wordpress blog stats
Connect with us

Hi, what are you looking for?

SEBI instructs crowdfunding platforms to include disclaimers on investments

The Securities and Exchange Board of India (SEBI) has issued another warning on crowdfunding, but this time it was directed at angel investor networks and start-up funding platforms, reports Mint. In a notice to these companies, SEBI directed them to include a disclaimer which says that crowdfunding platforms are neither stock exchanges nor authorized by the capital markets regulator to solicit investments. The disclaimer should also say that the securities traded on these platforms are not traded on any regulated exchange.

The Mint report added that firms such as Venture Catalysts, Lets Venture Online, and GREX and that most of them have complied with the SEBI notice sent in late July.

SEBI is concerned that these platforms were functioning as stock exchanges and as such they were in contravention of the Securities Contract Regulation Act, 1956 (SCRO) and Companies Act. Most of the crowdfunding platforms facilitate fund raising through private placement with companies. “Only recognized stock exchanges provide a platform where equity and other securities issued by companies are listed and traded in accordance with the provisions of the SCRA,”  SEBI warned investors in September 2016.

Crowdfunding guidelines

Note that SEBI has been trying to come up with guidelines for crowdfunding since 2014. The guidelines said 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.

Apart from the basic due diligence, these platforms 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.

SEBI is thinking of revisiting these guidelines and will keep minimum net worth criteria for investors to be eligible to invest in start-ups through such platforms, capping individual investments, and standardizing disclosure requirements, as per this Mint report.

You May Also Like


Info Edge Venture Fund has raised ₹375 crore from MacRitchie Investments, a subsidiary of Temasek Holdings, according to a stock exchange filing. The venture...


By Pallav Pradyumn Narang One of India’s most notable and successful angel investors Sanjeev Bikhchandani has come out vociferously against the trend of Indian...


Info Edge founder and vice chairman Sanjeev Bikhchandani has called out the overt influence of foreign funds in the Indian startup landscape, likening it...


From January 15, all landline phones dialling mobile numbers will need to prefix “0” first, the Department of Telecommunications ordered on November 20 and...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to Daily Newsletter

    © 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ