SEBI has come out with a proposal (pdf) to explore the possibilities of having a security-based crowdfunding framework in India within the existing legal framework. This proposal does not touch up on reward based crowdfunding that is common on platforms like Kickstarter and would apply for to services like LetsVenture. The regulatory authority had mentioned its plans to come up with such a proposal earlier this year. According to these proposals only accredited investors registered with a crowdfunding platform can invest in equity-based crowdfunding campaigns. Also, only Indian start-ups or SMEs can raise funds through these platforms. It has also proposed that such campaigns can only be run by SEBI recognized crowdfunding platforms. Apart from the basic due diligence, these platform will have to set up a 'Screening Committee' to select companies that can use these platforms. According to the proposal, crowdfunding platforms may charge a nominal fee from the company seeking funds through the platform and from the accredited investors on the platform. The regulatory authority has also sought public comments on the consultation paper that needs to be e-mailed to Aditya Sarda (adityas@sebi.gov.in) or Ankit Goel (ankitg@sebi.gov.in) on or before July 16, 2014. Here are the key points raised in the proposal Who can be an investor? In Indian scenario, considering the necessity to provide alternative funding sources to startups while ensuring that retail investors are not made to bear the risks of these ventures, SEBI has proposed to permit only Accredited Investors to participate in crowdfunding.…
