India's Securities and Exchange Board of India (SEBI) has ordered four unregistered online platforms (UOPs) to halt their operations involving the public subscription of unlisted securities on their platforms. The UOPs are AI Growth Pvt Ltd (owner of altGraaf), Texterity Pvt Ltd (operator of altGraaf), Purple Petal Invest Pct Ltd (owner and operator of Tap Invest) and Berkelium Technologies Pvt Ltd, the owner and operator of Stable Investments.
SEBI says these entities facilitated the public sale of privately placed unlisted non-convertible debentures (NCDs) which is a violation of regulatory guidelines and potentially puts public investments at risk.
In
an interim order, Ashwani Bhatia, whole-time member (WTM) of SEBI, says, "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 unauthorized 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."
After noticing the mushrooming of online marketplaces offering investment opportunities in NCDs, particularly to non-institutional investors, in 2022, SEBI introduced a regulatory framework for online bond platform providers (OBPPs).
During its routine surveillance, the market regulator found that these three online platforms, which were not registered as per SEBI's norms, solicited and sold unlisted NCDs to retail investors.
In one case, SEBI noted that as of 20 October 2024, unlisted NCDs issued by Sri Merusri Properties Pvt Ltd (Sri Merusri), a Bengaluru-based real estate developer, were offered on the altGraaf platform. Sri Merusri initially offered unlisted NCDs worth Rs4 crore in a private placement to Texterity which operates the altGraaf platform. After that, the NCDs were down-sold to the public by Texterity through the altGraaf platform, SEBI says.
Further, SEBI says the Sri Merusri offer was accessible to the general public, allowing anyone registered on the platform to purchase the NCDs offered for subscription.
"In most of the instances, it was noted that the operators of the platforms were allotted securities directly by the issuers. The securities, so allotted, were warehoused by the operators and sold to the general public. Interestingly, in some instances, the securities were acquired by the platform subsequent to the private placement. There appear to be no direct transactions between the issuer and the platform," SEBI says.
The market regulator also found that altGraaf and Stable Investments had made disclosures to the effect that transactions facilitated on the respective platforms or that the products offered thereon were in compliance with the applicable provisions of the Companies Act and SEBI Regulations. "Such disclosures appear to be misleading and therefore the transactions facilitated through the said platforms tantamount to mis-selling of securities."
From the disclosures made on the altGraaf website, SEBI found that the platform onboarded 75 companies and a total amount of more than Rs4,400 crore was raised through the platform as of 18 November 2024. From the Tap Invest platform, it is observed that it has onboarded more than 100 companies and raised more than Rs400 crore through the platform as of 18 November 2024. SEBI says the investigation is necessary with respect to both these platforms and for Stable Investments, where the data was not readily available.
SEBI noted that altGraaf claims to have over 1.86 lakh investors or users and Tap Invest claims to have over 25,000 investors-users. Further, in the present matter, where the distinction between public and private securities has been consciously blurred, and given the scale of operation of these platforms, the market regulator says the need for regulatory intervention cannot be disputed.
While directing these four platforms to cease and desist from offering securities for public subscription or from being offered for sale, SEBI ordered altGraaf, its operator Texterity, Purple Petal Invest-owned Tap Invest and Berkelium Technologies, the owner and operator of Stable Investments, to preserve all records and communications regarding the offerings made available on their platforms from their inception.
