Research On The Investor Protection System Of Equitybased Crowdfunding In China

Equity Crowd-funding is a new kind of financing mode for small and medium enterprises that plan to raise funds from ordinary investors though the internet.And investors are the significant participants in the Equity Crowdfunding,so protecting the investors are related closely with the development of the Equity Crowd-funding.However,in terms of investors protect,there are not only congenital defects in the system of Equity Crowd-funding,but also the development is still in its infancy,and the investors are lack of much protection,therefore it is urgent mission to establish legal mechanism to protect the investors.Nowadays,without the legal mechanism has obstructed the development of Equity Crowd-funding in China,so the Chinese government begin to pay more attention to working on legislation about Equity Crowd-funding.On the 18 th December of 2014,the Securities Industry Association's documents on the management about Equity Crowd-funding make clear that the character of Equity Crowd-funding is private placement,orientation of platforms,the protection of investors,the responsibility of fund raisers and so on.What's more,the ten ministries like the People's Bank of China announced the instruction about the sound development of internet which stipulates Equity Crowd-funding means a financing activity that the equity form to the public issue in a small range.These two documents to promote the development of equity,and exposed many shortcomings of Equity Crowd-funding in China.On the current situation of China's equity legislation,investors in China's equity investors are very unfavorable.First of all,according to China's Securities Law,Corporation Law,Partnership Enterprise Law of relevant provisions of the stock market is extremely easy to disclose illegal contribution of not more than 200 shareholders or limited partners not more than 50 people,the above all lead to the ownership of the crowd is difficult to play the power of the embarrassing situation.Second,the boundaries of equity and illegal fund raising are unclear,so that the stock market is extremely easy to violate the illegal absorption of public deposits and other illegal fund-raising criminal offenses,indirectly increased the risk faced by investors.Third,the lack of reasonable access to investors access standards,the management to set the standard for investors too high,although the risk of lower capacity of investors can be eliminated,but it violates the character of equity crowd-funding,which will lead to equity crowd-funding that lost its most attractive advantages,and not conducive to solve the problem of small and medium enterprises financing.Fourth,investor exit mechanism is still imperfect,and investors can't transfer of shares to obtain an income on investment,which not only increases the investment risk of investors,but also limited its investment wish,and increased the cost of realization by investors.Fifth,information disclosure regulation is not perfect which lead to investors falling into the risk of information asymmetry,contract fraud and other risks.Finally,the lack of a third-party fund custody system puts the interests of investors in danger.Through studying the protection system of equity crowd-funding investors of the United State and Britain,it is found that there are many perfect provision on the issuance of exemption,the delimitation of investors and the continuous disclosure of information,which is reference for China.Finally,the establishment of a sound system is the basis for the protection of equity investors in China,therefore,first,in order to avoid the stock of illegal public offering of securities,the establishment of equity incentive mechanism.Second,clarify the boundaries of equity and illegal fund-raising,improve the existing legal system,for the ownership of the legal system to provide institutional basis.Third,set reasonable investor access standards,investors will be more detailed classification and appropriate restrictions on the number of investors and the total amount.Fourth,improve the exit system of investors,set the stock transfer lock-up period,but also pay attention to the construction of equity transfer.Fifth,improve the information disclosure system,expand the main body of information disclosure,and improve the content of information disclosure requirements,but also the establishment of information disclosure credit evaluation system.In addition,in the provision of the first information disclosure,but also requires continuous disclosure of information,the maximum protection of investors the right to know.Sixth,the construction of equity stake in third-party fund custody system to protect investors in the process of equity investment in the process of security.Investors are an important participant in equity participation,and their investment funds are an important source of funds for equity participation.Therefore,the protection of investors is through the equity of all the important principles,and has a significant meaning.