Equity Crowdfunding State of Play: October 2015

With the recent surge of legislative reforms and demand for alternative finance on the rise, Equity Crowdfunding (ECF) is starting to gain global momentum. Interests are piqued, and appetites for capital are unsatiated, putting pressure on governments to legalise and regulate ECF markets. So, what does the world of ECF look like now? Here’s a quick snapshot of the global ECF environment.

Canada Enters the Mix

Following the footsteps of the U.K., New Zealand, and the United States, Canada has now implemented regulations for ECF, allowing private solicitations to retail investors.

Unlike in New Zealand, where we have a blanket set of rules, it is up to the securities regulators in each respective Canadian province to implement ECF regulations. Six early-adopters – British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, and Nova Scotia –  stepped forward to implement “a substantially harmonised” set of regulations, with regulations in provinces such as Ontario still in the works.

Self-Satisfaction

UK crowdfunding company, Seedrs, announced a self-crowdfunding round for £2.5m. With the average rate of investment amounting to £7,227/minute, the self-crowdfunding offer far exceeded expectations. This is Seedr’s second successful crack at self-crowdfunding, with the previous offer’s goal being reached in a matter of hours.

Fellow UK-based ECF, Crowdcube, has also had a number of successful self-crowdfunding rounds, raising £319k, £1.5m, and £5m in three rounds, spaced roughly a year apart.

The United States have also refused to shy away from self-promotion, with New York based ECF, OneVest, raising nearly $2m in July this year through its first self-crowdfunding effort.

ASEAN’s Crowdfunding Genesis

Earlier this year, Malaysia became the first country in the ASEAN region to have a defined regulatory environment for the crowdfunding sector. Thailand is also well on track to having a fully functioning legal environment for ECF platforms. They have outlined the sections of the legal playbook, stating the disclosure requirements and investment limitations for retail investors, among other regulations.

Singapore has lagged behind its counterparts, however, it has taken the first step into regulations with the Monetary Authority of Singapore (MAS) releasing a consultation paper of proposed regulations to facilitate ECF in Singapore. While it is no firm commitment, the expectation is that there will be a full regulatory framework in the near future.

As in Australia, Singapore is seeing significant momentum building in favour of Equity Crowdfunding. The Singapore Exchange (SGX) vividly demonstrated this keenness for alternative finance when it partnered with Venture Capital firm Clearbridge Accelerator (CBA) to set up an ECF platform.

We expect that other countries in the AESAN region – especially those who are experiencing growing SME sectors – will follow suit, providing opportunities for new ECF platforms to establish themselves in the market, as well as allowing for existing platforms to expand their reach.

What About China?

Equity crowdfunding is possible in China but has been largely self-regulated. Regulators have been vague on their stance on ECFs; the lack of visible development in ECF regulation since the draft release in December 2014 is evidence of such ambiguity.

However, in June 2015, Ant Financial Services Group, a company with close ties to the e-commerce giant, Alibaba, was recently granted a business licence by the Shanghai authorities to open an ECF platform. The grant appears to be the most recent indication that regulatory affirmation by the China Securities Regulatory Commission is on the books and due to be providing guidance sooner, rather than later.

USA: SEC Regulation A+

If you’ve been keeping up with crowdfunding news, you may have heard of Regulation A+, but what is it exactly?

Regulation A+ (reg. A+) refers to modifications made earlier this year to SEC Regulation A (reg. A), which is an approved exemption for companies having to register raises with the SEC. Despite the good intentions, it was poorly executed and the SEC itself estimated that only 26 offerings were made through reg. A. The significant differences between reg. A and reg. A+, but that is the subject of another post.

Also available on Equitise’s blog here

Cheers, Will

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