UNREGULATED BOND PLATFORM MENACE Go with regulated entity: Listed bonds subject to ratings, oversight

The Securities and Exchange Board of India (Sebi), through a circular dated December 5, 2024, warned investors against transacting on unregulated online bond platforms that promote unlisted securities.

- HIMALI PATEL

The circular highlighted that these platforms are not subject to any regulatory or supervisory oversight, and lack basic investor protection or grievance redress mechanisms.

"Unlisted securities, issued by smaller companies, often promise high interest rates of 15-18 per cent to attract investors. They may be complex, structured credit products that investors may not fully understand as they come with inadequate information," says Vishal Goenka, co-founder, IndiaBonds.com.

Unregulated platforms: A risky proposition

Unregulated platforms expose investors to counterparty risk.

"An investor transfers money to the platform's account. The latter in turn transfers securities to the investor's account. There is a counterparty risk that the platform may abscond with the money without transferring the securities," says Anshul Gupta, co-founder and chief investment officer (CIO), Wint Wealth.