Crowdfunding platforms seem to be in trouble again. According to the LiveMint report, the Securities and Exchange Board of India (SEBI) has issued another warning on crowdfunding, but this time it was directed at angel investor networks and startup funding platforms.

In a notice, SEBI has asked these companies to include a disclaimer stating that crowdfunding platforms are neither stock exchanges nor authorized by the capital markets regulator to solicit investments.

The disclaimer should further state that the securities traded on these platforms are not traded on any regulated exchange. As per the LiveMint report, firms such as Venture Catalysts, LetsVenture Online, and GREX have complied with the SEBI notice sent in late July 2017.

Earlier in August 2017, SEBI has sent notices to at least six angel firms asking them for details of their business. In September 2016, SEBI Warned investors stating, “Only recognized stock exchanges provide a platform where equity and other securities issued by companies are listed and traded in accordance with the provisions of the SCRA.”

As per the report by LiveMint, SEBI is thinking of revisiting these guidelines and will keep minimum net worth criteria for investors to be eligible to invest in startups through such platforms.

SEBI is concerned that these platforms were functioning as stock exchanges and as such they were in contravention of the Securities Contract Regulation Act, 1956 (SCRO) and Companies Act. Most of the crowdfunding platforms facilitate fund raising through private placement with companies.

Since 2014, SEBI has been trying to come up with guidelines for crowdfunding. According to the guidelines said only accredited investors registered with a crowdfunding platform can invest in equity-based crowdfunding campaigns. Not only this, only Indian startups or SMEs can raise funds through these platforms.

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