Sebi warns against investment and dealings in digital gold, its unregulated

After warning brokers against dealing in digital gold, the Securities and Exchange Board of India (Sebi) has now advised investment advisers not to help clients invest in the same. The regulator has warned against buying, selling or dealing in unregulated products, including e-gold.

“Undertaking such unregulated activity including dealing (that is advisory, distribution and execution or implementation services) in digital gold by investment advisers is not in accordance with the provisions of Section 12(1) of the SEBI Act, 1992 read with SEBI (Investment Advisers) Regulations (SCRR), 2013,” Sebi said in a statement. “Any dealing in unregulated activities by Investment Advisers may entail action as deemed appropriate under the SEBI Act, 1992 and regulations framed thereunder.”

Digital gold products are electronic receipts proving investments in the yellow metal by investors, but not actual gold. The original sellers of such digital gold products keep the physical gold in vaults. It is similar to gold exchange-traded fund (ETF) units. However, digital gold receipts have not been given the regulatory nod. Market experts say digital gold units are not issued by any regulated entity. Moreover, there is no method to check whether the digital gold certificate is backed with physical gold or not.

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Sebi, in a press statement, said it has come to their attention that some registered investment advisers are engaged in unregulated activity by providing a platform for buying, selling and dealing in unregulated products including digital gold. “Undertaking such unregulated activity including dealing that is advisory, distribution and execution, and implementation services in digital gold by investment advisers is not in accordance with rules,” the regulator said. “Any dealing in unregulated activities by investment advisers may entail action as deemed appropriate.”

In August, Sebi had informed the National Stock Exchange (NSE) that such activity is in contravention of SCRR, and the members should refrain from undertaking any such activities. As such, the NSE directed its members not to carry out such activity and comply with the regulatory requirements at all times.