may have to tweak their business model and style of operations as they prepare to share the following information:
** The entire process flow of registering an investor/company ** Whether there is any restriction on the type of investors who can register on a platform
** The entire process flow involved in fund raising activity by a startup ** The minimum subscription amount for an investor to invest in a startup ** Details of companies which have raised funds till date, number of investors who put money, and nature of security – stock, bond, or hybrid
** Whether the platform is complying with the private placement norms as stipulated under Companies Act 2013; and, if so how does a platform ensure that all the provisions of the law are compli- ed with at the time of fund raising
** Lastly, whether secondary market trading is permitted on such platforms? If yes, the steps involved in the secondary market trading.
“Sebi’s concerns are reasonable in view of the increase in such platforms… Fund-raising on unauthorised electronic platforms has been on the radar of regulators in India and abroad for some time,” said Sumit Agrawal, founder, Suvan Law Advisors. “In the Indian context, Sebi and the government should look at regulating them to ensure an audit trail of transactions. However, entry norms for such platforms should not be same as stock exchanges. Else, it could scuttle innovation and entrepreneurship,” said Agrawal.
The regulator has sought the information under Section11of SEBI Act 1992 which empowers it to act in any manner as it thinks fit to protect the interest of investors. In August 2016, Sebi had cautioned investors about fund raising on unregulated electronic platforms. A year later, it is beginning to scrutinise the world of startup funding.
According to a Sebi official, a team set up by the regulator is examining whether such fund mobilisation is a ‘deemed public issue’