intermediaries

Investing in unlisted shares has become very easy in recent years. As interest in pre-IPO firms and private market deals has increased, a number of digital platforms are now open to retail investors who can purchase unlisted shares either through early employees, angel investors, or current shareholders. However, this ease has also brought a more complex set of risks, especially because unlisted securities are not subject to the same public-disclosure requirements or investor-protection mechanisms as listed ones.

These are the most prevalent pitfalls that investors commit in purchasing unlisted shares electronically – and how to circumvent them. 

1. Failure to Check the Usage of SEBI

Registered Intermediaries in the Platform. Unlisted share platforms are not registered by SEBI; however, the transfer of shares should be registered by a SEBI-registered broker or Depository Participant (DP), which could be either NSDL or CDSL.

The biggest mistake is to trust the platforms that:

  • Do not report their partners as brokers/DPs. 
  • Request you to move money to the personal bank accounts. 
  • Guarantee returns (illegal under SEBI regulations).

How to stay safe:
Enquire with the site whether it is compatible with a formally registered SEBI-intermediary.
All registered brokers, RTA and DP entities are publicly posted on the website of SEBI.

 2. The use of Limited Digital Information About the Company. 

Unlisted firms do not have to release quarterly outcomes or shareholder presentations in the market or make disclosures. This brings about information asymmetry, which may be dangerous when carrying out transactions electronically.

Investors are expected to verify on their own:

  • Financial statement, MCA filings (Ministry of Corporate Affairs), 
  • Capital structure, and authorised capital. 
  • Professional networks
  • Management background
  • Litigation records kept in the public databases.

 

This will minimise reliance on platform summaries, which can only include simplified or selectively positive information. 

3. Disregard of Secure Payment and Off-Market Transfer Protocols. 

All non-listed shares are exchanged through off-market transactions in NSDL/CDSL. The most prevalent errors are:

  •  Wrong Demat account information. 
  • Failure to check the ISIN prior to transfer.
  • Making payment prior to the delivery instruction slip (DIS) or counter-confirmation being digitally signed.

 An honest transfer will be recorded in your DP statement in the section of Off-Market Credit with the appropriate ISIN and seller information. 

4. Bypassing Legal Documentation and Digital Signatures. 

Share Purchase Agreement (SPA) or transfer deed is a common practice in the sale of shares privately. Many investors skip reading: 

  • Lock-in clauses, transfer limitations under the Companies Act 2013. 
  • Exit terms (important since the unlisted shares are illiquid)
  • Valuation basis, and attached rights on the shares that are bought. 


Digital signatures have to be verifiable by licensed certifying authorities to be found in the list of Preferred Certifying Authorities of the Controller of Certifying Authorities (CCA), Government of India. 

5. Falling for FOMO, Grey Market Buzz, or Unrealistic Projections

This is an unregulated and very speculative GMP, the grey market premium. It is not the fair value of a company. One of the most widespread explanations of investors overpaying is relying on WhatsApp groups, Telegram channels, or social media hype.

Concentrate on essentials:

  • Revenue growth
  • Market size and competition
  • Unit economics
  • Corporate governance 

6. Failure to take care of Cybersecurity and Data Accuracy. 

Even one mistake in your DP ID or beneficiary account codes can cause a transaction to come to a halt. Digital security is also of paramount importance:

  • Use MFA on investment apps. 
  • Payments should not be made over public Wi-Fi. 
  • Store transaction records, emails and agreements in a secure manner. 

Conclusion

Buying unlisted shares digitally can be a powerful wealth-building strategy, but only if you approach it with the rigour private markets demand. assessing intermediaries, independent research, secure transfers, reading documents, and not being hype-prone are some of the actions that can help you navigate this market safely and without any panic.