What is SEBI?
The Securities and Exchange Board of India (SEBI) is the regulator for the market securities in India.
What about the notice to Angel Firms?
SEBI has shot off notices to half a dozen angel firms, asking them to disclose their details of fund-raising business and also explain whether they actually operate within the line of the securities market law. No doubt that the angel networks help startups raise seed money,SEBI is still worried as these angel networks act like stock exchanges which they are not authorized to do. This is the reason why SEBI decided to keep a check on them by giving them a notice to reveal all about their links. And also,it feels that by promoting issuance of securities to more than 200 investors, some networks may be disobeying the terms and rules of private placements as well.
What are the major concerns of SEBI regarding angel networks and crowd funding?
SRBI is concerned about the companies raising money on such platforms are following the explicit private placement norms under the company law. They want to find out who are the persons running these platforms and whether these platforms are operating like exchanges. Also,they are concerned that these platforms are opening doors to unscrupulous practices and captivating unsuspecting small investors.
What information the angel investors will now have to share with SEBI ?
- How is the investor/company or firm registered on the angel networks?
- What are the restrictions on the type of investors who can register on the platform?
- Disclosing the funds raised and the number of investors.
- Is secondary market trading authorized on the angel network and is the whole Process flow followed or no?
- In August 2016, SEBI had warned investors about fund raising on unregulated electronic platforms. A year later, it is beginning to inspect the world of startup funding.