BSE issues caution to investors regarding unregistered online bond platform providers

Leading stock exchange BSE, in a recent circular, has cautioned investors over unregulated and unregistered entities offering services in the nature of online bond platform providers (OBPPs). All the entities, including fintech players, offering OBPP services must obtain due registration from the Stock Exchanges as mandated in SEBI orders.

Such unregistered platforms lack regulatory or supervisory oversight and do not provide for any mechanisms for investor protection or grievance redressal. Investors are urged to exercise caution and avoid transacting on unregistered online bond platforms, said the circular by BSE.

"The activities undertaken by such unregistered online platforms may potentially be in violation of the Companies Act, 2013, the SEBI Act, 1992, and regulations framed thereunder. SEBI in the past has issued an interim order on November 18, 2024, against few such entities," it added.

The exchange also advised investors to verify the registration status of the OBPPs prior to transacting, and deal only with SEBI-registered entities, in order to safeguard their interests. It also cautioned all market participants to ensure compliance with the applicable regulatory framework prior to offering any services as an online bond platform provider.

Registers and regulated bond market platforms have welcomed the move and such measures shall help the corporate bond market grow steadily and promote healthier market practices. They believe that a pro-active regulatory framework builds confidence and trust amongst investors and encourages genuine and compliant platforms to contribute meaningfully to the market development.

BSE’s caution on unregistered online bond platform providers marks an important step for India’s growing bond market. This makes it clear that several platforms have been offering OBPP-like services without proper registration, leaving investors exposed because essential safeguards and grievance mechanisms are missing, said Tushar Sharma, Co Founder at Bondbay.

"This is a stepping stone in the way of creating a safer and transparent environment for investors, at a time when retail investors are increasingly participating in the Bond Market, contributing to its deepening and expansion. Strong pro-investors regulation ensures that investors interact with platforms that work responsibly and adhere to the rules and regulations," he said.