access to the bond market, their unregulated operations pose risks. SEBI emphasises: “There is a need to place checks and balances in the form of transparency in operations and disclosures to investors, mitigation of payment and settlement risk, and availability of redress mechanisms in case of complaints.”

The circular further specifies that OBPPs must obtain registration as stock brokers in the debt segment and comply with requirements, including robust technology systems, KYC verification, investor grievance redress mechanisms, and risk management frameworks, before operating.

It also mandates regular disclosure of transaction details, pricing, yields, and other essential information to investors on a fair and non-discriminatory basis.

In line with its mandate, SEBI has issued interim orders against certain unregistered entities, including on November 18, 2024, and urges investors to exercise caution. The regulator strongly recommends that investors verify the registration status of OBPPs before transacting and deal only with SEBI-registered entities to safeguard their interests.

Key advisory for investors

• Verify OBPP registration before transacting.

• Deal only with entities registered with SEBI and the stock exchanges.

Registration verification links

SEBI reiterates: “All market participants must ensure compliance with the applicable regulatory framework before offering services like Online Bond Platform Providers.”

The newly added unauthorised forex trading platforms to the Alert List are Starnet FX, CapPlace, Mirrox, Fusion Markets, Trive, NXG Markets and Nord FX.