The Telegraph
Friday , April 11 , 2014
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Crowd-funding rules on way

Mumbai, April 10 (PTI): Market regulator Sebi is planning to shortly come out with the guidelines for crowd-funding to encourage young entrepreneurs to raise capital from the market, which has been on a decline.

“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 U.K. Sinha today said at an investors’ conference organised by industry body IMC here.

Crowd-funding typically involves young entrepreneurs and small groups raising funds for their ventures through various online platforms involving individuals as well as organisations.

Of late, such platforms are being used to launch products that promise certain financial returns to the contributors.

While it is still at a nascent stage in India compared to large markets such as the US, China and the UK, the trend is catching up fast especially in the wake of the emergence of the social media as a key platform for such activities.

The International Organisation 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 systematic risks in future.

Sinha said he was concerned about the decline in capital raising activities as Rs 60,000 crore worth of approvals and intentions to raise money had either been allowed to lapse or withdrawn in the last three years.

“Several companies filed a draft red herring prospectus with Sebi to raise capital. But they either withdrew or allowed it to be lapsed,” he said.

Sinha complimented the Bombay Stock Exchange for achieving $1 billion market capitalisation of companies listed on its SME platform.

Sebi’s initiative for IPO without listing received a good response and within six months of issuing guidelines, three companies got listed on the BSE’s institutional trading platform, he said.