The Investor Legal Protection In Public-offering Crowdfunding

Basically,crowdfunding is a method of raising money.Equity-based crowdfunding repays the investors in the form of stock ownership,which runs by the Internet.The investors,financiers and crowdfunding platforms all have to participate in this process,and generally,equity-based crowdfunding opens to all the investors,advertising and promoting through the Internet.In China,due to the prohibition of law,equity-based crowdfunding platforms usually have no choice but to narrow the scope of publicize and collect,complete the fund raising in the means of private placement.However,public-offering crowdfunding is still the main trend in developed financial market.Public-offering crowdfunding has something in common with stock exchange and P2P,but there is also something different between them.It has the characteristics of“overt,small,and popular”,opening for common investors with comparatively high risk.Although without the formal recognization from Chinese Securities Law,public-offering crowdfunding does meet the essence of negotiable securities,and the process of crowdfunding is actually a kind of offering.In public-offering crowdfunding,investors face 3 layers of risk:the first layer of fraud,the second layer of irrational investment,and the third layer of being treated against their will.Obviously,this risk has been recognized by authorities.Therefore,they are very prudent at the present stage,leading to the lack of systematic management system.But equity-based crowdfunding is such a huge financial innovation after all,which has so many advantages and potentialities,and should not be restrained.On one hand,public-offering crowdfunding could complete the fundraising,market research and brand building at the same time,which could not be replaced by private placement.On the other hand,private placement is in lack of attraction for common investors,for it could neither satisfy the need of business startups nor patch up the inherent risk of crowdfunding.Thus,it is unreasonable to restrain public-offering crowdfunding but at the same time,allow private-placement crowdfunding.However,to develop public-offering crowdfunding,release exemption is necessary.This goal is connected with Chinese Securities Law reformation,and also in need of further regulations.In my opinion,public-offering crowdfunding is a kind of high-risk investment in essence,so it is impossible to garantee that the common investors would never lose any money in it.We should put more emphasize on ensuring that the related information should be open and true,and at the same time,inducing the investors to decide retionally,maintaining their risk tolerance.Different layers of risk should be treated differently.We should contain it,dredge it and disseminate it seperately.Therefore,the main solutions would be setting access rule,compulsory information disclosure and investment quota,which is also the main practice in the United States.As pioneer,the American system is worth to be analysed.After JOBS Act,SEC implemented a new round of securities issuing reformation,including the update of Regulation A~+from Regulation A,and the publishment of Regulation Crowdfunding.The two different regulations turned out to be feasible and applicable,although there were also some problems being found.As a price of release exemption,crowdfunding platforms have to meet certain admittance criterion.Brokers could get the qualification of crowdfunding automatically,but a platform could also resign as a funding portalfor the purpose of cost saving and procedure simplification.However,actually the choice of brokers is getting more and more favors because of more freedom and more ways of earning money,which is a noticeable phenomenon.When it comes to compulsory information disclosure,SEC asks different crowdfunding projects to take on different obligations,depending on the different issuing regulations they invoke.Investment quota is one of the most important innovations of JOBS Act,which were also developed in Regulation A~+and Regulation Crowdfunding.It aims at maintain a balance between safety and efficiency,especially after crowdfunding were allowed to advertise,which is contrary to the traditional exemption system of securities issuance.Based on this,we could go further in our own supervisory system.I am looking forward to seeing the completion of registration system reformation,so the public-offering crowdfunding may break the barrier of compliance accordingly.In setting access rule,I think that we shoud learn a lesson from American experience,raising the standard appropriately and giving the platforms more freedom.The main purpose of compulsory information disclosure is breaking information asymmetry.Besides the regular solutions,we may even be able to apply the block chain technology in the future so as to make the disclosure more authentic and reliable,reducing the investors'risk.The last but not least,calm period for common investors is also necessary,as well as investor education.The design of investment quota also means a lot to the whole stable financial market.In general,a switch on the management system and the train of thought is what crowdfunding needs.It is uneasy but essential,or we may regretfully miss the chance of relieving the financing pressure of business startups.I hope that in the future,more innovations on online finance including public-offering crowdfunding could be put into use,becoming the great driving force of market progression andeconomic development.