How to Check the Authenticity of Unlisted Share Dealers

SECTION A: Understanding Who Unlisted Share Dealers Are

=> Unlisted share dealers, also called unlisted share brokers, play a critical role in the growing market of private company shares.

=> Unlike listed shares that trade on stock exchanges, unlisted shares are bought and sold directly between investors or through intermediaries.

=> This makes the role of a dealer extremely important in ensuring smooth and secure transactions.

~ Key Functions of Unlisted Share Dealers:

Connecting Buyers and Sellers: They act as a bridge, connecting investors who want to sell their unlisted shares with potential buyers.
Valuation Guidance: Dealers often help determine a fair market value for shares, especially for companies not yet publicly listed.
Documentation Handling: They assist in preparing and verifying all the legal documents needed for transferring shares.
Advisory Services: Many unlisted share brokers provide insights about which private companies have high growth potential.

~ Why Their Role Matters:

High-Risk Market: Investing in unlisted shares carries inherent risks, including low liquidity and uncertain valuations. Dealers help reduce these risks by guiding investors through the process.
Regulatory Compliance: Properly registered dealers ensure that transactions comply with SEBI guidelines, reducing the chance of fraud.
Market Knowledge: Experienced brokers have knowledge of private company performance, helping investors make informed decisions.

~ Key Points to Remember:

Always identify if the dealer you are working with is officially recognized.
Dealers can charge a fee or commission for their services, which should be transparent before any transaction.
Verify the dealer’s experience in handling shares of companies similar to your target investment.

~ Example Table: Role of Unlisted Share Brokers

Function	Description	Importance
Connecting Buyers & Sellers	Match investors looking to sell with those looking to buy	Ensures liquidity in the unlisted market
Valuation Guidance	Help set a fair price for shares	Prevents overpaying or undervaluing shares
Documentation Handling	Prepare and verify legal transfer documents	Ensures safe and legal transactions
Advisory Services	Provide insights on high-potential companies	Helps investors make informed decisions

SRCTION B: Verify Dealer Registration and Legal Status

=> Before engaging with any unlisted share dealer, the most important step is to verify their legal registration and compliance status.

=> This ensures that the dealer is operating within the rules set by regulatory authorities and reduces the risk of fraud.

=> A SEBI registered dealer is a good indicator of credibility and accountability.

~ Steps to Verify Registration and Legal Status:

Check SEBI Registration:
- SEBI maintains a public database of registered intermediaries, including brokers dealing with unlisted shares.
- Investors can visit the official SEBI website and search for the dealer by name or registration number.
Look for Official Documentation:
- Genuine dealers should provide proof of registration and licensing on request.
- This documentation includes registration certificates and membership IDs with recognized regulatory bodies.
Verify Compliance with KYC and AML Norms:
- Registered dealers follow Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
- Ask for their KYC policies and check if they ensure all transactions comply with legal requirements.
Check Local or State Registrations:
- Apart from SEBI registration, some dealers may also be registered with local authorities or stock exchange associations.
- This additional registration indicates credibility and adherence to local market laws.

~ Why Verification Matters:

Protects Against Fraud: Dealers without proper registration may engage in scams or sell fake shares.
Legal Recourse: If something goes wrong, working with a SEBI registered dealer provides legal protection.
Ensures Market Transparency: Registered dealers follow standardized procedures for transactions, documentation, and pricing.

~ Key Points to Keep in Mind:

Always ask for a dealer’s registration number and verify it online.
Do not proceed with dealers who hesitate or fail to provide proof of registration.
Registration is a minimum requirement; it does not guarantee success but significantly reduces risk.

~ Example Table: How to Verify a SEBI Registered Dealer

Step	Action	Reason
Step 1	Visit SEBI official portal	Confirm dealer is legally recognized
Step 2	Request registration documents	Validate authenticity of claims
Step 3	Check KYC/AML compliance	Ensure legal transaction standards
Step 4	Verify local/state registrations	Additional credibility check

SECTIONC: Check the Dealer’s Market Reputation and Track Record

=> Once you have verified a dealer’s legal registration, the next crucial step is to evaluate their market reputation and track record.

=> Even a registered dealer may not always be reliable.

=> Checking their past performance and customer feedback ensures you are dealing with someone trustworthy.

~ How to Assess a Dealer’s Reputation:

Look for Online Reviews:
- Search for unlisted share reviews online to see what previous investors have experienced.
- Trusted platforms and investor forums often provide insights about the dealer’s credibility and reliability.
Check Social Media Presence:
- Many reputable dealers maintain social media accounts where they share updates and interact with clients.
- A consistent and professional presence can indicate transparency and engagement with investors.
Evaluate Years of Experience:
- Dealers with a long track record in handling unlisted shares often have better market knowledge and stronger networks.
- Experience is key in identifying genuine investment opportunities and avoiding risky deals.
Seek References from Other Investors:
- Ask the dealer to provide references of past clients.
- Speaking directly with previous investors helps understand how the dealer handles transactions and disputes.

~ Indicators of a Good Reputation:

Timely and transparent communication.
Clear documentation of all transactions.
Positive feedback from multiple investors.
No history of legal disputes or regulatory violations.

~ Red Flags to Watch For:

Poor or missing online presence.
Unwillingness to share client references.
Unrealistic promises of high returns in short periods.
Negative reviews or reports of fraud.

~ Example Table: Assessing Dealer Reputation

Factor	What to Check	Importance
Online Reviews	Ratings, complaints, investor experiences	Gauge credibility and reliability
Social Media	Activity, professionalism, engagement	Indicates transparency
Experience	Years in unlisted share market	Reflects market knowledge
References	Past client feedback	Confirms trustworthiness

SECTION D: Request Proof of Ownership Before Any Payment

=> Before making any payment to an unlisted share dealer, it is critical to confirm the ownership of the shares being sold.

=> This step ensures that the shares are genuine and legally transferable.

=> Performing share ownership verification protects you from fraud and avoids potential legal complications.

~ Why Proof of Ownership is Essential:

Prevents Fraud: Some dealers may attempt to sell shares they do not own or cannot transfer.
Ensures Legal Transfer: Proof of ownership guarantees the shares can legally be transferred to your name.
Confidence in Investment: Knowing that shares are authentic increases trust in the transaction.

~ Steps to Verify Share Ownership:

Ask for Company Confirmation:
- Contact the company in which you are buying shares to confirm that the dealer is a registered shareholder.
- Some companies maintain a shareholder registry that can verify ownership.
Request Demat Statements or Certificates:
- Genuine dealers can provide the latest demat statement showing the shares under their name.
- Physical share certificates (if applicable) should also match the details provided by the dealer.
Cross-Check Shareholder Details:
- Verify the number of shares, purchase date, and other details with the company’s records.
- Ensure that the shares are free from any liens, pledges, or legal disputes.
Document All Communication:
- Keep records of emails, messages, and documents exchanged during verification.
- Written proof will be useful if any dispute arises later.

~ Key Points to Remember:

Never make advance payments before completing share ownership verification.
Avoid verbal assurances; always ask for written proof.
If a dealer hesitates or refuses to provide proof, it is a major red flag.

~ Example Table: Steps for Share Ownership Verification

Step	Action	Reason
Step 1	Contact company to confirm dealer’s shareholding	Validates authenticity
Step 2	Request demat statements or certificates	Proof of legal ownership
Step 3	Cross-check shareholder details	Avoid disputes and fraud
Step 4	Document all communication	Provides evidence for legal protection

~ Best Practices:

Work only with dealers who willingly share ownership proof and cooperate transparently.
Double-check the authenticity of demat statements by contacting the company or registrar directly.
Consider involving a legal or financial advisor for additional verification if large investments are involved.

=> By thoroughly verifying share ownership before making any payment, you minimize the risk of falling victim to scams and ensure a smooth and secure unlisted share transaction.

SECTION E: Confirm Secure Payment and Transfer Methods

=> After verifying the dealer’s authenticity and share ownership, the next critical step is to ensure that all payments and share transfers are carried out securely.

=> Engaging in a safe unlisted share transaction protects your investment and reduces the risk of fraud or financial loss.

~ Why Secure Payment and Transfer Matter:

Preventing Scams: Unsecured payment methods can lead to losing money without receiving shares.
Legal Safety: Properly documented transfers provide legal proof in case of disputes.
Confidence in Transaction: Secure methods increase transparency and trust between buyer and seller.

~ Recommended Payment Methods for Safety:

Bank Transfers:
- Use official bank transfers rather than cash or UPI payments.
- This method leaves a paper trail for legal reference.
Escrow Services:
- Consider using an escrow account where funds are released only after successful share transfer.
- This protects both the buyer and the dealer from potential defaults.
Verified Digital Payment Platforms:
- Some trusted platforms facilitate secure unlisted share transactions with payment protection features.

~ Safe Transfer of Shares:

Demat Account Transfer:
- Shares should be transferred directly to your demat account using standard procedures.
- Confirm the transfer details with the company or registrar.
Document Verification:
- Every transaction must include formal agreements, signed transfer forms, and acknowledgment from the company.

~ Key Points to Ensure a Safe Transaction:

Avoid paying in cash or via informal methods.
Always request a receipt or proof of payment.
Verify the dealer’s preferred method is professional and traceable.
Confirm that share certificates or demat entries match the payment made.

~ Example Table: Secure Payment and Transfer Methods

Method	How It Works	Benefits
Bank Transfer	Direct transfer to dealer’s verified account	Traceable and legal proof
Escrow Account	Funds held until transfer completion	Protects both parties
Digital Payment Platform	Secure platform with transaction tracking	Reduces risk of fraud
Demat Transfer	Shares moved directly to investor’s account	Ensures legitimate ownership

~ Best Practices for Investors:

Always verify the dealer’s bank account details before transferring funds.
Confirm the transaction completion with a signed acknowledgment from the dealer.
Use escrow services for high-value transactions to minimize risk.
Maintain all payment records, agreements, and correspondence for future reference.

=> By confirming secure payment and transfer methods, investors can ensure that the unlisted share transaction is safe, legal, and transparent, reducing the likelihood of disputes or losses.

SECTION F: Avoid Unrealistic Promises and Price Manipulation

=> Investing in unlisted shares can be highly profitable, but it also carries significant risks.

=> One of the most common red flags is when a dealer makes unrealistic promises about returns or attempts to manipulate the share price.

Conducting an unlisted share price check and staying alert can protect your investment.

~ Why Unrealistic Promises Are Dangerous:

High Risk of Loss: Dealers promising guaranteed high returns often engage in scams or unethical practices.
Market Manipulation: Artificially inflating prices can trap investors in overvalued shares.
False Sense of Security: Overpromising creates unrealistic expectations and may lead to rushed, uninformed decisions.

~ Signs of Price Manipulation:

Sudden Price Spikes:
- Dealers or insiders may artificially inflate the price to sell shares at a higher rate.
Limited Transparency:
- Lack of clear information on how the share price is determined is a warning sign.
Pressure Tactics:
- Aggressive sellers pressuring you to buy quickly often indicate potential manipulation.

~ How to Perform an Unlisted Share Price Check:

Compare With Market Platforms:
- Use trusted unlisted share trading platforms to cross-check prices of similar shares.
Check Recent Transactions:
- Look at historical deals or company disclosures to see fair market value.
Analyze Company Performance:
- Review financials, growth prospects, and industry trends to validate the price.

~ Key Points to Remember:

Be skeptical of deals that promise extremely high short-term returns.
Always conduct independent verification rather than relying solely on the dealer.
Avoid investing in shares if you cannot confirm the price through credible sources.

~ Example Table: Spotting Price Manipulation in Unlisted Shares

Red Flag	How to Detect	Action
Unrealistic Returns	Promises of high profits in a short time	Verify with market data
Limited Transparency	No clear valuation method	Request documentation
Sudden Price Changes	Sharp, unexplained price hikes	Compare with other transactions
Pressure Tactics	Dealer urges immediate purchase	Take time, consult experts

~ Best Practices for Investors:

Always perform an unlisted share price check before finalizing any deal.
Consult multiple sources for price comparison.
Avoid decisions based on emotions or pressure from dealers.
Document all communications regarding pricing and agreements.

=> By staying vigilant and performing thorough price checks, investors can protect themselves from scams, avoid overpaying, and ensure a fair transaction in the unlisted share market.

SECTION G: Use Trusted Marketplaces or Platforms for Safety

The unlisted share market can be risky, but using trusted unlisted share platforms significantly reduces potential fraud and ensures smoother transactions.

These platforms act as intermediaries, connecting verified buyers and sellers while maintaining transparency and security.

~ Why Trusted Platforms Matter:

Verified Participants: Reputable platforms verify dealers and investors before allowing transactions.
Transaction Security: Payments and share transfers are conducted through secure, traceable channels.
Market Transparency: Platforms provide accurate pricing, transaction histories, and performance insights.
Legal Compliance: Many platforms ensure that all trades follow SEBI and regulatory guidelines.

~ Steps to Use Trusted Platforms Safely:

Choose Well-Known Platforms:
- Research platforms with a strong track record and positive reviews.
- Examples include platforms recognized by industry authorities or investor forums.
Register and Verify Your Account:
- Complete KYC verification and provide necessary documents to trade safely.
- Verified accounts reduce the risk of fraudulent activity.
Research Dealers on the Platform:
- Even on trusted platforms, check the dealer’s rating, history, and feedback.
Use Platform-Supported Payment Methods:
- Make payments through escrow accounts or bank transfers facilitated by the platform.
- Avoid off-platform transactions that bypass security checks.

~ Key Points to Keep in Mind:

Trusted platforms reduce, but do not eliminate, risk — always perform your due diligence.
Keep records of all transactions, agreements, and confirmations provided by the platform.
Use platform resources like pricing trends, expert insights, and transaction history to make informed decisions.

~ Example Table: Benefits of Using Trusted Unlisted Share Platforms

Feature	Benefit
Verified Buyers & Sellers	Reduces risk of fraud
Secure Payment & Transfer	Ensures safe transactions
Market Transparency	Accurate pricing and transaction history
Regulatory Compliance	Follows SEBI and legal guidelines

~ Best Practices for Investors:

Always trade through the platform’s secure payment and transfer methods.
Check dealer ratings and past performance before committing.
Avoid off-platform deals, even if offered attractive pricing.
Use platform tools to verify share prices, company performance, and market trends.

=> By using trusted unlisted share platforms, investors can navigate the unlisted market safely, access verified dealers, and make informed investment decisions.

=> Platforms provide a structured and secure environment, reducing the likelihood of fraud while improving transaction transparency and efficiency.

=> To make informed investment decisions in private stocks, you can check out detailed resources Unlisted Hub.