SEBI Cracks Down on 4 Platforms for Violating Securities Laws

The Securities and Exchange Board of India (SEBI) has issued a cease-and-desist order against four unregistered online platforms. The unregistered online platforms (UOPs) involved are AI Growth Pvt Ltd, the owner of altGraaf; Texterity Pvt Ltd, the operator of altGraaf; Purple Petal Invest Pvt Ltd, the owner and operator of Tap Invest; and Berkelium Technologies Pvt Ltd, the owner and operator of Stable Investments. The market regulator found these platforms in violation of securities regulations and has instructed them to halt offering securities for public subscription or facilitating their sale to the public.

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SEBI's interim order, dated November 18, 2024, revealed that these platforms facilitated the public sale of NCDs initially issued via private placements. This practice contravenes the Companies Act, 2013, the SEBI Act, 1992, and related regulations, which clearly differentiate between public issues and private placements.

Private placements are meant for a restricted group of up to 200 pre-identified investors annually and are subject to limited compliance requirements. On the other hand, public issues require more detailed information to be shared, such as getting credit ratings and hiring registered professionals like merchant bankers and debenture trustees. SEBI flagged the platforms for blurring this regulatory line and exposing retail investors to significant risks.

altGraaf, claims to have raised over ₹4,400 crore for 75 companies and onboarded 1.86 lakh users as of November 18, 2024. Tap Invest claims that it has facilitated ₹400 crore in fundraising for over 100 companies and has a user base of more than 25,000. Stable Investments did not disclose its financial activity details. SEBI found that these platforms subscribed to NCDs issued through private placements and later sold them to the public, violating investor limits and compliance requirements.

Ashwani Bhatia, whole-time member of SEBI noted, “The distinction between public issues and private placements is not merely procedural, but a fundamental safeguard, ensuring that public investments are protected through rigorous oversight. Allowing such unauthorised platforms to mushroom and operate unchecked would undermine this critical framework and expose the public to significant risk.”

SEBI’s order highlighted that these platforms lacked proper safeguards, such as following investor limits and registering as required by law. SEBI explained that these issues put investors at risk and weaken the trust and stability of financial markets.

The order further noted, “Allowing such unauthorized platforms to mushroom and operate unchecked would expose the public to significant risk. Interim ex-parte directions are warranted to preserve market integrity.”

SEBI has provided the accused platforms a 21-day period to file their responses. Meanwhile, the investigation into potential collusion between these platforms and issuing companies remains ongoing.

In Conclusion

As per SEBI’s framework, online bond platform providers (OBPPs) must register with stock exchanges as stockbrokers in the debt segment to operate legally. In its routine inspections, SEBI identified several platforms engaging in unregulated activities, including offering unlisted NCDs to retail investors without ensuring necessary compliance.

This decisive action by SEBI reaffirms its commitment to safeguarding investor interests and maintaining market transparency. By addressing violations and holding platforms accountable, the regulator aims to reinforce the critical distinction between public and private securities issuance.