INSUBCONTINENT EXCLUSIVE:
MUMBAI: Top crowd funding platforms lined up to register themselves as alternative investment funds (AIFs) after the Securities and Exchange
Board of India (Sebi) pulled them up for not following private placement norms
and places serious restrictions on the ability of these platforms.
Sebi registrations will impact the freedom of these platforms that
typically cater largely to smaller start-ups
For instance, as an AIF, these platforms will be able to pool money only from those individuals who have a minimum liquid networth of Rs 2
Further, the minimum size of investment has to be Rs 1 crore.
Restrictions also apply on companies where these platforms can invest money
As a registered AIF, crowd funding platforms can only make investments in companies that fall under the definition of startup prescribed by
the Department of Industrial Policy and Promotion (DIPP)
founder of a Mumbai-based crowd funding platform
several crowdfunding platforms, including technology providers such as LinkedIn, for facilitating fund raisings that are in violation of
Sebi rules.
As per the Companies Act, a company can allot securities to not more than 200 people in a financial year through private
concern was that the crowdsourcing platforms facilitate and execute the transactions and hence their activity could be construed as
accountability if anything went wrong
In 2016, the market regulator released a discussion paper proposing draft norms
However, Sebi dropped the idea subsequently due to multiple factors
The Reserve Bank of India (RBI) had released a set of rules of crowdsourcing firms in peer to peer (P2P) lending
There were also views within the government that the new-age platforms should not be over burdened with regulations.
