Buying unlisted shares online? SEBI cautions investors about risks on unauthorised platforms

The regulator said it has noticed certain platforms facilitating transactions in unlisted securities but clarified that such platforms are not approved or recognised by SEBI.

"Investors are once again cautioned about the risks in conducting any transactions or trading on such electronic platforms or sharing any sensitive personal details on the same as these platforms are neither authorised nor recognised by SEBI," the regulator said.

The warning is important because investors using such platforms may not receive the same protection available in the regulated securities market. If a dispute arises, investors may not be able to access formal investor protection mechanisms or grievance redressal channels.

SEBI said that investors dealing through such platforms will not have access to "benefits of investor protection under SEBI/Exchange(s) jurisdiction" and may also not be able to use the "investor grievance redressal mechanism administered by Exchange(s) or the online dispute resolution mechanism administered by Exchanges/Depositories."

The regulator reiterated that investors should rely only on authorised market infrastructure when dealing in securities.

"It is to reiterate that only recognised stock exchanges are authorised to provide a platform for fund raising and trading in securities," SEBI said.

SEBI has earlier issued similar warnings against unauthorised online platforms offering virtual trading, paper trading, fantasy trading games and unregistered platforms dealing in unlisted debt securities.

Before investing in unlisted shares, investors should check the platform’s regulatory status, understand the risks involved, and avoid being influenced only by promises of high returns or early access to private company shares. In the securities market, regulatory protection is an important part of investment safety.