Following the lead set by market regulators from both the United States and the United Kingdom, India has started reviewing the drafting of a framework for 'crowdfunding'. This is the emerging manner in which funds are raised through the pooling of money from different individuals through the Internet.
Crowdfunding has become a growing phenomenon amongst young entrepreneurs with some instances being utilized in India. Here, individuals have formed small groups to raise funds for venture purposes.
There are no clear regulations that govern these activities, thus there is a need to have a framework in place to regulate the activities when it involves money and securities. This would help prevent the profileration of money laundering activities or other criminal actions utilizing the 'crowdfunding' platform.
Another analysis said that when crowdfunding involves the sale of securities, then the same can be regulated under the SEBI rules for Collective Investment Schemes or Alternative Investment Funds. There is also the option of creating a whole new set of rules and regulations dependent upon the commentaries from various stakeholders.
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