The Study On Perfection Of The Supervision System Of Equity Crowdfunding Platform In China

Equity crowdfunding is a new method of equity financing based on Internet, which involves platform, investor and financier. As the intermediary to provide investor and financier with services, the platform not only carries out the tasks of matching financing needs of both sides, but also takes some responsibilities to supervise the fundraising process. Equity crowdfunding platform in China now faces a number of legal risks, whose operation relates to the interests of financiers and investors, and the healthy development of the industry. So it should be placed under the sound supervision system in order to prevent and control the legal risks.Chapter I summarizes the present development status and regulations of equity crowdfunding platform in China. It introduces the definition of equity crowdfunding, the role the platform plays, and the development status of the platform. Then it gives a brief introduction of the typical business models of the platform both in China and the United States, from which we find that the models of chinese platform follow the American platform’s. In addition, this chapter overviews the legislative status of the platform which has regulatory gaps.Chapter II discusses the legal risks which the platform faces. At first, the chapter analyzes the contract disputes occurring between the platform called Renren Tou and the financier called Nuomiduo Company. The disputes focus on the legal effectiveness of the financing agreement signed by both parties and the definition of their legal relationships. Although the judges in the case uphold the legitimacy of equity crowdfunding with the will of supporting the development of the Internet financial, this case highlights many legal risks the platform faces. The platform may be suspected of being involved in offering stock to public illegally and raising fund illegally. During the raising and saving process of fund, the platform may misappropriate or occupy the funds investors gives. What the platform cannot do is not clear, so the interest conflicts may occur between the platform and its users. The security fraud may also happen on the platform. And users’ data are in the risk of leak due to the platform’s technical vulnerability and its behavior of selling information.Chapter III outlines the regulations of equity crowdfunding platform in the United States. The United States’ mature regulatory regime becomes a model for other countries, and it has very important significance for China because our typical business models of platform follow the United States’. The United States recognizes the legitimacy of equity crowdfunding through legislation, and sets up an intermediary type called funding portal specially for equity crowdfunding. In order to control the legal risks faced by the platform, the country creates the obligations of the platform, including that it cannot set their own funding pool and conduct the behaviors prohibited by the laws, and must take measures to prevent securities fraud and protect the rational choice and the privacy of investors.Chapter IV lists some suggestions to perfect the supervision system of equity crowdfunding platform. The Securities Act should be amended to establish the legitimacy of the platform, and the supporting regulations should be made by the regulatory organizations in order to build a complete supervision system from top to bottom. The platform should be required to set up the fund trusteeship system to protect the safety of funds from investors, and not to engage in business activities prohibited. In order to prevent the occurrence of investment fraud, the platform should undertake some obligations, including satisfying the establishment criteria, reviewing the information that financiers disclose, educating the investors and protecting the investors’ privacy.Equity crowdfunding is the inevitable outcome of the development of the financial markets in the Internet era, and is real need for promoting development of small and medium-sized enterprises, achieving inclusive financial and perfecting multi-level capital market. A market will not develop healthily and orderly if its intermediary runs badly. Legal risks of equity crowdfunding platform should be emphasized, and perfection of the supervision system to prevent and control such risks could raise a solid foundation for the long-term development of the industry.