Analysis On The Regulation Of Equity-Crowdfunding And The Regulation Principle

In China,Equity-Crowdfunding is still suffering the obstacles from the current law,especially the illegal fund-raising in criminal law,prohibition of public placement without authorization in securities law.Because of the obstacles from the current law as well as the lack of legal foundations for regulation and supervision on the one side,and encouragement for innovation on the other side,regulatory authorities are demonstrating selective enforcement.In addition,there has been controversy about the nature and the operational model of Equity-Crowdfunding between public placement and private placement.In China,the problems faced by Equity-Crowdfunding regulation,on the one hand,is to remove the obstacles of current law and to acknowledge its legal status,on the other hand,is how to include it into the regulatory scope and how to regulate it effectively and efficiently.German lawmakers have made a systematic modification on Investment Products Act(VermAnlG),Securities and Exchange Act(WpHG),Industry and Commerce Administration Act(GewO)and so on through the compilation of the legislative amendments "Small and Medium Investor Protection Act".While the former unregulated investment product of Equity-Crowdfunding "participatory subordinated debt" is included into the regulatory scope of the "Investment Products Act",the article 2a of "Investment Products Act" is added,specifically to provide the exemption for the Equity-Crowdfunding,which is not only helpful to strengthen the protection of small and medium investors,but also takes the promotion of financing efficiency for start-ups and SME into account.Regarding the prospectus information disclosure and the annual information disclosure,german lawmakers has enacted provisions in line with their national condition,such as exemption of Prospectus,Investment Product Information Sheet,reduced Fiscal Year Reporting Obligations.Through the right of withdrawal,restricted advertising and Product Governance,the german lawmakers has been aiming at strengthening the protection of small and medium investors.Besides,Equity-Crowdfunding is strictly divided from the "fund"with the purpose of encouraging direct finance,reducing financing costs and promoting Inclusive Finance.On the one hand is to provide the exemption for the Equity-Crowdfunding,on the other hand,is to define the constituent elements of exemption strictly,and the allocation of the corresponding obligations to the platforms and corresponding obligations rights to small and medium investors,in order to protect them,a "restricted exemption" has come into being.On the occasion of the first anniversary of the birth of "Small and Medium Investor Protection Act",the overall evaluation on this act from the Equity-Crowdfunding industry is good.However,application of the exemption clause only to participation debt,subordinated debt and other similar investment products,the cap of total placement amount,individual investment limit,and the low-level supervision of industrial and commercial bureau have also drawn a lot of critical comments.The german legal regulation framework of Equity-Crowdfunding has provided not only positive experience but also negative experience for the reform of the legal system about Equity-Crowdfunfing and the construction of new regulation model of Equity-Crowdfunding in China,which is same as civil law countries with Germany.Because of the deep-rooted regulation principle——taking into account both risk prevention and opportunity exploitation,both protection of small and medium investors and protection of start-ups and SME——that needs to be followed in the area of Equity-Crowdfunding regulation both in China and Germany,the german legal regulation experience of Equity-Crowdfunding can be learned and transplanted for China.Two countries' regulation models of Equity-Crowdfunding are likely to further converge on the basis of the above-mentioned regulation principle in the context of the internationalization of the Equity-Crowdfunding market.