Sebi cautions investors over dealing with foreign trading portals
31 October 2018
Market regulator Securities and Exchange Board of India (Sebi) has issued an advisory cautioning investors against the so-called services offered by various firms through online web portals to trade in a variety of financial products, including various types of derivatives, which are apparently traded on overseas platform/exchange.
These firms are operating from overseas, but providing/offering services to Indian residents. These firms/entities in order to attract clients solicit their business through various means of communications such as electronic messages, blogs, advertisements, websites, emails, leaflets/pamphlets, apps, calls etc, and also many such entities/portals offer free online registration without complying with the basic Know Your Customer (KYC) procedures and often offer high level of leverage, low brokerage and other incentives for trading on overseas platform/exchange. Such firms/web-portals/platforms are not supervised by any regulatory body in India, Sebi said.
Further, the inherent complexity of the products offered by such firms/web-portals/platforms may not suit the risk profile of the investors and their excessive leverage can result in significant losses to investors, Sebi has warned.
In view of above, all investors are cautioned to avoid participating in such unregulated web portals / entities offering transactions in securities (including derivatives) which are executed or undertaken on the terminal of foreign exchanges/platforms, the regulator stated in its advisory.
Sebi has warned investors that for any kind of claim/dispute relating to such participation or enforcement of any agreement/contract/claim etc, the following recourses shall not be available to them:
Rights of investors under bye-laws/regulations of Recognised Stock Exchange(s) and investor protection will not be available to investors under Indian securities laws. This will exclude the investor from the dispute resolution mechanism and investor grievance redressal mechanism administered by recognised stock exchanges in India, it added.