Equity Crowdfunding Regulations by Countries

Investments into crowdfunding can breach various securities laws, because soliciting investments from the general public is often illegal, unless the opportunity has been filed with an appropriate security regulatory authority.

These regulators have different ways of determining what is and what is not a security.

Any crowdfunding arrangement in which investors are asked to contribute money in exchange for potential profits based on the work of others would be considered a security.

Considering that a lot of project creators are inexperienced and a lot of investors are often not enough financially educated, these regulations are made primarily in order to protect the people.

Let’s dive into the different approaches to investing crowdfunding.

Although it was admitted by the Civil Code, it is not regulated.

The Argentine crowdfunding model will flow through collective financing platforms, which must be in charge of a corporation authorized and registered by the financial institution.

Final purpose of the finance platform has to be to put in contact with the fundraiser and investors, regardless if either a private personal or any legal entity is investing.

It must have a legal structure, statute and corporate purpose, name, registered addresses, shareholder registration, own website and email, among other requirements.

Australia differences between debt crowdfunding and equity crowdfunding.

Regarding equity crowdfunding, the Corporations and Markets Advisory Committee (CAMAC) proposed a regulatory regime specifically designed to facilitate crowd sourced equity funding (CSEF) in Australia in 2014.

The CAMAC report recommended Australia introduce legislation allowing retail investors to invest up to $10,000 a year in start-ups via equity crowdfunding, with a maximum of $2,500 in each company. It suggested companies be allowed to raise up to $2 million per year on such platforms.

Following this principle, the equity crowdfunding became regulated in 2018, in fact, in the same year, the government provided the first licenses for the platforms.

In addition, the Securities and Futures Commission, Hong Kong’s securities regulator, imposed certain legal restrictions on equity crowdfunding platforms, such as the requirement to provide services only to professional investors.

Israel has yet to enact legal framework for equity crowdfunding.

In July 2013, Italy became the first country in Europe to implement a complete regulation on equity-crowdfunding, which applies only to innovative startups and establishes.

The Monetary Authority of Singapore (MAS) controls equity-based crowdfunding the same way it controls debt-based crowdfunding.

For both cases, the crowdfunding platform must have a Capital Markets Service (CSL) license. If a platform also wishes to offer advice to investors, it needs to acquire a license as a financial advisor.

Instead, each platform is reviewed on a case-by-case basis to decide whether the platform requires a license to operate.

In general, if the money raised is only brokered via the platform and not centrally pooled in any way, unlicensed providers are acting within the law.

On May 16, 2016, Title III of the 2012 JOBS Act’s Regulation CF came into effect which allows equity crowdfunding (also referred to as “Regulation Crowdfunding”), regardless of net worth or income.

It must be conducted by a licensed broker-dealer or via a funding portal registered with the SEC.

The legislation mandates that funding portals register with the SEC as well as an applicable self-regulatory organization to operate.

Regulation A offerings places limits on the value of securities issuer may offer and individuals can invest through crowdfunding intermediaries.

An issuer may sell up to $1,000,000 of its securities per 12 months, and, depending upon their net worth and income, investors will be permitted to invest up to $100,000 in crowdfunding issues per 12 months.

Related posts:

The weather is cooling down and the end of the year is approaching us. For many, this means it’s open enrollment season for our employer-sponsored benefits and only a few months to spend the rest of…

Shabaan is dark. Dark as my mother’s soot coated cooking pot. The one she uses to boil bitter traditional vegetables that accompany ugali (maize meal). He likes chewing the bitter khat leaves, a…

Trunk or Treating is new to Halloween traditions, but it’s becoming more and more well-known as the years pass. Trunk or Treat events have a handful of benefits that include a safer environment, less…