SEBI Cautions Investors on Online Bond Market Risks

There has been another advisory from India’s markets regulator, this time asking investors to stay away from unregistered online bond platforms. The Securities and Exchange Board of India (SEBI) said it has recently seen more fintech companies and a few stockbrokers offering bond investments even though they have not taken the registration that became mandatory under the 2022 circular. The regulator views this as a worrying trend, especially since more retail investors are beginning to explore fixed income products through digital channels.

It raises the obvious question. Why is SEBI returning to this theme, and why now?

What Has Triggered This Renewed Warning to Investors?

SEBI explained that some of these platforms are helping investors buy unlisted debt securities while staying completely outside the regulated market structure. Because they are not supervised, they also do not have the usual investor safeguards in place. There are no standard processes for handling complaints, no dispute channels, and no formal protection framework. SEBI has also noted that such activity may run into issues under the Companies Act 2013 and the SEBI Act 1992.

This warning came not long after an interim order in November 2024, when the regulator acted against a few entities that were running similar operations. And this is not the only segment under watch. Last week, SEBI asked investors to be careful about buying digital gold from unregulated platforms. A year earlier, three unregistered online bond platforms - altGraaf, Tap Invest and Stable Investments were barred from operating without approval. Each update points in the same direction. SEBI seems keen to keep the market tidy as participation grows.

How Should Investors Protect Themselves?

The regulator has advised investors to check whether a platform is registered before making any investment. The information is available on SEBI’s website and through the compliance sections of NSE and BSE. SEBI has also reminded market intermediaries that services involving bond distribution or trading must follow the full regulatory process.

There is a simple rule behind this. When unlisted securities are offered to more than 200 investors, the activity is deemed to be treated as a public issue under the Companies Act. If this happens on an unregistered platform, the investor is left exposed. Disclosures may not be clear; the legal protections are limited and there is no reliable path to address disputes.

SEBI has also made it clear that any issue arising from transactions on unregistered platforms will not receive the same protections that apply when dealing with regulated intermediaries. This becomes important when some platforms advertise high or guaranteed returns without explaining how the product actually works.

Is SEBI’S Latest Warning A Sign of Broader Oversight Ahead?

The timing suggests that SEBI is reinforcing the idea that anything resembling bond issuance, broking or distribution must fall within the regulated system. With digital channels attracting more investors, the regulator appears to be drawing firmer boundaries now rather than later.

Conclusion

For investors, the safest practice is still considerably basic. Check whether the platform is registered and stick to regulated options wherever possible. This reduces the chance of running into complications and ensures proper recourse if something goes wrong. As more players enter the fixed income space, could this push for cleaner compliance eventually lead to a more stable and transparent bond investing landscape?

Sources

The New Indian Express