The Securities and Exchange Board of India (SEBI) on Wednesday, 17 June issued a renewed caution to investors against buying, selling, or transacting in unlisted securities of public limited companies through unauthorised electronic platforms and websites. The warning comes despite earlier advisories the regulator had issued in December 2024 and August 2016, underscoring a persistent compliance gap.

What SEBI Said

In an official statement, SEBI reiterated that several platforms continue to facilitate trading in unlisted stocks in defiance of previous warnings. 'Investors are once again cautioned about the risks in conducting any transactions/trading on such electronic platforms or sharing any sensitive personal details on the same as these platforms are neither authorised nor recognised by SEBI,' the regulator said.

SEBI also advised investors to refrain from sharing sensitive personal information on these platforms, which operate outside the regulatory framework.

Risks to Investors

Investors who transact through unauthorised platforms may forfeit critical regulatory safeguards available in the formal securities market. These include investor protection benefits under SEBI and stock exchange jurisdiction, grievance redressal mechanisms, and online dispute resolution facilities provided through recognised exchanges and depositories.

The regulator stressed that only recognised stock exchanges are authorised to provide platforms for fundraising and trading in securities in India.

Broader Pattern of Unauthorised Activity

This is not an isolated warning. SEBI has previously cautioned investors against unauthorised virtual trading platforms offering paper trading, fantasy trading games, and simulated investment products. Similar advisories have been issued against unregistered online platforms facilitating transactions in unlisted debt securities. The recurrence of such warnings signals that enforcement gaps continue to allow non-compliant platforms to attract retail participation.

Notably, the proliferation of such platforms has coincided with a surge in retail investor interest in pre-IPO and unlisted shares, a segment that carries significantly higher risk and lower transparency than exchange-listed instruments.

What Investors Should Do

SEBI has advised investors to verify the regulatory status of any platform before carrying out securities-related transactions. All trading and investment activity should be conducted exclusively through authorised and regulated market infrastructure institutions — including recognised stock exchanges and registered depositories.

With retail participation in financial markets at record levels, the regulator's repeated warnings point to an urgent need for investor awareness campaigns and stronger platform-level enforcement in the months ahead.