Sebi warns on digi-gold investments

MUMBAI: Markets regulator Sebi has warned the general public about investing in digital gold/e-gold products through online platforms since these products are not govt-permitted ‘securities’ and hence not under the regulatory purview of Sebi.The regulator’s warning came at a time when gold prices globally are near their alltime high levels. Recently, there was a phase of frenzied buying of the yellow metal in the country.The regulator also said that in case of any investor complaints, none of the investor protection mechanisms that exist under Sebi’s watch today, would be available to those investing in e-gold/digital gold products.In contrast, Sebi said that it has enabled investments in gold and gold related instruments through various regulated gold products.

“These are exchange traded commodity derivative contracts, gold exchange traded funds (ETFs) offered by mutual funds and electronic gold receipts (EGRs) tradeable on stock exchanges. Investments in these Sebi-regulated gold products can be made through Sebi registered intermediaries and are governed by the regulatory framework prescribed by Sebi,” a release said.The regulator has taken note of the e-gold and digital gold products being sold by various entities as an alternative to physical gold.

“In this context, it is informed that such digital gold products are different from Sebi-regulated gold products as they are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of Sebi.”“Such digital gold products may entail significant risks for investors and may expose investors to counterparty and operational risks.”The regulator also said that investors in such instruments should note that “none of the investor protection mechanisms under securities market purview shall be available for investments in such digital gold/e-gold products.”Digital gold products are sold by some of the biggest names in the jewellery business in India. A PSU in a joint venture with a Swiss company, some online jewellers and e-commerce platforms also sell these products.To buy digital gold, a buyer has to log-in to the website of the seller and can spend as low as Rs 100 to buy the product. The seller gives a receipt of the purchase of the amount invested and the grammage of the gold purchased. When needed, the buyer can surrender the receipt to either get money equivalent to the value of the gold that’s in his possession or exchange a gold jewellery, depending upon the options the seller offers.