SEBI has identified some online bond platforms that continue to offer unlisted bonds or non-compliant products or offer them on other related platforms and websites.
Securities and Exchange Board of India (Sebi) on June 16, 2023, permitted online bond platform providers to offer government securities, sovereign gold bonds and several other instruments, enhancing investors' options. The markets regulator also barred them from offering unlisted bonds and made several other restrictions improving investors' confidence.
Online Bond Platform Providers
Online bond platform providers operate electronic systems for 'offering or transacting' listed or proposed-to-be-listed debt securities, excluding recognised stock exchanges or electronic book provider platforms.
Guidelines & Non-Compliance By Certain OBPPs
On November 14, 2022, Sebi asked online bond platform providers to limit their offerings to listed debt securities and those proposed for public offering.
However, SEBI has identified some online bond platforms that continue to offer unlisted bonds or non-compliant products or offer them on other related platforms and websites. It observed that some platforms didn't divest themselves of non-compliant products after the 2022 circular.
New Guidelines Expand Offerings
"A holding company, subsidiary or associate of an Online Bond Platform Provider or any third party shall not utilise the name/ brand name/ any name resembling that of the Online Bond Platform Provider or the Online Bond Platform for undertaking any activity or offering products/ securities or services (including the offering of unlisted securities) that are not regulated by a financial sector regulator viz. SEBI, RBI, IRDAI, or PFRDA," the release said.
Any separate platforms or websites providing such non-compliant offerings must be divested. Additionally, providers must remove any links or tabs on their platforms that direct users to such offerings.
Says Vishal Goenka, Co-founder of IndiaBonds.com, a SEBI-registered Online Bond platform Provider (OBPP), welcomed "SEBI's quick response to market feedback regarding offerings on the OBPP." According to him, the circular aims at investor protection by ensuring the separation of listed securities from unlisted bonds and promotes transparency, thus boosting investor confidence in the growing market. He feels that these steps are important, especially when the industry is in a nascent stage, with most non-institutional investors not well-versed in the benefits of direct bonds and fixed-income investments.
Further, SEBI received representations from online bond platform providers seeking permission to offer additional regulated and listed securities on their platforms, such as government securities and commercial papers.
In response to these requests, Sebi permitted the inclusion of these on platforms– listed municipal debt securities, securitised debt instruments, listed Government Securities, State Development Loans, Treasury Bills, and listed Sovereign Gold Bonds.
"For any vibrant fixed-income market to develop, government securities are at the core of investment in a credit continuum. By allowing Government securities and Sovereign Gold Bonds to be offered on OBPPs, investors now have a choice of bond investments as per their risk appetite," Goenka says.