Capital markets regulator the Securities and Exchange Board of India (SEBI) has reportedly asked angel networks and crowdfunding platforms to put up a disclaimer saying they do not classify as stock exchanges and are not authorised to solicit investments.
Some investment facilitators, such as Venture Catalysts and GREX, are already complying with the order, Mint reported, quoting a letter issued by the regulator in July.
A month ago, SEBI had issued notices to several angel networks, seeking details of how their fundraising process worked and whether they complied with the prevailing securities market and Indian company law provisions. SEBI’s concern was that since these platforms connected investors with enterprises, they were akin to public markets and needed to be regulated.
Some angel networks had welcomed SEBI's move to form a committee to examine their models even as others questioned its role in regulating investments in early-stage ventures.
The regulator had eased the rules for investment in startups in November 2016, following recommendations from a panel of experts chaired by Infosys co-founder NR Narayana Murthy. At that time, many angel networks and crowdfunding platforms had requested to be recognised as a new class of market intermediaries and sought specific norms relating to eligible startups, investors, minimum and maximum investment amounts, disclosure norms, etc.
SEBI increased the upper limit for the number of angel investors in a scheme to 200 from 49, halved the minimum investment threshold to Rs 25 lakh, and allowed investors to put money in firms that were up to five years old.
The regulator also reduced the lock-in period for angel funds to one year from three years, and allowed such investors to park 25% of their funds in overseas startups, in line with other alternative investment funds.
