The Indian corporate bond market has long been an institutional market with very limited secondary market liquidity and minimal individual investor participation.
The Online Bond Platform Providers (OBPPs), SEBI-registered digital marketplaces in India that lets retail and non-institutional investors buy and sell listed corporate bonds, government securities (G-Secs), and debentures directly, have tried to fix that by providing an online platform via which investors can discover, compare and transact in the permitted debt securities. Access may be wider as a result of the online platform but that does not necessarily lead to informed investment decisions or a proper understanding of credit, liquidity and market risk. A retail investor may well come across a headline yield, a credit rating, a product ranking or a very straightforward purchase process prior to even looking at the issuer's balance sheet and the actual terms of the security.
The interface can have a huge bearing on how the product is viewed. A corporate debenture might be seen as a very good substitute for a bank fixed deposit, despite the fact that the legal protections, the credit risk, the liquidity and the certainty of repayment are all very different. The problem is not that digital design per se is wrong, but is that design and presentation can have an effect on the decision to invest and that therefore it is something that ought to be subject to regulation. The distribution process can involve a number of parties. The issuer provides the information about the security. The OBPP may be the one that displays, markets or facilitates the transaction. A channel partner may be the one to introduce the investor, provide the product information or solicit the transaction. Where a representation is in issue, each of those parties can point to another as the source of the information or the source of the decision. That fragmentation can lead to an accountability gap. Equally, an issuer's default will not in itself establish wrongdoing on the part of the platform.
The issue is whether intermediary accountability should be based purely on their formal regulatory classification or whether it should also take into account the functions they perform, the influence they have over investor choice and the degree of control they have over the distribution process. A function sensitive but legally bounded approach is required. The duties that arise will be those arising from the applicable law, the intermediary's regulated activities and the relevant standards. The reforms should be designed to address the risks associated with promotion, curation and channel based distribution.
The overarching framework for investor protection and the regulation of the securities market is the Securities and Exchange Board of India Act, 1992 (the "SEBI Act"). In Sahara India Real Estate Corporation Ltd. v. Securities and Exchange Board of India, 2012 INSC 367, decided 31st August 2012, the Supreme Court held that the optionally fully convertible debentures issued by the Sahara companies were public issues of securities within the jurisdiction of SEBI. The Court characterised the SEBI Act as a special law which is in addition to and not in derogation of other laws. That decision confirms the scope of SEBI's powers, but does not give rise to a separate doctrine of functional liability in respect of online bond platforms.
Chapter VI-A of the SEBI Act deals with penalties and adjudication. Section 15HA provides for penalties in cases of fraud and unfair trade practices and Section 15J requires the adjudicating officer to take into account the amount of disproportionate gain or unfair advantage, the loss caused to investors, and the repetitive nature of the default. SEBI has initiated adjudication against an entity which is registered as a stock broker and is also acting as an OBPP in an order dated November 2025 for non-compliance with the OBPP framework.
The regulatory provision for platforms is Regulation 51A of the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 ("NCS Regulations"). Regulation 51A(1) states that "no person shall act as an online bond platform provider without a certificate of registration from the Board as a stock broker under the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992".
Regulation 51A(2) states that "such person shall comply with the conditions of registration and such other requirements as may be specified by the Board from time to time". The Chapter was brought into force with effect from 9th November 2022. Regulation 51A(3) permits a person who is already acting as an OBPP to continue for a limited period until such time as they are registered.
The registration framework was laid down in SEBI's circular of 14th November 2022 and is contained in the Master Circular dated 15th October 2025 (SEBI/HO/DDHS/DDHS-PoD/P/CIR/2025/0000000137) as amended from time to time. It has to be read in conjunction with the subsequent circulars and not as a static document. The Master Circular sets out the products an OBPP may offer, the minimum disclosures required for each security, the operating standards and an advertisement code. The minimum disclosures for each security must include its rating, the rating date and rating agency, the rating rationale, the coupon, the current yield and yield to maturity and the calculation of those yields.
The advertisement code requires advertisements to be accurate, true, fair, clear, complete, unambiguous and concise. It is expressly prohibited to make any statement which is false, misleading, biased or deceptive and it is also prohibited to use any form of testimonial or any ranking on any basis.
All advertisements must contain a standard warning which, since 28 December 2023, has read: "Investments in debt securities / municipal debt securities / securitised debt instruments are subject to risks including delay and/or default in payment. Read all the offer related documents carefully". No words may be added or deleted. The NCS Regulations define "advertisement" to include notices, brochures, pamphlets, catalogues, websites and any other form of printed or digital medium. That definition is of course relevant to the question of whether a platform's own listing pages would be caught by the code, a point considered below.
SEBI's circular of 14th August 2026 entitled "Modification in the regulatory framework for Online Bond Platform Providers (OBPPs) including measures for promoting ease of doing business" amends the NCS Master Circular. Among other things it broadens the product range to include certain products which are themselves regulated by other financial sector regulators.
Such products may be offered via a separate tab or on a separate platform and would still be subject to the directions of the respective regulator. The wider product menu will of course mean that the number of rule sets that an OBPP will have to deal with will increase and the issue of allocation discussed below will be even more acute.
The SEBI (Investment Advisers) Regulations, 2013 are to be read with reference to their definitions and to the actual activity carried on. "Investment advice" is advice relating to the investing in, purchase of, sale of or otherwise dealing in securities for the benefit of the client (whether in writing, orally or by any other means). Trading calls and advice given through widely available public media are excluded. An "investment adviser" is a person who for consideration is in the business of giving investment advice.
Stockbrokers who give investment advice to their clients as an incident to their main business are exempt from registration. The exemption is subject to certain conditions. The broker must still comply with the general duties and responsibilities set out in Chapter III. These include the duty to act in a fiduciary capacity and to disclose any conflicts of interest. They must also obtain a client's risk profile, assess suitability and ensure that the client is properly aware of the warnings and disclaimers that will be contained in the advertising material for the product being recommended.
In N. Narayanan v. Adjudicating Officer, SEBI 2013 INSC 287, decided on 26th April 2013, the Supreme Court stated that disclosure and transparency are the two pillars upon which market integrity is built. Market abuse was defined as the use of manipulative and deceptive devices and the dissemination of false or misleading information with a view to inducing investors to come to conclusions on wrong premises. The case was about the duties of the directors of a listed company and has nothing to do with digital interface design or bond platform advertising. The Court's observation that a media projection made with a view to gain a benefit from a position in securities would amount to market abuse is of relevance by analogy to paid promotion on platforms. It is not a holding in respect of platforms.
In Chairman, SEBI v. Shriram Mutual Fund, 2006 INSC 353, decided on 23 May 2006, the Supreme Court held that mens rea is not an essential ingredient of a contravention of a civil statute. A penalty is attracted as soon as the contravention of the statutory obligation is established. Unless the statute requires mens rea to be established, it is not necessary to establish that the contravention was intentional. The Court held that once the contravention is established the penalty has to follow and only the quantum of the penalty is discretionary.
The Supreme Court has again reaffirmed the civil penalty principle in Nilesh Shah v. Securities and Exchange Board of India, 2026 INSC 681, decided on 13th July 2026, in the context of a mutual fund asset management company and associated parties. The principle is that a breach of a statutory provision is not in any way excused simply because investors have not suffered a loss or have in fact made gains. A disclaimer will not of course take away the obligation which the law has imposed. The principle will be applied to OBPPs in the case of an OBPP only where the relevant statutory or regulatory duty and its breach are established. It does not in any way create a rule of a particular kind of platform or render a disclaimer irrelevant in all circumstances.
In Securities and Exchange Board of India v. Kishore R. Ajmera, 2016 INSC 201, decided on 23.02.2016, the Supreme Court held that where there is no direct evidence, evidence may be inferred from the totality of the facts and circumstances. For civil liability under the SEBI Act and the regulations the test is preponderance of probabilities. For prosecution under section 24 the test is proof beyond reasonable doubt. The Court referred to the volume of trades, the period of persistence in a scrip, the proximity of the buy and sell orders and the volume of trading in illiquid scrips.
In Securities and Exchange Board of India v. Vedanta Ltd., 2026 INSC 978, decided on 9th September 2026, the Court considered the allegations of misleading buyback announcements and the evidence which would be sufficient to support a finding of fraud under the PFUTP Regulations. The Court was clear that inferences could be drawn from the surrounding circumstances but that one had to look at the material evidence and the material discrepancies. The Court remanded the issue of fraud to the SAT for fresh adjudication in the light of the material inconsistencies in the trading data. However, this judgment is in line with a disciplined approach and should not be read as establishing a special test for OBPP liability.
For platform cases, Kishore R. Ajmera and Vedanta (supra) are best viewed as authorities on evidentiary inference rather than as creating a presumption of liability. A pattern of circumstances may give rise to an inference but that inference must be one which is reasonably supported by the facts in the case and the legal elements in question must still be proved.
Disclosure and suitability are two very different things, disclosure being about the accuracy, completeness and clarity of the information provided to the investor, while suitability is about whether the recommendation is appropriate in the circumstances of the investor, in light of their own objectives and their own risk profile. A security can be fully disclosed and yet still be unsuitable for an investor who needs liquidity right away or who simply cannot afford to take a large loss.
The three types of platform conduct dealt with herein, must be read in the context of the existing rules. A platform which is simply enabling the execution of an investor's own decision is still governed by the rules applicable to its status and conduct. A platform which is promoting, ranking or highlighting securities is of course subject to the advertising code which already prohibits the use of any criteria for ranking. Whether or not a platform's own listing or comparison table constitutes an "advertisement" is a matter of interpretation. The NCS Regulations definition, which covers websites and digital media, would appear to support the view that a listing page is within the code. The materials available do not indicate that SEBI or the courts have settled that issue.
A platform which gives investment advice to its clients as defined is subject to the Investment Advisers Regulations and to Chapter III (referred to above). "Featured" is not in itself a conclusive indicator. A disclaimer does not absolve the platform of its obligations in respect of the activity, a point which is made in the mutual fund context in Nilesh Shah (supra). The real issue is whether certain platform activities, for example personalised ranking and risk-based matching, would amount to investment advice as defined, and that question would be required to be answered in the light of the definition itself.
Yield to maturity (YTM) is a calculated figure based on the price of the security and the expected contractual cash flows, subject to the assumptions that go into the calculation. It is not a guaranteed rate of return. The actual return one will achieve may be very different in the event of default by the issuer, if payments are delayed, if one sells prior to maturity or if the interim cash flows are reinvested at a different rate. Platforms must clearly differentiate between coupon rate, current yield and YTM and must not present a calculated yield as if it were a guaranteed return. The minimum disclosure requirements already require disclosure of coupon, current yield, YTM and the method of calculation of each. The proposal is therefore to ensure that these disclosures are given appropriate prominence in all displays, rather than to create a new obligation.
A rating is an opinion on credit risk within the relevant rating framework. It is no guarantee of repayment, of principal or of liquidity. The minimum disclosure requirements already include the rating, the date of the rating, the rating agency and the rating rationale. A high rating may be relevant to an investment decision but it does not in any way remove the possibility of default, downgrade or loss.
Listing must not be confused with liquidity. A security may be listed yet trade infrequently, and an investor seeking to exit before maturity may be unable to find a buyer at a reasonable price. The materials reviewed do not identify a specific existing rule requiring disclosure of secondary-market liquidity. A recommendation that platforms disclose material limitations on liquidity is therefore a proposal, not an existing duty.
SEBI issued a circular dated 7 October 2026 titled “Introduction of Credit Risk-o-Meter as an additional disclosure mechanism for debt securities”. The circular provides for the Credit Risk-o-Meter to become a mandatory component of specified offer and disclosure materials, advertisements and OBPP web/mobile platforms. However, the circular states that its provisions come into force 45 days after issuance; as at 29 October 2026, the requirement is therefore not yet in force and is scheduled to take effect on 21 November 2026. The Meter is a visual aid to credit-risk assessment, not a guarantee of repayment, principal protection or liquidity. It should supplement, not displace, the underlying rating information and rationale, issuer disclosures, security ranking, covenants, concentration and liquidity considerations. The reform question is how to prevent its visual simplicity from being mistaken for a comprehensive measure of investment risk.
On 21 August 2026, SEBI published two consultation papers: one proposing Fixed Income Channel Partners (“FICPs”) for distribution of fixed-income securities through OBPPs, and another proposing a revised advertisement code for OBPPs. As at 29 October 2026, these remain consultation proposals on the materials located for this revision; they should not be described as operative requirements unless a subsequent final instrument has been issued.
The FICP paper proposes that individuals and non-individual entities be enlisted with stock exchanges and appointed by OBPPs. An individual must be a citizen of India, at least 18 years old, have passed at least Class 12, have no conviction for an offence involving fraud or dishonesty, and hold a valid NISM Fixed Income Securities certification. The paper also places continuing duties on OBPPs. An OBPP would maintain the mapping of clients to each FICP and report it monthly to the exchange. It would publish the list of appointed FICPs, including cancellations, notify affected clients, organise training, generate alerts for unusual activity, monitor client data security, and withhold money due to an FICP while a complaint is resolved. It would also endeavour to resolve complaints within 21 calendar days, and ensure that an FICP offers no unregulated product and undertakes no unregistered activity.
These duties in part deal with the concern that an OBPP should not contract out of its obligations by way of outsourcing client acquisition. They are again of a supervisory nature. The provisions discussed above do not expressly provide a rule as to when a representation made by an FICP in the course of authorised solicitation will be attributable to the OBPP. That is a perfectly legitimate point for comment.
The advertisement-code consultation reportedly proposes restrictions on vague expressions such as “high yield”, “high rated” and “high returns”, with any permitted use to be supported by a clear calculation method and risk disclosure. This remains a proposal unless and until adopted in a final instrument. The operative advertisement code must be applied in the meantime, including its requirements of accuracy and fairness and its prohibition on rankings based on any criteria.
A coherent framework should provide equivalent protection against comparable risks without imposing identical operational duties on intermediaries performing materially different functions. The four pillars below are proposed as a framework for evaluating existing obligations and identifying where further regulation may be justified. Each is set out with its position under existing rules and the proposed addition.
Pillar | Core requirement | Position under existing rules | Proposed addition |
|---|---|---|---|
1. Balanced disclosure | Accurate and intelligible risk information, with appropriate prominence for credit, security, ranking, covenant and redemption information | Advertisement code: accuracy, no misleading statements, fixed standard warning. Rating and rationale required. | Prominence rules for risk and rating on every display; further controls on headline-yield presentation (proposed); Credit Risk-o-Meter requirement under the 7 October 2026 circular, effective 21 November 2026. |
2. Fair yield presentation | No misleading implication that a calculated yield is guaranteed | Coupon, current yield, YTM and calculation required. Advertisements may not carry exaggerated slogans inconsistent with the product's risk and return profile. | Express treatment of premature sale and default risk alongside every yield figure (proposed); restriction on terms such as “high returns” (proposed). |
3. Conflict management | Disclosure and management of commissions, referral payments, issuer-funded promotion and other material incentives | Investment advisers must disclose conflicts of interest. The general obligation to identify and disclose conflicts on the platform is addressed in the Master Circular. | Remuneration and conflict rules for FICPs (proposed in the FICP paper); disclosure of paid placement in listings. |
4. Auditability | Records adequate for supervision and dispute resolution | Data retrievability and integrity. Advisers must keep records. | Retention of promotional material, ranking logic and recommendation decision logs. |
These pillars should not be read as creating a general guarantee against investment loss, and their purpose is to promote fair distribution, traceable decision-making and compliance with applicable intermediary obligations. A breach should attract the consequences prescribed by law. Any additional duty should be introduced through an appropriate regulatory instrument rather than assumed to exist by implication.
An effective framework requires accessible grievance redressal, adequate record-keeping and proportionate enforcement. Compliance should not be measured only by the volume of disclosures or the existence of standardised documentation. The relevant questions are whether material information was communicated intelligibly, whether the intermediary complied with the obligations applicable to its activities, and whether the record permits the disputed transaction and representations to be reconstructed.
An OBPP that fails to comply with an applicable circular or regulation may face action under the SEBI Act and the regulations, subject to the elements of the relevant contravention and the applicable procedure. The FICP consultation paper proposes a target of 21 calendar days for resolving complaints against a channel partner; that proposed target should not be represented as a current binding obligation unless adopted by a final instrument.
Where a breach of a stated regulatory obligation is established, the civil-penalty principles in Shriram and Nilesh Shah (supra) are important: absence of investor loss or a claim of bona fides will not ordinarily cure a proved contravention. That does not dispense with identifying the particular duty, establishing its breach and applying the statutory provision governing the consequence. Nor does it convert an issuer's default into proof of platform misconduct. An issuer's default does not, without more, establish that an OBPP misrepresented the security or breached a regulatory duty. Equally, the issuer's primary obligation to repay does not absolve a platform of responsibility for its own conduct. The analysis must identify the applicable duty, the conduct alleged to constitute breach and the evidence supporting it. Where a civil remedy is sought, the connection between the breach and the investor's loss matters; that connection is not necessarily an element of the regulatory contravention itself.
Records of promotional content, communications, transactions and material ranking or recommendation decisions can assist both supervision and dispute resolution. Record-retention requirements should be proportionate, technologically workable and consistent with applicable law. Investors should receive clear information about the platform's complaint process and the regulatory mechanisms available to them.
Online bond platforms can broaden retail participation in India's corporate debt market, but the success of digital distribution should not be measured solely by transaction volumes or the number of securities made accessible. The quality of information, the transparency of commercial incentives and the accountability of the distribution chain are equally important. Digital access without adequate comprehension risks accelerating investment decisions without improving their quality.
The existing framework is more developed than is sometimes assumed. The advertisement code already requires accuracy and fairness, prohibits rankings based on any criteria and mandates a fixed standard warning. Minimum disclosures include yield and rating information. The Investment Advisers Regulations address stock brokers who provide investment advice incidentally to their primary activity, subject to the applicable conditions.
SEBI's 7 October 2026 circular introduces the Credit Risk-o-Meter as a mandatory disclosure mechanism, with the requirement scheduled to come into force on 21 November 2026. The reform agenda is therefore narrower than a general call for platform liability: it concerns enforcement of existing obligations at platform level, clear allocation of responsibility for channel partners, fair presentation of yield and rating information, meaningful conflict disclosures, auditable records, and coordination where products of other regulators are offered. Any additional duties should be introduced by an appropriate regulatory instrument and stated clearly enough to be enforced.
Thus, the central proposition stands. Formal labels should not obscure the substance of an intermediary's conduct; equally, functional accountability must not become free-standing liability untethered to law.
The sound approach is to identify the function performed, the applicable statutory or regulatory duty, the platform's control over the relevant representation or process, and the evidence of breach. That approach protects investors without turning an intermediary into a guarantor of the issuer's solvency or the investment's performance.
Author is a Senior Advocate practicing at Supreme Court of India. Views are personal.