Equity Crowdfunding Platforms Are Illegal, Says SEBI

Coming on too hard against digital equity crowdfunding websites such as Grex, LetsVenture, Termsheet, Equity Crest and Tracxn, for facilitating startups in raising investor money on their platforms, SEBI has questioned the very legality of their operations, triggering a huge setback to the industry.

“Electronic platforms facilitating fundraising on digital platforms are neither authorised nor recognised under any law governing the securities market,” said the Sebi note to investors. “Such platforms, which are open to all investors registered with the platform, amount to a contravention Securities Contract Act and the Companies Act,” the regulator has clarified.

SEBI’s heavy handed circular has not gone well with startup companies, who have lashed out at the regulator, saying raising funds from private investors through such platforms does not fall under SEBI’s jurisdiction.