Proposed law on ponzi scheme to hurt crowdfunding for startups: Panel
15 Jan 2019 11:17 PM GMT
A proposed legislation to check Ponzi schemes will make crowdfunding illegal and financing for startups difficult in its present form unless the concept of an ?unregulated deposit? is explicitly defined in the bill, a parliamentary panel has said.
- The Banning of Unregulated Deposit Schemes Bill, 2018, which aims to check unscrupulous entities from cheating gullible investors, was introduced in the Lok Sabha in July last year.
- Crowdfunding entails raising small amounts of capital from a large number of people to finance a new venture, making use of the easy accessibility of vast networks of people through social media and investor websites.
- Legitimate deposits, according to the bill, are overseen by watchdogs such as the Securities & Exchange Board of India (SEBI), Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), National Housing Bank, Pension Fund Regulatory and Development Authority, Employees’ Provident Fund Organisation, the ministry of corporate affairs and schemes offered by state governments.
- The committee finds the definition ambiguous and prone to harassment and misuse.
- Shruti Rajan, a partner at the law firm Cyril Amarchand Mangaldas said that while the law can have an impact on crowd funding to kick-start businesses, such funding of charitable ventures is unlikely to be affected.
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