SEBI to Issue Guidelines Soon For Crowd-Funding

MUMBAI: To encourage young entrepreneurs to raise capital from the market, which has seen decline is such activity, regulator SEBI plans to shortly come out with the guidelines for crowd-funding. "We are coming out with guidelines on crowd-funding soon, because we want to encourage young entrepreneurs to raise capital. Our aim is to help young people raise capital very smoothly," Sebi chairman UK Sinha said at an investors' conference organized by industry body IMC. Crowd-funding typically involves young entrepreneurs and small groups of people raising funds for their ventures through various online platforms involving individuals as well as organizations.

Of late, such platforms are also being used for launching products that promise certain financial returns to the contributors. While it is still in a nascent stage in India, compared to large markets like the U.S., China and the UK, the trend is catching up fast especially in the wake of emergence of social media as a key platform for such activities. International Organization of Securities Commission, a body of market regulators across the world including SEBI, recently called for greater regulatory checks on 'crowd-funding' investment products to avoid any potential systemic risks in future.

Sinha also said that he is concerned about the decline in capital raising activities as 60,000 crore worth of approvals and intentions to raise money have either been allowed to lapse or withdrawn in the last three years. "Several companies filed draft red herring prospectus with SEBI to raise capital. But they either withdrew or allowed it to be lapsed, Sinha said. Sinha complimented BSE for achieving $1 billion market capitalisation of companies listed on its SME platform. Sebi's initiative for IPO without listing received good response and within six months of issuing guidelines, three companies got listed on BSE's institutional trading Platform, he said. "This will allow qualified institutional bidders, private equity, venture capital good opportunity, so I expect that once this platform also succeeds, venture capital and private equity will find better to start getting their companies shifted here," he said.

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