SEBI TERMS EQUITY CROWD FUNDING ILLEGAL
In a move which is Anti Startup India, SEBI released a note stating that more than twelve equity crowd funding platfroms along with Letsventure, Tracxn, Grex, Termsheet, Equity Crest etc are illegal and should not enable crowdfunding for startups from group of investors.
These ventures have been helping seed and early stage startups to raise angel capital for last few years and started getting popular. International markets have been very flexible in equity crowdfunding and success of syndicate platforms like angel list is just an example.
“Electronic platforms facilitating fundraising on digital platforms are neither authorized nor recognized under any law governing the securities market,” said the Sebi note to investors. “Such platforms, which are open to all investors registered with the platform, amount to a contravention Securities Contract Act and the Companies Act,” the regulator has clarified.
SEBI Believes that any kind of investments in to the companies should happen through stock exchanges which are regulated. To facilitate startup or SME investments NSE launched NSE EMERGE and BSE SME, But are not showing positive results. NSE emerge so far has got only 16 companies.
These kind of moves by government will not be inline with Startup India and Startup India initiative which aims to make India a largest destination for startups and innovation.
Instead of regulating crowdfunding startups which are quite successful in helping startup raise capital, SEBI should consider changing its NSE EMERGE policies and make startup investments easy.
Hope government takes quick action on this.