Sebi warns investors against trading unlisted shares on unauthorised online platforms
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The Securities and Exchange Board of India (Sebi) on Wednesday issued a fresh caution to investors against dealing in securities of unlisted public limited companies through unauthorised electronic platforms and websites, saying such entities do not operate under its regulatory oversight.
The markets regulator said it has observed the emergence of several online platforms facilitating transactions in unlisted securities of public limited companies, exposing investors to significant financial and operational risks.
Sebi reiterates earlier warnings
In a statement, Sebi referred to advisories issued in December 2024 and August 2016, reiterating that investors should avoid conducting transactions or sharing sensitive personal information on such platforms.
The regulator also drew attention to its earlier warnings regarding unauthorised virtual trading platforms offering paper trading services, fantasy gaming-linked investment products and online platforms dealing in unlisted debt securities.
"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.
Only recognised exchanges can facilitate trading
Sebi emphasised that recognised stock exchanges alone are authorised to provide a platform for fund-raising and trading in securities. Investors have been advised to verify the status of any platform before undertaking transactions.
According to the regulator, investors who choose to transact on unauthorised platforms will not be entitled to the safeguards available within the regulated securities market ecosystem.
Investors may lose access to protections
The watchdog noted that participants using such platforms could be deprived of investor protection benefits available under Sebi's regulatory framework, including access to stock exchange-administered grievance redressal systems and the online dispute resolution mechanism operated by exchanges and depositories.
As a result, Sebi urged investors to exercise caution, verify the legitimacy of trading platforms and avoid sharing personal or financial information with unregulated entities.
Context: Rising interest in unlisted shares triggers regulatory concerns
The warning comes amid growing retail investor interest in unlisted shares of companies that are either preparing for public listings or are perceived as potential IPO candidates. Over the past few years, trading in shares of privately held and pre-IPO companies has increasingly migrated to digital platforms that connect buyers and sellers outside recognised stock exchanges.
Market participants have frequently shown interest in acquiring stakes in high-profile unlisted firms in sectors such as financial services, technology, consumer internet and infrastructure in anticipation of future listings. However, unlike transactions executed through recognised exchanges, trades in unlisted securities often suffer from lower transparency, limited price discovery and settlement-related risks.
Sebi has repeatedly flagged concerns over investor protection, particularly where online platforms create the impression of being regulated marketplaces despite lacking formal authorisation. The regulator's latest advisory underscores its effort to channel securities transactions through recognised and regulated market infrastructure while curbing risks arising from informal trading ecosystems.