SEBI Apprehensive About LinkedIn's Fundraising, Questions The Platform

SEBI questioned LinkedIn about its internal control systems and the practices it adopts to curb the violation of its private placement norms.

SEBI, LinkedIn, fundraising, capital, sourcing, angel, investors, private placement

The Securities and Exchange Board of India (SEBI) has raised a doubt over LinkedIn Corp’s provision of services on its social networking site. SEBI has questioned the sourcing and raising of funds by people and start-ups which would stand as a violation of the Companies Act. LinkedIn, in its reply said it is not engaged in any such activities.

With nearly 42 million users in India, LinkedIn has quite a number of angel funding groups and other similar one who claim to enable and assist any entrepreneurial activities, monetarily, to any registered LinkedIn member. These groups go by the names ‘Startups and Entrepreneurs Get Funded’ (62,396 members) and ‘Global Investment Network’ (44,005 members).

 Source: businesstandard

Deepa Sapatnekar, the head of Communications for LinkedIn India said, “LinkedIn’s vision is to create economic opportunity for the entire global workforce. We can confirm that LinkedIn is not engaged in any activities associated with the securities market.”

As per Companies Act, no entity can raise capital from more than 200 investors without making a public issue of the securities offered in place of such investments and listing of such securities on a recognised stock exchange, as per the private placement norms. SEBI is apprehensive about LinkedIn crossing the mark of 200 investors already who are engaged in funding of entrepreneurial activities.

SEBI had, a few weeks ago, questioned LinkedIn about its internal control systems and the practices it adopts to curb the violation of its private placement norms.

“For practical reasons, these online networks can be used by companies/start-ups to solicit funding from practically millions of registered users. So a founder of a company can be a part of such groups and propose detailed funding proposals in the group, which can be broadcast to all the members within a second. In comparison to professional and dedicated Indian online funding platforms, LinkedIn and Facebook have enormous reach,” said an angel investor, anonymously.

 Source: thefinancialexpress

SEBI has been actively pulling up start-ups and firms who are violating the norms of sourcing of capital. The market regulator wrote to nearly half-a-dozen star-ups asking to explain their fundraising business and whether or not they function within the securities market guidelines.

In August 2016, SEBI cracked up a whip in several equity crowd-funding start-ups and they were found to be neither authorised, nor recognised under any of the security market laws.

SEBI formed a panel of 10 members on financial and regulatory technologies, which is being headed by T.V. Mohandas Pai, the head of Manipal Global Eduction. The panel aims to chalk out trends relating to fin-tech and advises SEBI on it opportunities and challenges.

Information source: livemint

Title image: digitallearning

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