Route Study About The Realization Of Protecting The Investors Of Equity-based Crowdfunding In China

In this article, I will discuss the investors protection of the Equity-based crowdfunding. As the Equity-based crowdfunding has not yet obtained the exemption from the Law of the Securities, in July 2015, the government carried out a new regulation to confirm the legal nature of the Equity-based crowdfunding. In a word, Equity-based crowdfunding is a method by means of the Internet raising funds from the public for the development of the innovative enterprise and Start-Ups. As the Equity-based crowdfunding will be opened to more and more general public investors, the investment risks will be more and more serious. The healthy and orderly development of the Equity-based crowdfunding can’t go without of the complete, sound system of protecting the investors. If the general public investors face the high investment risks and the government don’t enact any policy to protect the rights of the investors. The Equity-based crowdfunding will be hard to develop further. In addition, the Equity-based crowdfunding will be difficult to give full play to its own value. However, up till now, the government has not yet enacted any new laws and the markets haven’t formulated the united rules to protect the rights of the investors. In this article, I will put forwards some suggestions for building the system to protect the rights of the investors based on learning the legal experience of the foreign countries. The legal experience includes three aspects, the restrictive rules on the investors, the restrictive rules on the issues and the platforms’ obligation of protecting investors.Chapter One confirms the legal nature of the Equity-based crowdfunding as a method by means of raising funds from the public on the Internet. Based on this conclusion, the problem of protecting the investors is becoming more and more serious, so that the legislators are faced with finding the best balance point to deal with the contradiction between the advantages of raising funds and the disadvantages of bringing risks to the investors.Chapter Two mainly analyzes the restrictive rules on the investors in foreign laws, including the rules of limiting investment amounts, the rules of investors’ taxonomic constraint and the model of the “Leader + Backer”. The rules of limiting investment amounts is a method by means of limiting the biggest loss in order to control the risks which the investor could face, but in operation, it’s difficult to affirm the maximum investment amount of every single investor. By comparison, the rules of investors’ taxonomic constraint seems more reasonable, and we need to establish a united standard to classify the investors in order to match with this rule. The model of the “Leader + Backer” can help the investors to acquire the information, recognize the risks, make investment decisions and so on, and this model can reduce the investment risk effectively.Chapter Three mainly analyzes the restrictive rules on the issuers in foreign laws, including the rules of restricting the qualification of the issuers, the rules of limiting investment amounts and the requirement of the information disclosure. In terms of the rules of restricting the qualification of the issuers, many countries specify that the issuers who are illegal or non-honest can’t be admitted to raise funding from the public. In order to lower the risks, Italy only permits the specific person to raise funding via the Internet. In terms of the maximum investment amounts, the foreign countries stipulate the maximum amounts that the issuers could raise per year. Although many countries exempt the issuers’ obligation of disclosuring the information, but in consideration of the investors, the laws regulate that the innovative enterprise and Start-Ups should disclosure the basis information which is related to the benefits of the investors.Chapter Four analyzes the legal nature of the Equity-based crowdfunding platforms before discussing the platforms’ obligation of protecting the investors. I think the platforms couldn’t be regarded as a brokerage which provides information for the investors and the issuers, it should be regarded as a special financial intermediary, and it should be given more obligation of protecting the investors. The Equity-based crowdfunding platforms’ obligation mainly includes the obligation of investors appropriateness and the obligation of verifying the information of issuers.As a result, I think when we constructive the protection system of Equity-based crowdfunding, we should limiting investment amounts and the financing amounts reasonably. We also should definite the requirement of information disclosure and build the flexible ways of information disclosure. At the same time, we also should encourage the platforms to push the model of the “Leader + Backer” in order to let the Equity-based crowdfunding make the best use of itself. Meanwhile, we should strengthen the obligation of protecting the general public investors.