No doubt start-ups should have the option to raise funds from capital markets. There is crowd-funding platform but the same may not be able to fulfill requirements of various types of start-ups.
In a major boost for start-ups, capital market regulator SEBI made it easier for entrepreneur driven new companies to list on stock exchange platforms with an easier listing, shareholding and disclosure norms.
The new rules are intended to attract start-ups to list in the country rather than looking for funds from a foreign bourse.

For listing on all the national exchanges, common conditions is the applicant, promoters, and/or group companies, shall not be in default in compliance with the listing agreement, the applicant Company shall be in compliance with SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009 and amendments thereof. But many small and medium enterprises (SMEs) may not be able to comply with such strict requirements. (Reference Article)

SME Exchange
SME Exchange

So to facilitate fund raising for SMEs, SEBI permitted national exchanges to have a dedicated platform for SMEs in 2012 with various relaxed conditions for listing and minimum net worth of only Rs 1 crores. On 13th March 2012, BSE launched a dedicated platform for Small-and-Medium Enterprises.

Nobody can say that easier funding and listing norms for SMEs and Start-ups are not required but at the same time, those platforms should not be misused for money laundering. Recently SEBI barred 260 entities, including individuals and companies, from the securities markets for tax evasion and laundering of black money through stock trading platforms. Based on the three parameters set by the financial market regulator, if any company is found to fall under more than one of the criteria, it would suspend the shares of those entities and ensue appropriate action against them. The parameters formed by S.E.B.I. include the mentioned address being non-existent, misuse of preferential allotment, and weak fundamentals that do not support price rise. It can be noted that preferential allotment is a major route for money laundering. In its probe S.E.B.I. noticed ups-and-downs in prices in shares of the companies which were non-existent in reality. The shares were allotted preferentially to favorite entities and prices were pushed up without any fundamental basis, which was then followed by an exit by the investors.
No STT - No Money Laundering


As the SEBI had relaxed listing, fund-raising norms for Start-ups by allowing new platform of ITP, this may lead to money laundering same as in the case of SMEs. As on date, no unscrupulous promoters are able to raise funds and in the process, small investors are cheated. However to avoid money laundering, one can have different norms for long term capital gain tax and security transaction tax for gains made from transactions on these exchanges as compared to main national exchanges .

Obviously, once the government decides not levy STT on the transaction on these exchanges, capital gain tax from such transactions will not be exempt and will be liable to a higher rate of tax and in the process checking the menace of money laundering through these exchanges.

Main Contributor : Swati

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