SEBI has now launched a comprehensive probe to find out whether the three ‘unregistered online’ platforms have flouted norms by offering such services without a license.

Allowing such unauthorized platforms to grow and operate unchecked would expose the public to significant risks, SEBI said.

Current SEBI rules require all OBPPs to be registered as a stock broker in the debt segment of a recognized stock exchange.

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

In an ex parte interim order, the market regulator said the three platforms, during routine monitoring, sold unlisted non-convertible debentures (NCDs) to retail investors without being registered with the regulator.

Accordingly, SEBI has now launched a detailed investigation to examine whether the three ‘unregistered online’ (UOP) platforms have flouted the provisions of the Companies Act, 2013, the SEBI Act, 1992 and other norms in offering such services without a license.

It is relevant to note that SEBI requires all online bond platform providers (OBPPs) to register as stock brokers in the debt segment of a recognized stock exchange. These rules were put in place to protect investors and curb the growth of illegal online bond markets.

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

That said, SEBI has also directed the three platforms to file their 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 investment technology platform operated by AI Growth Private Limited, which also runs fintech startup Jiraaf. Interestingly, Agrawal and Ghosh are also named as co-founders of altGraaf, according to Tracxn.

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

Along the same lines, Stable Investments is a Mumbai-based startup, founded in 2022 by Kanishk Ranka, and offers fixed income instruments to investors.

In its order, the regulator revealed that although the NCDs were issued on the three platforms through a private placement, these debentures were consequently put up for sale publicly.

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

Simply put, the standards governing private placements are less stringent than those governing public issues in order to protect the interests of investors. In this case, the three platforms allegedly purchased MNTs through lax private placements and sold them publicly to retail investors, thus “blurring” the lines between public and private financial instruments.

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

He added that Tap Invest has raised over INR 400 Cr so far for over 100 companies and has over 25,000 on its platform. Data for stable investments was not available.

The regulator also noted that all three platforms gave their customers the impression that the entire process complied with regulatory principles. As such, SEBI could also invoke provisions relating to fraud against the three entities.