SEBI( Securities and Exchange Board of India) has very recently changed its rules and regulations of crowdfunding. If you do not have any idea on the term crowdfunding, it is worth to mention that the term crowdfunding refers to the solicitation of funds from several investors. This process is done through various social networking sites or web based platform to accomplish a particular project or social cause or any business venture. SEBI hopes that the recent changes in the rules and regulations encourage and provide a beneficial result to the raise capital as well as prevent mistreat of such opportunities.
In this latest norm, crowdfunding policies can be provided by the entities that are only registered under SEBI. Under this projected norms, a company is allowed to raise up to Rs. 10 crore. It is evident that in this method of fund raising a huge risk is involved. In order to lower the level of high risks, SEBI has also proposed new techniques. In this new technique, none can participate in the activities of fund raising without the accredited investors.
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SEBI has also declared lists of these investors. It is interesting to note that in this list, you can find companies, investors, financially secure retail investors, institutional investors along with portfolio managers and investment advisors. Furthermore, the limit of crowdfunding investment is also restricted in this latest rules. According to the declaration of SEBI, it has come to the fact that the retail investments cannot invest more that Rs. 60,000 or ten percent of their total worth.
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Under the latest norms of SEBI, such establishments or entities are given permission to raise the funds that are not associated with any business group that has the turnover of more than Rs 25 crore. It is worth to mention in this context that entities that are associated with any business enterprise and also enlisted with an exchange or conducting business for four or above years are also banned to participate in crowdfunding fund raising. Apart from this, entities that are involved with business of a financial sector or real estate are also banned to participate in the fund raising program.
Crowd Funding Stats
Sites of Fundraising
It is interesting to note that the final issue of the norms will be issued after 16th July based on the reactions and reviews of stakeholders and others. In recent times, you can find numerous sites around the internet that are dedicated to fund raising activities. Apart from this, various professional and social networks are also there that are also used as the powerful platform of fund raising.
Based on the rules and regulations of financial markets of the United Kingdom and The United States, SEBI has published the consultation paper of 66 pages that thoroughly discuss the crowdfunding in India. From now on, in order to enjoy the benefits of crowdfunding, all the stakeholders, investors and business need to abide by the rules strictly.