SEBI Introduces Guidelines on Offerings by Online Bond Platform Providers

SEBI, the Securities and Exchange Board of India, has implemented guidelines aimed at regulating online bond platform providers (OBPPs). These guidelines restrict the offering of products other than listed debt securities on these platforms.

However, certain permitted securities, such as government securities and listed sovereign gold bonds, can be offered. This move comes after SEBI observed non-compliance by certain OBPPs, which prompted the need for stricter regulations.

SEBI's Guidelines on Product Offerings by Online Bond Platform Providers

SEBI has issued guidelines that limit the scope of offerings by online bond platform providers. The regulator specifies that OBPPs can only offer listed debt securities and a select range of permitted securities on their platforms.

These permitted securities include government securities, Treasury Bills, listed sovereign gold bonds, listed municipal debt securities, and listed securitized debt instruments.

Registration and Compliance Requirements

To ensure compliance with the guidelines, online bond platform providers are required to register themselves as stockbrokers in the debt segment of the stock exchange.

This registration enables SEBI to oversee their operations and ensure investor protection. Providers must strictly adhere to the prescribed rules and cease offering any products or services not permitted under the regulations.

Prohibitions and Naming Restrictions

SEBI's guidelines also prohibit the use of the online bond platform provider's name, brand name, or any similar name by its holding company, subsidiary, or associate for offering products and services outside the purview of financial sector regulators.

This measure prevents the misuse of the platform's reputation for unregulated offerings, thereby protecting investors' interests.

Non-Compliance and NCS Regulations

SEBI's decision to introduce these guidelines stemmed from observations of non-compliance by certain OBPPs. These platforms were found to be offering products other than listed debt securities, including unlisted bonds, through separate platforms or websites.

Such practices are in contravention of the NCS (Issue and Listing of Non-Convertible Securities) Regulations. The new framework aims to address these concerns and bring all offerings within the regulatory framework.

Key highlights of the new framework

• OBPPs will only be allowed to offer listed debt securities.

• OBPPs will need to register themselves as stock brokers in the debt segment of the stock exchange.

• The holding company, subsidiary, or associate of an OBPP will not be allowed to use the name, brand name, or any name resembling that of the OBPP for offering products and services that are not regulated by a financial sector regulator.

What does this mean for investors?

The new framework will give investors more confidence in investing in debt securities through OBPPs. This is because the securities offered on OBPPs will now be regulated by SEBI.

What are the next steps?

OBPPs will need to comply with the new framework within a specified time frame. SEBI will also be monitoring the activities of OBPPs to ensure that they are complying with the rules.

Conclusion:

SEBI's guidelines on product offerings by online bond platform providers aim to ensure compliance, investor protection, and a level playing field within the bond market.

By restricting the offerings to listed debt securities and permitted securities, SEBI seeks to safeguard investors' interests.

Online bond platform providers are now required to register as stockbrokers and comply with the regulations to continue operating in this space. This move strengthens SEBI's oversight and reinforces the regulatory framework governing the operations of OBPPs.