SEBI Expands Online Bond Platform Rules

The Securities and Exchange Board of India (SEBI) has expanded the scope of products and services that can be offered by Online Bond Platform Providers (OBPPs). This move allows OBPPs to list certain products regulated by the International Financial Services Centres Authority (IFSCA) as well as bonds issued under specified provisions of income-tax law.

SEBI introduced these measures following feedback from market participants, aiming to improve ease of doing business. The revised provisions have come into effect immediately.

Under the updated framework, online bond platforms can now offer products, securities, and services regulated by financial sector regulators including SEBI, the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority of India (IRDAI), IFSCA, and the Pension Fund Regulatory and Development Authority (PFRDA).

OBPPs can also offer bonds issued under Section 54EC of the Income Tax Act, 1961, as well as those issued under Section 85 of the Income-tax Act. For IFSCA-regulated products, platforms will have to follow the framework applicable to SEBI-registered stock brokers operating in GIFT-IFSC.

To distinguish these products from domestic debt securities, OBPPs must clearly identify IFSCA-regulated offerings as “international” or “overseas instruments”. Platforms will also have to disclose the applicable grievance redressal mechanism to investors.

The revised framework lays down separate requirements for 54EC bonds. These instruments can be offered through a dedicated section on the online bond platform or through another website or platform.

OBPPs offering 54EC bonds will have to clearly inform investors that these are tax-specific instruments. Platforms must also state that complaints relating to these bonds will not fall under SEBI's grievance redressal mechanism and instead need to be addressed to the issuer.

In addition, platforms must disclose important information about 54EC bonds, including the eligible issuers, lock-in period, investment limits, and whether the securities can be transferred. Details concerning tax benefits, minimum or applicable application size, and exemption from listing requirements under SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations must also be provided.

SEBI has separately modified the compliance officer requirement for OBPPs. Under the earlier framework, platforms were required to appoint a Company Secretary as their compliance officer.

This expansion of online bond platform rules is expected to increase the range of investment options available to investors and improve the overall efficiency of the bond market in India.

The move is seen as a positive step towards developing the bond market and providing more opportunities for investors to participate in it. With the revised rules, OBPPs can now offer a wider range of products, making it easier for investors to access different types of bonds and securities.

Overall, the expansion of online bond platform rules by SEBI is a significant development in the Indian bond market, and it is expected to have a positive impact on the market's growth and development.

In terms of significance, this move is expected to benefit investors by providing them with more investment options and improving the overall transparency and efficiency of the bond market. It is also expected to benefit OBPPs by allowing them to offer a wider range of products and services, which can help to increase their business and revenue.

The expansion of online bond platform rules is also expected to contribute to the overall growth and development of the Indian economy, by providing more opportunities for investors to participate in the bond market and by improving the efficiency and transparency of the market.