SEBI asserts dabba trading illegal; warns investors
It urged people to trade only through registered brokers and recognized exchanges
Reiterating the illegality of dabba trading, the Securities and Exchange Board of India (SEBI) has cautioned investors to remain vigilant and not deal with any entity offering illegal trading services.
(In market parlance, dabba trading refers to illegal and unregulated off-market trading that operates outside the purview of recognised stock exchanges and regulatory oversight).
The watchdog reacted on noticing a newspaper advertisement promoting dabba trading. The market regulator and the National Stock Exchange (NSE) initiated action, including lodging a complaint with the cyber police and alerting the Advertising Standards Council of India (ASCI) to assess violations of advertising standards and ensure appropriate corrective steps.
Stating that dabba trading was illegal, SEBI urged investors to trade only through registered brokers and recognized exchanges. It added that such activities posed significant risks and violated various provisions of the Securities Contracts (Regulation) Act, 1956 (SCRA), the SEBI Act, 1992, and the Bhartiya Nyay Sanhita, 2023.
The statement read, “It is reiterated that dabba trading is illegal, and SEBI is committed to safeguarding investor interests through regulatory enforcement, awareness, and coordination with law enforcement agencies. Investors are advised to remain vigilant and not to deal with any entity offering illegal trading services.”
Moreover, SEBI formally complained to the newspaper, expressing concern over publication of the ad, which encouraged unlawful trading practices and potentially misled investors.