Capital market watchdog SEBI (Security and Exchange Board of India), is all set to release its norms for crowdfunding channels across country, aiming that large firms and institutional investors to fund money via this channel, ask such investors to take prior nod from it before getting access to such platforms.
These platforms have emerged as a new source of funding for startups. Close to 200 companies have raised Rs 350-450 crore on these platforms over the past 18 months, according to industry estimates.
It will also have a relax disclosure norms so that information is shared only with investors and not the public at large.
The regulator will set a floor for transactions with a minimum threshold of stake purchases and at the same time ensure no single investor (through these platforms) owns more than 25 per cent of the investee firm, reported Mint.
In March this year, SEBI set up a regulatory framework for crowdfunding, which a minimum net worth criteria for investors to be eligible to invest in start-ups through such platforms, capping individual investments, and standardising disclosure requirements for start-ups raising the money.
“I appreciate Sebi asking various intermediaries to reaffirm that they are playing by the rules of law, especially the private placements laws, and are taking concrete steps toward more forward looking regulations like crowdfunding/funding platforms,” said Surojit Nandy, co-founder of GREX, a private market platform.
Earlier this month, the regulator formed a committee on Financial and Regulatory Technologies (CFRT) and crowdfunding is one of the key areas that it is looking to cover with the help of the committee’s recommendations.
Companies wishing to raise money from the public may be required to make compulsory basic disclosures about the start-ups in which the money is invested such as the risks involved, the total amount raised and the investment terms.
In September 2016, SEBI sent notice to over half-a-dozen digital equity crowdfunding platforms (ECP), including prominent ones like Grex, LetsVenture, Termsheet, Equity Crest and Tracxn, citing them as unauthorised, unregulated and illegal. SEBI also asked these crowd-funding platform, to stop “onboarding” new investors or taking up fund raising mandates from startups, it is reliably learnt.