SEBI Bars 3 ‘Unregistered’ Online Platforms From Selling NCDs

The Securities and Exchange Board of India (SEBI) has barred three online platforms, namely altGraaf, Tap Invest and Stable Investments, from selling unlisted bonds with immediate effect. 

In an interim ex-parte order, the market regulator said that the three platforms, during a routine surveillance, were found to be selling unlisted non-convertible debentures (NCDs) to retail investors without being registered with the regulator.

Accordingly, SEBI has now initiated a detailed probe to examine whether the three “unregistered online” platforms (UOPs) flouted provisions of the Companies Act, 2013, SEBI Act, 1992 and other norms by offering such services without a licence.

It is pertinent to note that SEBI mandates all online bond platform providers (OBPPs) to be registered as a stock broker in the debt segment of a recognised stock exchange. The rules were brought in to safeguard investors and curb the growing illegal online bond marketplaces. 

“… Allowing such unauthorised platforms to mushroom and operate unchecked would undermine this critical framework and expose the public to significant risk. Therefore, in order to preserve the integrity of the financial markets and prevent further investors from being exposed  to such unregulated platforms, interim ex-parte directions are warranted,” read the order. 

That said, SEBI has also now also ordered the three platforms to file its objections to the order within 21 days of the issuance of these directions. 

Founded in 2021 by Vineet Agrawal and Sourav Ghosh, altGraaf is an invest tech platform operated by AI Growth Private Limited, which also runs fintech startup Jiraaf. Curiously, Agrawal and Ghosh are also named as cofounders of altGraaf, as per Tracxn. 

On the other hand, Tap Invest, founded in 2021 by Nishchay Nath, Himanshu Chowdhary and Soumya Kushwaha, is also an investech platform that has reportedly raised $2.3 Mn to date and is backed by QED Innovation Labs, Snow Leopard Capital, among others. 

On similar lines, Stable Investments is a Mumbai-based startup, which was founded in 2022 by Kanishk Ranka, and offers fixed-income instruments to investors. 

In its order, the regulator disclosed that while the NCDs were issued to the three platforms via private placement, and, consequently, these debentures were put out for sale publicly. 

Elaborating on this, SEBI added, “In this case, the UOPs have flagrantly violated… regulatory demarcation by making available privately placed unlisted NCDs for public sale… Immediate regulatory intervention becomes critical in such cases, especially considering the scale of operations of these platforms…”.

Simply put, norms governing private placements are less stringent compared to public issues to safeguard investor interests. In this case, the three platforms allegedly bought NCDs via lax private placements and sold them to retail investors publicly, thereby “blurring” the lines between public and private financial instruments. 

Additionally, SEBI also flagged the scale of the operations of the three platforms. The regulator said that altGraaf had facilitated the sale of NCDs worth more than INR 4,400 Cr for 75 companies, adding that 1.86 Lakh users were registered on its platform as of November 18. 

It added that Tap Invest had raised more than INR 400 Cr for more than 100 companies till date and had more than 25,000 on its platform. The data for Stable investments was not available. 

The regulator also took note that the three platforms were giving the impression to their customers that the entire process was following regulatory principles. As such, SEBI could also invoke provisions of fraud against the three entities.