In a bid to safeguard gullible investors against risky investment products, capital markets regulator SEBI cautioned against dealing with foreign websites and online trading portals that are offering a variety of financial products including various types of derivatives, which are traded on overseas platform. The watchdog noted that many of these firms attract and clients solicit their business through various means of communications such as electronic messages, blogs, advertisements, websites and emails, offering free online registration without complying with even the basic Know Your Customer (KYC) procedures.
These services often offer high level of leverage, low brokerage and other incentives for trading on overseas platform/exchange, SEBI said. These firms and websites any not under the supervision of any Indian regulatory body, SEBI said. Notably, the regulatory authority said, “..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.”
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Hence, it cautioned investors to “avoid participating in such unregulated web portals or entities offering transactions in securities (including derivatives) which are executed or undertaken on the terminal of foreign exchanges or platforms”.
SEBI also said that investors that have dealings with such web portals will not have recourse to dispute resolution mechanism and investor grievance redressal mechanism like investors who trade in recognised exchanges in India. “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,” said SEBI.