The Securities and Exchange Board of India (SEBI) has issued a fresh advisory warning investors against engaging in trading activities through unregistered intermediaries, web applications, and online platforms offering virtual trading, paper trading, or fantasy gaming services based on stock prices. According to SEBI, these entities are in violation of the Securities Contract (Regulation) Act, 1956, and SEBI Act, 1992, as they operate without authorization.
Key Points of SEBI’s Advisory:
- Risks of Unauthorized Platforms:
- Investors trading through unregistered platforms are unprotected under SEBI’s jurisdiction and related mechanisms.
- Unauthorized platforms often use real-time stock price data of listed companies for fantasy trading or simulated markets, misleading users about their legitimacy.
- Investor Protection Limitations:
- Those engaging in activities on these platforms, including sharing sensitive personal and financial information, do so at their own risk.
- Investors using unauthorized platforms cannot avail themselves of SEBI’s investor grievance redressal system, including SEBI Complaints Redress System (SCORES), or any online dispute resolution facilitated by Exchanges or Depositories via in.
- Previous SEBI Warnings and Regulations:
- SEBI previously issued a similar warning in 2016 to curb unauthorized trading activity.
- In May 2024, SEBI mandated Market Infrastructure Institutions (MIIs) and registered market intermediaries to restrict sharing of real-time price data with unauthorized third parties, aiming to control data misuse by unauthorized platforms.
What Investors Should Know:
- Avoid Engagements with Unregistered Platforms: SEBI emphasizes the risks associated with engaging on unregistered platforms that do not provide official stock market trading or investment services.
- Stay Within SEBI-Authorized Channels: For safe and regulated trading, SEBI advises investors to use only SEBI-registered platforms and intermediaries, which fall under SEBI’s protective framework and investor grievance mechanisms.
Conclusion
SEBI’s advisory seeks to protect investors from risks posed by unregulated entities using virtual stock trading as a lure, underscoring the importance of trading only through registered platforms. By remaining cautious, investors can avoid potential losses and data security risks while ensuring their activities stay within SEBI’s protection and regulatory framework.
