Highlights:
- SEBI imposes a ban on four online platforms for distributing unlisted bonds and debentures.
- The platforms were found to be offering unlisted Non-Convertible Debentures (NCDs), violating regulatory norms.
- SEBI’s move aims to safeguard investor interests and ensure transparency in the securities market.
Regulatory Action: SEBI Cracks Down on Online Platforms Distributing Unlisted NCDs
On November 18, 2024, the Securities and Exchange Board of India (SEBI) took significant action against four online platforms for distributing unlisted Non-Convertible Debentures (NCDs), which are securities that had not been listed on a stock exchange. These platforms—AI Growth, Texterity, Purple Petal Invest, and Berkelium Technologies—have been banned from distributing such securities, as they were found to be operating without the necessary licenses or adherence to market regulations.
The platforms now banned by SEBI include:
- AI Growth, which owns and operates the platform altGraaf.
- Texterity, the owner of altGraaf.
- Purple Petal Invest, the parent company of Tap Invest.
- Berkelium Technologies, the operator of Stable Investments.
According to SEBI’s investigation, Tap Invest had raised over Rs 400 crore through its platform. Another prominent platform, altGraaf, managed by AI Growth, had facilitated the raising of more than Rs 4,400 crore in funds. Since its inception in 2021, Tap Invest secured $2.3 million in funding from high-profile investors such as Snow Leopard Capital and QED Innovation Labs. However, it was found that the platform had used unregistered securities to assist over 100 companies in raising capital, breaching SEBI’s regulations.
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Similarly, altGraaf is well-known for offering regulated investment platforms like Jiraaf, which has attracted support from investors such as Accel and Harmony Partners. Through its operations, altGraaf has helped 75 companies raise Rs 4,400 crore in securities. Despite this large-scale involvement, altGraaf was also found to be distributing unlisted NCDs, prompting SEBI’s intervention.
SEBI’s decisive action underscores the regulator’s commitment to ensuring investor protection and maintaining the integrity of India’s financial markets. By targeting these platforms, SEBI aims to reduce the risks posed by unlisted securities, which often lack transparency and regulatory oversight.
What Are NCDs? Understanding the Basics of Non-Convertible Debentures
For those unfamiliar with investment terminology, Non-Convertible Debentures (NCDs) are a type of fixed-income security issued by companies to raise capital. Unlike convertible debentures, NCDs cannot be converted into equity shares of the issuing company, meaning they remain as debt instruments throughout their term. Investors receive periodic interest payments, and at maturity, the principal amount is repaid.
NCDs are typically considered safer investments than stocks due to their fixed interest rate. However, they also come with their own set of risks, especially when issued by companies with weak credit ratings or when they are unlisted, as in the case of the banned platforms.
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What Should Investors Consider While Investing in the Share Market as Per SEBI?
Investing in the share market can be rewarding, but it comes with risks. As per SEBI, here are key factors every investor should consider before jumping into the market:
- Know Your Risk Appetite: Always assess your financial goals and risk tolerance before investing.
- Do Your Research: Ensure you invest in well-researched stocks, bonds, or NCDs. Avoid investments that offer unrealistic gains.
- Branch Out Your Portfolio: Spread your investments across different asset classes to minimize risk.
- Choose Regulated Platforms: Ensure your investments are made through platforms regulated by SEBI or other recognized financial authorities.
- Avoid Unlisted Securities: Unless you are an experienced investor, avoid dealing with unlisted securities or those that aren’t fully transparent.
Where and How to Lodge a Complaint If Any Issues Arise
In case of any grievances or issues related to investments, SEBI has set up mechanisms for investors to lodge complaints. You can submit complaints online through the SEBI Complaints Redress System (SCORES) portal. Here’s how:
- Visit the SCORES website (https://scores.sebi.gov.in).
- Register and create an account.
- File your complaint related to market misconduct, fraudulent practices, or issues with online platforms.
- You will receive a unique reference number, and SEBI will track the progress of your complaint.
Additionally, if the issue is with a listed company or an exchange, you can approach the concerned stock exchanges for resolution. SEBI also provides educational resources and helplines for investors to enhance awareness about market risks.
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Conclusion
SEBI’s recent crackdown on these four online platforms highlights the need for proper due diligence when investing, as well as the importance of engaging with SEBI-regulated platforms to ensure the safety of your investments. Always stay informed and make investment decisions based on reliable, transparent information to protect your financial future.
