The wisdom (or lack of wisdom) of the crowd

India’s underserved debt and equity investment markets have seen a proliferation of specialized lenders creating avenues for capital that used to be stashed under beds to be put to better (hopefully) and riskier (definitely) uses. Given that these lenders are solving a problem that has vexed the Indian economy, one would imagine that the regulator would be dancing around a fire, singing ai se eu te pego (roughly, oh if I get you).

And reality? The Securities and Exchange Board of India (SEBI), in a press release in August 2016, declared that “electronic platforms” that are “facilitating fund raising on digital platforms” are illegal, on the ground that facilitating investments in the form of “private placements” contravenes provisions of the Securities Contracts (Regulation) Act, 1956 (SCRA), and the Companies Act, 2013 (CA).

Devoid of nuance, SEBI’s absolutist proclamation requires closer examination – what do these acts say? And do all “electronic platforms” fall afoul of the law?