SEBI wants to Increase the Number of Angel Fund Investors

By giving angel funds access to a larger pool of accredited investors, the Securities and Exchange Board of India (SEBI), the market watchdog, hopes to broaden the definition of qualified institutional buyers (QIB). The SEBI further suggested lifting the angel fund restriction of 200 investors in its February 21 consultation document. Up till now, private placements have restricted startup investment opportunities to no more than 200 investors under the Companies Act of 2013.

Institutional investors that invest in securities that might not be accessible to ordinary investors include mutual funds, banks, insurance companies, financial institutions, and foreign institutional investors (FIIs). These investors are known as QIBs. The proposal also intends to require angel funds to onboard and only give investment options to accredited investors with a high risk appetite, out of concern for the investors' financial well-being and investments.

Attracting More Investors

According to SEBI, angel funds can grow by drawing in additional investors who meet regulatory requirements and are independently confirmed to have the requisite risk appetite and understanding. According to SEBI, the deadline for submitting feedback and recommendations on the plan is March 14. The markets watchdog loosened its requirements for alternative investment funds (AIFs) to retain their investments in dematerialised form just days prior to this development.

Additionally, SEBI stated that, with few exceptions, investments made prior to July 1 will not be subject to this rule. However, in order to stop illegal transactions in investors' demat accounts, SEBI has also been striving to take the initiative to introduce new technological measures. A few days ago, the markets regulator proposed an authentication system that calls for stock broking or trading apps to detect a user's unique client code (UCC), in addition to SIM cards and mobile devices.

Suggested Modifications

SEBI suggests adding Alternative Investment Funds (AIs) to the ICDR Regulations' definition of a Qualified Institutional Buyer (QIB), particularly for angel funds. Like QIBs, this inclusion recognises AIs' financial capability and risk assessment abilities.

It may be possible to lift the current cap of 200 investors per Angel Fund investment. By drawing in more investors and boosting cash flow to start-ups, this modification aims to support the expansion of angel funds.

After being evaluated by outside organisations, AIs are thought to possess the financial stability and risk awareness required to make investments in illiquid, high-risk assets like start-ups.

The regulatory objective of enabling efficient capital raising while protecting investor interests is supported by the inclusion of AIs as QIBs. Angel Funds can invest more in start-ups and promote innovation and economic growth by broadening the pool of qualified investors.

Comments from stakeholders can be posted on the SEBI website. The goal is to maintain strong investor protection measures while ensuring that the regulatory structure efficiently supports the expansion of angel funds.

Plum to Invest $6M in Personal Insurance Expansion

Plum will invest $6 million over the next two years to break into the personal insurance market, expanding its offerings beyond corporate health plans.

StartupTalkyNitin Konde