Study On The Legal Risks And Legal Regulations Of Equity-based Crowdfunding

With the booming development of the "Internet+finance" in china, equity-based crowdfunding as an important force in the "encourage people to do business creatively and drive innovation", achieve the goals that traditional financing channels can not do. On the one hand, the equity-based crowdfunding can effectively reduce small businesses and start-ups financing costs, improve financing efficiency. On the other hand, the equity-based crowdfunding gives the general public the opportunity to participate in equity investment directly. However, the rapid development of equity-based crowdfunding has also brought a series of problems, because the relevant laws and regulations did not timely follow-up of equity-based crowdfunding, our equity-based crowdfunding is still in the "Vacuum zone" of legal regulation.On the one hand, lack of supporting laws and regulations easily lead equity-based crowdfunding into illegal fund-raising or illegal public offering, platform and issuer face enormous compliance risk.On the other hand, lack of legal norms has also led to the lack of mandatory protection for investors,investors need to face contract fraud, financial security, rights difficult and many other risks.In order to reduce these legal risks,fully enhance the efficiency of financing,sufficiently reduce financing costs and effectively protect the interests of investors,we must construct the legal system of equity-based crowdfunding.This paper begins with the legal risks of equity-based crowdfunding participants need to face. Then this paper presents suggestions on equity-based crowdfunding legal regulation on the basis of extraterritorial laws and platform’s activity.This paper discussed on equity-based crowdfunding in the following four parts:The first part summarizes crowdfunding and equity-based crowdfunding’s concept,development,mode and so on. First, it introduces crowdfunding’s concept,development and classification, which brings us the concept of equity-based crowdfunding. Second,it focuses on equity-based crowdfunding’s meaning, development status, participants and operational processes as well as two forms of equity-based crowdfunding major models, laying the groundwork for the discussion below.The second part analyzes the legal risk of equity-based crowdfunding participants need to face. This part can be sub-divided into platform’s legal risk,issuer’s legal risk and investors’legal risk.The third part briefly introduces the extraterritorial equity-based crowdfunding regulatory experience.In this part, through introducing American’s"Jumpstart Our Business Startups Act" and the SEC "final rule",the British’s "The FCA’s regulatory approach to crowdfunding over the internet and the promotion of non-readily realisable securities by other media" and Japan’s "Financial Instruments and Exchange Act and some other modifications Act", it showes how these countries regulate the crowdfunding.The last section briefly discusses the enlightenment experience of extraterritorial regulation.The fourth part presentes suggestions on equity-based crowdfunding legal regulation. First, it introduces briefly the current status of the lack of equity-based crowdfunding legal regulation in china. Second,from the overall equity-based crowdfunding regulation,it proposes we should establish a multi-level legal system of equity-based crowdfunding and regulate the private and public equity-based crowdfunding in different ways.Finally, from the part equity-based crowdfunding regulation, this article proposes regulatory proposals for crowdfunding platform, issuers and investors.