As per a report by Economic Times, Securities & Exchange Board of India (SEBI) has sent notices to atleast six angel firms in one-and-a-half months asking them for details of their business. However, the names of these angel investment firms is not yet out in public domain.

In last couple of years its pretty evidently seen and noticed by our team too that lot of amateurish people better be called as 'Startup Brokers' are creating companies on Facebook (create Facebook pages) and present them as angel firms (which they are not) to budding entrepreneurs and newly formed startups. They however act as platform or matchmakers for startups to raise funds.

SEBI's primary queries are -- Who are people behind these angel networks? How do they raise these funds? Are they acting like unauthorized stock exchanges?

SEBI fears that these unpopular electronic players might be "playing matchmakers in equity or debt market, they are acting like stock exchanges which they are not authorized to do," the report said. “By facilitating the issuance of securities to more than 200 investors, some networks may be violating the rules of private placement,” the report added.

The regulator has also set up a team which is examining such cases.

Also, there are concerns whether some platforms are opening the doors to unscrupulous practices and alluring unsuspecting small investors, said the person.

"Under Securities Contracts (Regulation) Act, 1956, technically, any entity which assists in dealing in securities can be tagged ‘stock exchange’ but the application of such a wide provision has to be carefully thought through. Otherwise, any investment banker or an adviser facilitating a deal in unlisted securities (whether or not on an electronic platform) can be termed as a stock exchange,” said Tejesh Chitlangi, partner at IC Legal, a law firm which advises some angel networks, as quoted by ET.
Advertisements

Post a Comment

Previous Post Next Post
Like this content? Sign up for our daily newsletter to get latest updates.