Crowdfunding’s Potential for the Developing World

WB report coverFrom infoDev: Growing innovation –  a global partnership program within The World Bank Group17 October 2013

A new report commissioned by infoDev studies the promise and the risks of crowdfunding as a tool to finance innovation and growth in developing countries. It also provides an in-depth case study of crowdfunding’s potential in funding clean energy and climate technologies.

Crowdfunding—the practice of raising funds from multiple individuals via the web—first emerged in an organized form in the low-investment environment of 2008, and has quickly grown into a multi-billion dollar industry projected to reach $5 billion this year, channeling funding to hundreds of thousands of ventures globally. …

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Download the report

Australia: Advisory body releases paper on crowdfunding equity

By Crowdfund Vibe Staff Writers

The Australian Corporations And Markets Advisory Committee (CAMAC) – a government regulatory advisory body – has released a discussion paper on equity crowdfunding. Its paper follows from an undertaking in the Government’s National Digital Economy Strategy to hold an independent review of the regulation of crowdfunding equity. 

Australian-Coat-of-Arms

The CAMAC discussion paper notes that equity crowdfunding is already theoretically available in Australia, but subject to compliance by the issuer and the online intermediary with fundraising, licensing and other requirements under the Corporations Act. The paper examines the nature of those requirements and – taking into account approaches in other countries – asks whether the Australian provisions should be adjusted in some manner for crowdfunding equity.

CAMAC notes that this form of fundraising carries a series of risks for persons providing funds through this means. While risks may be present in any capital raising process, the central role of the Internet means that the number of persons potentially affected can be significantly greater than for more traditional means of fundraising. It also examines the degree of scrutiny of these offerings, and the information to be provided to investors, compared with traditional prospectus or other disclosure requirements.

Another issue it explores is the obligations that should rest on the online intermediaries (platform operators). 

The discussion paper seeks views on all of these issues, as well as:

  • whether CSEF should be regulated in any different manner than any other form of corporate fundraising
  • whether any form of regulatory accommodation for CSEF should be limited to specific situations, such as offers to sophisticated investors, falling well short of general public offers open to all investors, or
  • whether the Australian legislation should ‘cherry pick’ CSEF approaches in some other jurisdictions but within the context of otherwise maintaining the existing regulatory structure, or
  • whether the Australian legislation should regulate the process of CSEF in the same self-contained manner as, say, under the JOBS Act in the USA, which is intended to exhaustively regulate this form of fundraising in that jurisdiction.

CAMAC has asked for written submissions by Friday 29 November 2013. 

Click here to download the discussion paper

New Zealand: New financial markets law will authorise crowdfunding equity

By Crowdfund Vibe Staff Writers

OLYMPUS DIGITAL CAMERAIn August this year the New Zealand Parliament passed a major law reform for regulating New Zealand’s financial markets. This new law will include one of the first regimes in the world to licence crowdfunding.

“The passage of the Financial Markets Conduct (FMC) Bill is a significant milestone and the result of a comprehensive review of securities law.  It addresses the lessons from the global financial crisis and the failure of finance companies and also picks up many of the recommendations of the Capital Market Development Taskforce” Mr Craig Foss, New Zealand’s Minister of Commerce, stated when the law passed.

“This new law will provide better information and protections for investors and clearer rules and options for companies looking to raise capital. It plays an important role in the Government’s Business Growth Agenda to build New Zealand’s capital markets and drive business growth, exports and jobs”, he explained.

The new law rewrites many of the rules for how financial products and financial services are offered to the public and how they are governed and operated.

It will permit new forms of capital-raising, such as peer-to-peer lending and crowdfunding.  These will be authorised through a licensing regime which will be available from 1 April 2014. The detail of the licensing system will be set out in regulations.

The NZ Financial Markets Authority is responsible for implementing the changes and will consult on new licensing frameworks and other key operational changes. An exposure draft of the crowdfunding regime and other regulations to support the Bill will be released for consultation in October.

“The FMC Bill is the largest Bill in a suite of reforms in this sector, sitting alongside the Financial Advisors Act and The Financial Reporting Bill,” stated Mr Foss. The Minister singled out the pending authorisation of crowdfunding and peer-to-peer lending in several tweets to promote the new law.

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