SEBI Cracks Down on 4 Bond Platforms for Illegal Operations

The Securities and Exchange Board of India (SEBI) has ordered four online bond platforms to stop their operations immediately. These platforms were found offering securities to the public without proper registration with stock exchanges.

Platforms Under SEBI’s Radar

The platforms affected include:

1. altGraaf (run by AI Growth and Texterity)
2. Tap Invest (owned by Purple Petal Invest)
3. Stable Investments (operated by Berkelium Technologies)

Why SEBI Took Action

SEBI’s rules require online bond platforms to register as stock brokers in the debt segment of a stock exchange. However, during its routine surveillance, SEBI discovered that these platforms were selling unlisted non-convertible debentures (NCDs) directly to retail investors.

Key violations identified:

• Unregistered Operations: These platforms were not registered as required.
• Public Sales of Private Securities: They offered privately-placed unlisted NCDs to the general public, which SEBI says resembles a public issue under the Companies Act.

Private placements are legally limited to a maximum of 200 pre-identified investors per financial year. SEBI noted that these platforms structured their offerings to bypass these rules.

How It Worked

The platforms acquired unlisted NCDs directly from issuers and stored them. They then resold these securities to the public, effectively blurring the lines between private and public issues.

Why This Matters

Ashwani Bhatia, a whole-time member at SEBI, emphasized that the distinction between public and private issues is critical for investor protection. By ignoring these safeguards, these platforms exposed investors to high risks.

SEBI’s investigation also highlighted the scale of operations:

• altGraaf: 75 companies onboarded, raising over ₹4,400 crore.
• Tap Invest: Over 100 companies onboarded, raising more than ₹400 crore.

What’s Next?

SEBI’s intervention aims to shut down unregulated activities that could harm retail investors. This move underscores the importance of strict oversight in the financial markets to ensure public safety and maintain trust.