Corp has been asked by the Securities and Exchange Board of India (Sebi) whether its business- and employment-oriented social networking service provides people and start-ups with a platform to publicly raise money in violation of the Companies Act, Livemint
reported on Friday citing two sources aware of the development.
In its response to Sebi, LinkedIn
said that it was not involved in any securities markets-related activities.
According to the financial daily's report, LinkedIn
hosts various angel investors and funding groups, like “Startups and Entrepreneurs Get Funded” (62,396 members) and “Global Investment Network” (44,005 members), which claim that they would be willing to help registered members of the social networking service with funds for business activities.
What are Sebi's concerns
According to the report, the market regulator is concerned because it is possible that the number of investors funding such entrepreneurial activity on LinkedIn
could cross 200. The current private placement norms
under the Companies Act
do not allow any entity to raise investments from more than 200 investors without a public issue of the securities offered in return for such investments and listing said securities with a listed exchange.
Citing one of the aforementioned sources, the report said that Sebi
wrote to LinkedIn
a few weeks ago and inquired whether the latter had controls in place and if it could bring in a monitoring mechanism to ensure that private placement norms
would not be breached on its platform.
The report added that LinkedIn's India team was in touch with the market regulator to address its concerns.
“For practical reasons, these online networks can be used by companies/start-ups to solicit funding from practically millions of registered users. So a founder of a company can be a part of such groups and propose detailed funding proposals in the group, which can be broadcast to all the members within a second. In comparison to professional and dedicated Indian online funding platforms, LinkedIn
and Facebook have enormous reach,” an angel investor told the financial daily on the condition of anonymity.
Referring to Sebi's questions, LinkedIn
India's Head of Communications Deepa Sapatnekar, according to the report, said: "LinkedIn’s vision is to create economic opportunity for the entire global workforce. We can confirm that LinkedIn
is not engaged in any activities associated with the securities market."
As reported in July
this year, LinkedIn
has launched a ‘Lite’ version of its Android app in India. This will work on slow data networks and low-end smartphones, as it looks to tap job seekers outside the large cities. The solution is much like those of Facebook and Google’s to get around India’s patchy networks.
As reported in June
this year, LinkedIn
launched a Search Appearances feature through which the network's half a billion members can find out how many times and by whom their profile was discovered.
Members can also use the feature to see which companies are interested in them as prospective employees. This can help the user assess the job opportunities in the market. Also, users can pursue the job openings at each company with just a click, along with being able to track down the hiring managers at these firms.