Regulating Crowd Equity Funding – the Why and the How

AuthorMarina Nehme
Publication Date01 Mar 2018
DOIhttp://doi.org/10.1111/jols.12082
JOURNAL OF LAW AND SOCIETY
VOLUME 45, NUMBER 1, MARCH 2018
ISSN: 0263-323X, pp. 116±35
Regulating Crowd Equity Funding ± the Why and the How
Marina Nehme*
Crowd equity funding is a form of sharing economy that allows com-
panies to obtain seed or other capital through small equity investments
from a large range of investors via an online portal. Investors receive
shares in the company in return for their investment. This form of
finance has been viewed as a way to remedy the shortfall of capital for
small and medium enterprises. However, in certain jurisdictions the
regulation of this form of sharing economy is akin to that used for the
traditional economy. This has created hurdles to the growth of this
alternate form of finance. Accordingly, this article provides a snapshot
of the regulation that applies to crowd equity funding in different
jurisdictions to highlight the flaws of such regulatory approaches. The
article concludes by advocating that an `outside-the-box' solution may
be needed to regulate this emerging industry.
INTRODUCTION
Technological developments have altered the way we conduct business and
have resulted in the rise of the sharing economy.
1
One of many examples
that illustrates this is the growth of crowdfunding. Crowdfunding relies on
online web-based platforms to allow individuals, businesses and/or not-for-
profit organizations to raise small amounts of money from a large number of
people in order to fund a particular project, business venture or even personal
116
*Faculty of Law, University of New South Wales, The Law Building, UNSW,
Sydney, NSW 2052, Australia
m.nehme@unsw.edu.au
I would like to thank Professor Bronwen Morgan, the other participants at the workshop
`Between Activism and Enterprise: The Role of Law in Redefining Growth and
Prosperity in the New Economy' (August 2016, UNSW), and the anonymous reviewers
for their constructive feedback on an earlier draft of this article.
1 M. Cusumano, `How Traditional Firms Must Compete in the Sharing Economy'
(2015) 58 Communications of the ACM 32, at 32.
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loan.
2
This form of sharing economy has had a phenomenal expansion since
it gained traction in 2003.
3
As with other forms of sharing economy, crowdfunding has taken two
pathways: one is focused on helping communities while the other may be
viewed by some as neo-liberalism on steroids.
4
For example, donation and
reward crowdfunding are community-focused: the purpose of the contribu-
tion moves away from the generation of financial return. It focuses instead
on benefiting a cause or project.
5
To various degrees, these two forms of
finance allow members of the public to share their resources with others and
even become collaborators.
Donation-based crowdfunding aims to fund charitable or social causes
and is strictly philanthropic. It is a popular form of funding that raised
US$1.94 billion worldwide in 2014.
6
Reward crowdfunding allows funders
to view themselves as collaborators by providing them with a reward for
their contribution.
7
For example, art projects have taken advantage of this
form of finance by putting the names of the contributors on the credits for the
project.
8
In 2014, reward crowdfunding raised US$1.33 billion worldwide.
9
Crowdfunding has also started to compete with the traditional economy
through peer-to-peer lending (P2P lending) and crowd equity funding (CEF).
Unlike donation and reward crowdfunding, P2P lending and CEF aim to
generate financial returns to investors and they are more akin to the
traditional economy in that regard. However, funders in these projects are
not your typical investors but are more likely to be attracted to the venture
due to the values of the business that is being promoted.
10
P2P lending has been very popular with US$11.08 billion being raised
worldwide in 2014.
11
This source of finance matches online investors with
117
2 E. Kirby and S. Worner, `Crowd-Funding: An Infant Industry Growing Fast' (2014)
IOSCO SWP3/2014, 4.
3 D. Freedman and M. Nutting, `A Brief History of Crowdfunding: Including
Rewards, Donation, Debts, and Equity Platforms in the US' (2015), at
www.freedman -chicago.com /ec4i/Histor y-of-Crowdfun ding.pdf>. How ever, the
term crowdfunding only appeared in 2006: R. Harrison, `Crowdfunding and the
Revitalisation of the Early Stage Risk Capital Market: Catalyst or Chimera?' (2013)
15 International J. of Entrepreneurial Finance 283, at 285.
4 C. Martin, `The Sharing Economy: A Pathway to Sustainability or a Nightmarish
Form of Neoliberal Capitalism?' (2016) 121 Ecological Economics 149, at 149.
5 Massolution, 2015CF: The Crowdfunding Industry Report (2015) 9.
6 id.
7 P. Belleflamme et al., `Individual Crowdfunding Practices' (2013) 15 Venture
Capital: International J. of Entrepreneurial Finance 313, at 318.
8 Arts Law Centre of Australia, `Crowdfunding: Information sheet' (2015), at
www .ar ts law .c om. au /im ag es/ up loa ds/ Cr owd so urc in g_f und in g_i nf o_s he et_
19_01_15.pdf> 3.
9 Massolution, op. cit., n. 5, p. 14.
10 M. Nehme, `The Phenomenon of Crowd Equity Funding: An Opportunity to
Promote Financial Literacy' (2017) 59 Cnd. Business Law Rev. 269.
11 Massolution, op. cit., n. 5, p. 14.
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borrowers with the aim of providing them with unsecured loans to fund a
particular venture.
12
The investors will become lenders and will receive
interest as well as repayment of their loans at the end of the agreement.
However, P2P lending does not allow investors to have a stake in the
business or venture. To fill this gap, CEF has been established and raised
US$1.1 billion in 2014.
13
This form of finance allows companies to obtain
capital through small equity investments from a large range of investors via
an online portal, the intermediary. Investors receive shares in the company in
return for their investment and this provides them with an opportunity to be
part of the business.
14
It is this form of finance that is the focus of this article,
as the regulation of CEF reflects the reality that it needs to be regulated
differently from the traditional economy. In fact, applying the same rules in
both instances will cause the downfall of CEF and other forms of sharing
economy.
Consequently, this article reflects on the type of regulation that may apply
to CEF. While not adopting a traditional comparative approach, the article is
attempting to provide a broad picture of the different types of regulations
that have been adopted in countries that may be viewed as early adopters in
each continent. The countries referred to are the United States, Italy, the
United Kingdom, Australia, New Zealand, Malaysia, and Thailand. African
countries have not yet adopted laws facilitating CEF. Accordingly, Nigeria,
Tunisia, and Morocco will be considered to highlight the danger of
regulating CEF in the same vein as the traditional economy.
To achieve the purpose of the article, Part I studies the benefits and risks
attached to CEF in order to determine the motivations behind the regulation
of this area of the law. Part II then assesses the approaches different
countries have adopted in their efforts to promote CEF to highlight problems
that may be attached to these approaches. The article concludes by
recommending that any regulatory change in this area should adopt `outside-
the-box' solutions to achieve a balance between consumer protection and
business empowerment.
I. BENEFITS AND RISKS ATTACHED TO CEF
Today, it has been widely acknowledged that small and medium enterprises
(SMEs)
15
are key contributors to employment and economic growth,
16
in
118
12 Kirby and Worner, op. cit., n. 2, p. 9.
13 Massolution, op. cit., n. 5, p. 14.
14 Corporations and Markets Advisory Committee (CAMAC), Crowd sourced equity
funding: Report (2014) 5.
15 For the purpose of this article, the definition of small and medium enterprises
includes start-ups.
16 M. Harper, Profit for the Poor: Cases in Micro-Finance (1998) 17.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
both national and global economies.
17
In the European Union, SMEs are
viewed as the `backbone of the European economy, providing a potential
source for jobs and economic growth'.
18
Similarly, at the start of 2016 in the
United Kingdom, small businesses accounted for 60 per cent of private
sector employment,
19
with 47 per cent of the private sector turnover
generated by these firms.
20
SMEs are likewise major employers in the
Australian economy, hiring 68.3 per cent of the workforce as of June 2014,
and are considered a major source of innovation.
21
The United States Small Business Administration notes that `[s]mall busi-
nesses continue to be incubators for innovation and employment growth'.
22
The same can be said about SMEs in Africa where they are playing a key role
in boosting national productivity,
23
and helping establish a new middle
class.
24
Similarly, SMEs account for 97 per cent of all enterprises in the Asia-
Pacific Economic Cooperation (APEC) region and employ half of the
workplace in that area.
25
However, in spite of such significant contributions worldwide, one of the
challenges that SMEs face relates to attracting external funds into their
businesses.
119
17 M. Ayyagari et al., `Small and Medium Enterprises Across the Globe' (2007) 29
Small Business Economics 415, at 415.
18 European Commission, `Eurostat: Small Business Statistics ± Small and Medium-
Sized Enterprises (SMEs)', at
statistics/structural-business-statistics/sme>.
19 Federation of Small Businesses, `UK Small Business Statistics: Business Population
Estimates for the UK and Regions in 2016' (2016), at
media-centre/small-business-statistics >.
20 Department for Business Innovation and Skills (BIS), `Statistical Release ± Business
Populatio n Estimates f or the UK and Reg ions 2014' (2 014), at ps://
www.go v.uk/g overnm ent/u ploads /syste m/uplo ads/at tachm ent_da ta/fil e/3779 34/
bpe_2014_statistical_release.pdf>.
21 G. Cilfillan, `Statistical Snapshot: Small Business Employment Contribution and
Workplace Arrangements' (Parliament of Australia, 2 December 2015), at
www.aph .gov.au /About _Parlia ment/Pa rliame ntary_D epartme nts/Pa rliamen tary_
Library/pubs/rp/rp1516/Employ>.
22 K. Kobe, Small Business GDP: Update 2002±2010 (2012) United States Small
Business Administration Report no. 390, 1.
23 S.M. Muriithi, `African Small and Medium Enterprises (SMES) Contributions,
Challenges and Solutions' (2017) 5 European J. of Research and Reflection in
Management Sciences 36, at 36.
24
J.F. de Sousa dos Santos, `Why SMEs are Key to Growth in Africa' (2016), at
www.weforum.org/agenda/2015/08/why-smes-are-key-to-growth-in-africa/>.
25 APEC, Small and Medium Enterprises Working Group: Small and Medium
Enterprises (2016), at
on-Econ omic-a nd-Tec hnical- Cooper ation/ Working -Group s/Small -and-M edium-
Enterprises>.
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1. Benefits attached to CEF: alternative source of funds for SMEs
(a) SMEs: poor access to finance
Traditionally, SMEs have not been able to access public capital. In the early
days of such businesses, these organizations have usually relied on the per-
sonal wealth of founding members, support from their families, and internal
finance to fund their businesses.
26
Once those funds are depleted, the growth
of the organization becomes dependent on external private financing.
27
Such
an endeavour is impeded by the information asymmetry that exists with those
businesses. In fact, SMEs have been faced by credit rationing by lenders due
to the opacity of their management and finances.
28
Further, the elevated risk
attached to those enterprises has made it more expensive for small businesses
to raise external funds from banks and investors. The situation is worst for
start-ups, as these organizations do not have a track record for quality
purposes. This makes lending to these ventures risky and even unlikely.
29
This reality has meant that SMEs in certain fields have been facing a
shortfall in finance,
30
which in turn creates an obstacle to the growth of the
business.
31
In view of the key role these businesses play in the economy, this
may have a negative impact on the productivity of the nation, the efficiency
of markets, and the rate of employment.
32
Further, it may prevent innovative
businesses from becoming established.
33
The problem of a shortfall in external funding for small businesses has
become more prominent as a result of the global financial crisis. The crisis
has affected the supply of credit to these businesses by financial institutions
because of the rise in the cost of corporate and banking borrowing. This has
resulted in a fall in the lending volume of financial institutions.
34
As a
120
26 See, for example, D. Holts-Eakin et al., `Entrepreneurial Decisions and Liquidity
Constraints' (1994) 25 RAND J. of Economics 334.
27 A. Berger and G. Udell, `The Economics of Small Business Finance: The Roles of
Private Equity and Debt Markets in the Financial Growth Cycle' (1998) 22 J. of
Banking & Finance 613, at 627.
28 J. Stiglitz and A. Weiss, `Credit Rationing in Markets with Imperfect Information'
(1981) 71 Am. Economic Rev. 393.
29 G. Cassar, `The Financing of Business Start-ups' (2004) 19 J. of Business Venturing
261, at 265.
30 R. Oakey, `A Commentary on Gaps in Funding for Moderate Non-Stellar Growth
Small Businesses in the United Kingdom' (2007) 9 Venture Capital 223, at 224.
31 M. Wright and P. Westhead, `Introduction' in Advances in Entrepreneurship, Vol. 1,
eds. M. Wright and P. Westhead (2000) 1.
32 J. Egeln et al., `Firm Foundations and the Role of Financing Constraints' (1997) 9
Small Business Economics 137, at 137.
33 T. Astebro, `The Return to Independent Invention: Evidence of Unrealistic
Optimism, Risk Seeking or Skewness Loving?' (2003) 113 Economic J. 226, at 227.
34 V. Ivashina and D. Scharfstein, `Bank Lending During the Financial Crisis of 2008'
(2010) 97 J. of Financial Economics 319, at 319±20. The decline in lending by
banks may also be due to other factors: see, for example, G. Dell'Ariccia et al., `The
Real Effect of Banking Crises' (2008) 17 J. of Financial Intermediation 89, at 90.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
consequence of the tightening of lending practices ± which are especially
influenced by the poor economic prospect for small businesses,
35
stagnation
of inter-bank lending, and the increase of capital cost
36
± there is now an
even bigger shortfall of funding for SMEs.
Lastly, changes to regulatory regimes have also significantly impacted on
the lending practices of banks. For example, the implementation of risk-
based capital standards under the Basel Accord may have played a further
role in the decline in bank lending practices.
37
(b) Alternative forms of finance: CEF filling a gap
All the above factors have emphasized the problem of the shortfall in finance
for SMEs and this issue has become more prominent in government agendas.
For example, in response to this concern, governments and national organi-
zations have attempted to address the problem by providing support to
SMEs. One of these initiatives is the African Guarantee Fund, a non-bank
financial institution which specializes in providing loan guarantees and other
guarantee products to African financial institutions in a bid to boost the
lending to SMEs.
38
While these initiatives have provided some relief to SMEs, informal
finance remains the main source of credit for these organizations once their
personal and internal funds are depleted.
39
For example, once funds from
family and friends have been exhausted, entrepreneurs have relied on money
lenders, informal credit unions, and loan sharks.
40
More traditionally, SMEs have also tried to attract funds from venture
capitalists. However, venture capital firms may not be interested in funding
SMEs if the amount needed is small or if the enterprise is not able to scale up
its business quickly enough.
41
Further, the competition to attract funding
121
35 A. Sharp, `Crowdfunding Success Factors' (2014) 5 International Research J. of
Applied Finance 822, at 825.
36 OECD, `The Impact of Global Crisis on SME and Entrepreneurship Financing and
Policy Responses' (2009), at 6.
37
A. Berger and G. Udell, `Small Business Credit Availability and Relationship Lending:
The Importance of Bank Organisational Structure' (2002) 112 Economic J. F32, at F44.
38 African Development Bank Group, `African Guarantee Fund for Small and
Medium-Sized Enterprises' (2017), at
init iat ives -pa rtne rsh ips /afr ica n-g uara nte e-fu nd- for -sma ll- and- med ium- siz ed-
enterprises/>.
39 See, for example, A. Abdulsaleh and A. Worthington, `Small and Medium-Sized
Enterprises Financing: A Review of Literature' (2013) 8(14) International J. of
Business and Management 36.
40 E. Yaldyz-Hanedar et al., `Why Do SMEs Use Informal Credit? A Comparison
Between Countries' (2014) 2 J. of Financial Management Markets and Institutions
65, at 65.
41 A. Tomczak and A. Brem, `A Conceptualized Investment Model of Crowdfunding'
(2013) 15 Venture Capital: An International J. of Entrepreneurial Finance 335, at
336.
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from venture capitalists is fierce and the success rate in attracting funds is
low.
42
SMEs may also be attracted to angel investors, who not only provide
funds but also expertise, skills, and know-how. However, the market for
angel investors is opaque.
43
Little information is available regarding the
number of individuals willing to provide angel capital and the types of
businesses that have attracted angel investments.
44
Additionally, as with
venture capitalists, competition to access funds from angel investors is fierce
and the rate of such investments is steadily declining.
45
In view of the failure of the traditional modes of finance in fulfilling the
needs of these ventures, the sharing economy has stepped into this area in a
bid to fill the gap. For example, using reward crowdfunding, SMEs, includ-
ing start-ups, have been able to raise funds by pitching their ideas. One
notable example is Pebble, who used Kickstarter, an online intermediary, to
raise US$10 million for the creation of a Pebble smartwatch.
46
This form is
especially helpful for start-ups who are testing their viability and the
marketability of their products.
Another form of sharing economy that may help SMEs is P2P lending.
However, P2P lending may not be attractive to businesses due to the costs
involved since, in addition to the setting up cost, the business has to repay
the loan with interest to its investors irrespective of whether the business is
profitable.
47
Additionally, P2P lending does not provide investors with
equity in the business: the investors can only be lenders, and this limits their
choices and rights.
48
CEF may also be appealing to SMEs when the business is `between a
stage of failure or success'.
49
For instance, CEF may allow a business to
raise funds once it is already established but unable to further develop
without extra capital.
50
From a business perspective, the use of CEF may be
122
42 id.
43 S. Prowse, `Angel Investors and the Market for Angel Investments' (1998) 22 J. of
Banking and Finance 785.
44 id.
45 Tomczak and Brem, op. cit., n. 41, p. 336.
46 The target amount was only $100,000. Kickstarter, `Pebble: E-Paper Watch for
iPhone and Android' (2017), at
pebble-e-paper-watch-for-iphone-and-android/description>.
47 S. Freedman and G.Z. Jin, `Do Social Networks Solve Information Problems for
Peer-to-Peer Lending? Evidence from Prosper.com' (2008) NET Institute Working
Paper 08-43, at
solve-information-problems-peer-peer-lending-evidence-prospercom> 3.
48 J. Pesok, `Crowdfunding: A New Form of Investing Requires a New Form of
Investor Protection' (2014) 12 Dartmouth Law J. 146, at 148.
49 Tomczak and Brem, op. cit., n. 41, p. 336.
50 L. Collins and Y. Pierrakis, The Venture Crowd: Crowdfunding Equity Investment
into Business (2012) Nesta Report, at ts.kingston.ac.uk/29 089/1/
the_venture_crowd.pdf> 18.
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appealing as, unlike debts, it removes the risks of personal guarantees that
traditional financial institutions may require of the business founders. CEF
may also be used as a vessel to connect SMEs with angel investors. For
instance, intermediaries have created networks of angel investors through
their platforms.
51
The great potential of CEF has been recognized by national governments
around the world.
52
While this is good, CEF is not without its risks, some of
which are akin to the challenges faced by traditional fundraising.
2. Risks attached to CEF
A common dilemma facing the sharing economy and CEF in particular
relates to the type of regulation needed to ensure the protection of the public:
do we allow businesses to self-regulate, or do we need government inter-
vention to protect consumers?
(a) Self-regulation?
Although there is no consensus regarding its definition, the term `self-
regulation' describes any system where business entities impose regulations
(rules and enforcements) upon themselves.
53
It is likely to be effective if
firms acknowledge that their future viability depends on their relationships,
not only with their current customers and shareholders, but also with the
wider community.
54
From that perspective, this regulatory approach may appear to be a perfect
fit for CEF. This form of finance has three key players involved: the issuers,
the intermediaries, and the investors. An intermediary's role in connecting
issuers and investors puts it in a prime position to be the gatekeeper for this
industry. It can self-regulate by imposing a range of rules upon its em-
ployees, and also upon issuers and investors. For instance, it can block a
business from accessing funds if it has not developed a business plan, or if it
has poor infrastructure or little know-how. It may also impose rules
123
51 Angel investor networks are currently being developed on an ad hoc basis: see V.
Ramadani, `The Importance of Angel Investors in Financing the Growth of Small
and Medium Sized Enterprises' (2012) 2(7) International J. of Academic Research
in Business and Social Sciences 306.
52 See, for example, B. Popper, `JOBS Act Becomes Law, but Questions Linger about
Potential for Fraud' VB News, 5 April 2012, at
crowdfundi ng-bill-be comes-law- but-questio ns-linger- about-pote ntial-for- fraud/>;
Commonwealth of Australia, Budget 2015 ± Growing Jobs and Small Business
(2015), at
Growing_Jobs_and_Small_Business.pdf> 2.
53 C. Coglianese and E. Mendelson, `Meta-Regulation and Self-Regulation' in The
Oxford Handbook of Regulation, eds. R. Baldwin and M. Lodge (2010) 146.
54 Taskforce on Industry Self-Regulation, Industry Self-Regulation in Consumer
Markets: Report (2000) 22, at 47.
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regarding the types of investors that may access its platform and the amounts
that may be invested.
As gatekeeper, it is in an intermediary's best interests to limit fraud and
attract successful ventures, since inferior-quality projects would negatively
impact upon its profitability and reputation. If an intermediary develops a
reputation for trustworthiness, investor confidence in its platform would be
raised. This, in turn, may mean that more investors and businesses would be
attracted to that intermediary as they will trust the platform to promote viable
projects.
55
Conversely, if an intermediary became known for poor invest-
ments, the platform will fail.
However, although there are intrinsic and extrinsic motivations for an
intermediary to closely monitor the projects it promotes, self-regulation
works best when there are clearly defined problems but no substantial risk of
serious widespread harm to consumers.
56
In that regard, this form of
regulatory approach would not suit CEF as it may accentuate a range of
pitfalls attached to investments in general.
(b) Pitfalls of self-regulation in the context of CEF
(i) Intermediaries' self-promotion
A close look at the information provided by existing intermediaries indicates
a lack of transparency: intermediaries only publicize and promote their
successful projects and do not provide information regarding unsuccessful
CEF projects.
57
The information provided by a platform is targeted toward
enhancing that organization's image, so as to attract more business, rather
than being a true representation of CEF investments. Even in the case of
successful CEF projects, little information is provided to educate potential
investors about the illiquidity of the markets they are considering investing
into.
58
Such selective disclosure is caused by the inherent conflict of interest for
an intermediary between acting as gatekeeper and promoting its own
business. This selective disclosure may also send the message to the average
investor that all businesses promoted by the platform are successful. In
reality, there is a limited flow of information that consumers can rely on to
make their purchase decisions and assess the trustworthiness of the platform.
124
55 J.M. Heminway, `The New Intermediary on the Block: Funding Portals under the
Crowdfund Act' (2013) 13 UC Davis Business Law J. 177, at 185±6.
56 Taskforce on Industry Self-Regulation, op. cit., n. 54, p. 29.
57 See, for example, Afrikstart Crowdfunding Africa, `Crowdfunding in Africa:
Fundraising Goes Digital in Africa: The Emergence of Africa-Based Crowdfunding
Platforms' (2016) , at tart.com/report /wp-content/up loads/2016/09/
Afrikstart-Crowdfunding-In-Africa-Report.pdf> 41.
58 K. Bouaiss et al., `More than Three's a Crowd . .. in the Best Interest of Companies!
Crowdfunding as Zeitgeist or Ideology?' (2015) 10 Society and Business Rev. 23, at
23±24.
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(ii) Dangers attaching to an intermediary's failure
The majority of intermediaries have not been generating any profit, which
means that they are at risk of failure.
59
In fact, one intermediary has noted that
it will not be a viable business model unless it is able to expand its organization
to other jurisdictions.
60
Without any restrictions, the collapse of an online
platform during an active trade may result in the loss of data or contracts
entered into between investors and businesses, and may cause investors to lose
their investments.
61
Accordingly, it is important for an intermediary to have a
data retention system that will continue to make all relevant information
regarding an active investment available even if the platform fails. Further,
clients' funding should be placed in trust for added protection.
(iii) Fraudulent businesses
While fraud is a common problem in business,
62
this may be accentuated in
an online environment. Since raising money may be accomplished more
quickly online by targeting millions of people, a fraudster may raise capital
quickly and then abscond with it before anyone realizes that a fraud has been
committed.
63
Each of the types of crowdfunding has already been the subject
of fraudulent activities.
64
One concern in such instances is that as individual
investors' losses are relatively small, they are unlikely to seek redress. A
class action may also be unlikely as the gains for lawyers running such a case
are limited.
65
As such, ensuring that safeguards are in place to protect
consumers is essential to maintaining confidence in this form of investment.
Further, consumer protection advocates have noted that CEF may pose a
danger for older investors who are already the target of securities fraud.
66
125
59 Kirby and Worner, op. cit., n. 2, pp. 25±6; E. Chaffe and G.C. Rapp, `Regulating
Online Peer to Peer Lending in the Aftermath of Dodd-Frank: In Search of an
Evolving Regulatory Regime for an Evolving Industry' (2012) 69 Washington and
Lee Law Rev. 485, at 506.
60 `La StrateÂgie Africaine d'Afineety' (29 December 2015), at
cahiers-des-eco/afrique/233-actualite/40471-la-strategie-africaine-d-afineety.html>.
61 R. Jones, `Quakle Collapse Serves as Warning to Peer-to-Peer Investors' Guardian,
15 February 2014, at
collapse-warning-peer-to-peer-investors>.
62 See, for example, G. Robb, White-Collar Crime in Modern England: Financial
Fraud and Business Morality 1845±1929 (1992).
63 G.F.B. Tomboc, `The Lemons Problem in Crowdfunding' (2013) 30 J. of Informa-
tion Technology and Privacy Law 253, at 266.
64 See, for example, M. Nunez, `Kickst arter Crooks: The Big gest Frauds in
Crowdfunding' Thrillist, 19 February 2014, at
gear/kickstarter-frauds-worst-crooks-in-crowdfunding>.
65 J. Pesok, `Crowdfunding: A New Form of Investing Requires a New Form of
Investor Protection' (2014) 12 Dartmouth Law J. 146, at 149.
66 As cited in J. Eaton, `Using Crowdfunding to Start Your Business' AARP The
Magazine, October/November 2013, at
10-2013/crowdfund-investing-in-small-business.2.html>.
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(iv) Business failures
It is additionally important to remember that equity investment in small
businesses is risky in any event, as they have well-documented high rates of
failure.
67
Start-ups are even riskier.
68
With the promotion of CEF, business
failure may become more pronounced, as businesses may attract the funds
they have sought without having the necessary know-how to convert their
pitch into reality and may not have a full appreciation of all the inter-
dependencies attached to a product's development.
69
Another problem that
emerges is the underfunding of CEF projects, where entrepreneurs have
underestimated the costs involved in their project or have been too
concerned that the funds needed may deter investors from investing and
so have not actually asked for the amount they believe necessary to achieve
success.
70
(c) Need for regulation
In view of the risks attached to CEF and the harm that may be caused to
investors, self-regulation may not be appropriate. Government intervention
is needed to ensure the protection of consumers and provide guidelines to
courts, lawyers, and businesses on the best way to deal with CEF. The fact
that CEF exacerbates the existing problems attached to fundraising by SMEs,
such as the high rate of failure and the risk of fraudulent activities occurring,
means that some countries have opted to apply existing laws to CEF. Con-
sequently, in Africa, no new regulatory rules have been introduced to
distinguish CEF from the traditional economy. As the disclosure regime
attached to fundraising is designed to inform the audience and protect it from
information asymmetry, such a regime was applied.
71
However, the use of
the disclosure regime that applies to traditional forms of fundraising in the
context of CEF is too costly and, as such, self-defeating, since most organi-
zations seeking to access this form of finance are SMEs with limited funds at
their disposal and consequently cannot afford to comply with the regime.
126
67 Sharp, op. cit., n. 35, p. 825.
68 See, for example, E. Schwaten, `The Grim Reality of Start-ups: 95 Per Cent Fail'
Sydney Morning Herald, 20 March 2015, at
grim-reality-of-st artups-95-per-cen t-fail-20150320-1m 3wtb.html>; E. Anders on,
`Half of the UK Start-ups Fail within Five Years' Telegraph, 21 October 2014, at
/businessclub/11174584/Half-of-UK-s tart-ups-
fail-within-five-years.html>.
69 E. Mollick, `The Dynamics of Crowdfunding: An Exploratory Study' (2014) 29 J. of
Business Venturing 1, at 11.
70 Symposium Panel II, `Crowdfunding' (2013) 16 SMU Sci. and Technology Law Rev.
59, at 66±7.
71 J.M. Heminway, `Investor and Market Protection in the Crowdfunding Era:
Disclosing to and for the Crowd' (2013±2014) 38 Vermont Law Rev. 827, at 827; Re
Golden Gate Petroleum Ltd [2010] FCA 40 [24].
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
Accordingly, Malaik was a Nigerian CEF platform specifically designed
to help SMEs in Africa raise small amounts of money from a range of
people.
72
Soon after it started operating, however, the organization was
suspen ded fro m trad ing by th e Niger ian Sec uriti es and Ex chang e
Commission as Nigerian securities regulation blocks such organizations
from operating in the market.
73
Additionally, Afrikwity, a Tunisian CEF intermediary with the aim of
financing Tunisian and African start-ups, has had to work around the fact
that this form of finance is treated in the same way as the traditional
economy in Tunisia. To go around those rules, it has only targeted funders
who are foreign investors or Tunisians residing overseas.
74
This approach
may raise a range of legal questions such as the jurisdiction of contract that
may apply in case of a dispute.
In fact, the absence of regulation specific to CEF seems to limit its
expansion. This can be seen for instance with Afineety, a CEF intermediary
in Morocco. This platform has had to navigate the rules applying to the
traditional economy and has been entering into concessions with the
Moroccan government. Further, this has slowed its expansion in other
African countries.
75
Accordingly, it is important for the regulation of CEF to
be different from that which applies to the traditional economy, while at the
same time balancing the interests of entrepreneurs and the protection of
investors.
II. CONSIDERATIONS FOR ACHIEVING THE RIGHT BALANCE IN
REGULATION
As the existing disclosure regime attached to fundraising hinders the
development of CEF, a novel approach to regulating this collaborative form
of finance is required. A review of the different approaches taken by the
United States, Italy, the United Kingdom, Australia, New Zealand, Malaysia,
and Thailand reveals that a consensus has emerged regarding the best way to
regulate this collaborative form of finance. The regulation adopted applies to
all three key players involved: (i) the businesses issuing securities, (ii) the
intermediary platforms facilitating CEF, and (iii) the investors.
76
127
72 S. Wisse-Huiskes, Crowdfunding Potential For Nigeria ± Report (2017) 8.
73 S. Timm, `SEC Ban Puts Brakes on Equity Crowdfunding in Nigeria ± Report',
Media Release, 19 April 2017, at
crowdfunding-equity/>.
74 M. Mhidi, `Afrikwity: Nouvel Acteur de Financement des Startups Tunisiennes et
Africaines' Wajahni, 28 March 2016, at
acteur-de-financement-des-startups-tunisiennes-et-africaines>.
75 `La Strategie', op. cit., n. 60.
76 See summary of different CEF initiatives around the world in CAMAC, op. cit., n.
14.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
While consensus has been reached regarding the imposition of restrictions
on these three groups of stakeholders, the approach adopted in each
jurisdiction varies ± and some regulation may in fact have created new
hurdles to the development of CEF by adopting a very conservative
approach. In fact, the new rules are adapted and influenced by existing
regulation that applies to the traditional economy.
1. Regulation of businesses
To mitigate the risk of fraud and business failure, countries around the world
have imposed a range of obligations that issuers have to comply with before
accessing CEF.
(a) Disclosure
In line with fundraising regulation applying in the traditional economy, the
first obligation requires issuers to provide a CEF offer document when
raising funds through this alternative form of finance. The document will
discuss the rights attached to the shares provided as a result of CEF.
The document is also designed to lessen the information asymmetry that
may exist in the CEF market, but the type of disclosure required has varied
across jurisdictions with little consensus regarding this matter. A key
consideration should be the cost of the disclosure document: from an issuer's
perspective, the production of such a document should be cheaper than the
creation of mainstream fundraising disclosure documents.
Further, in order to be accessible to consumers, regulation must ensure
that the information contained in the document is clear, concise, and acces-
sible to non-traditional investors. Recent research has also suggested that
information regarding a venture's quality and its human, social, and intel-
lectual capital is crucial for the success of this form of fundraising.
77
Highlighting the different breed of investo rs attracted to CEF, such
disclosure plays a more significant role in swaying investors to invest in a
venture than financial information.
78
Failure to provide such information
may send the message that the venture is of below average quality.
79
Regulation of the disclosure regime should take this reality into account to
ensure that the required disclosure document is relevant and appealing to the
128
77 G. Ahlers et al., `Signaling in Equity Crowdfunding' (2015) 39 Entrepreneurship
Theory and Practice 955, at 961±2.
78 F. Polzin et al., `The Wisdom of the Crowd in Funding: Information Heterogeneity
and Social Networks of Crowdfunders' (2017) Small Business Economics (published
Online First, 25 January 2017), at
wisdom-of-the-cro wd-in-funding-inf ormation-heter ogeneity-and/120 20426?search
BackButton=true&fulltextView=true&abEvent=detailLink>.
79 S. Grossman, `The Informational Role of Warranties and Private Disclosure about
Product Quality' (1981) 24 J. of Law and Economics 461.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
CEF audience. Accordingly, there needs to be an acknowledgement that CEF
is not on par with traditional forms of finance.
(b) Caps
Several jurisdictions have taken a conservative approach to CEF fundraising
via the introduction of caps on issuers. While fundraising in general does not
have such caps, with organizations able to raise any amount they wish, rules
attached to CEF have introduced a cap, with some caps being too low to be
effective.
Accordingly, there is no consensus regarding the appropriate cap that
should be in place. Italy has the highest cap on investments (¨5 million),
80
followed by Germany (¨2.5 million),
81
while the United States imposes a
cap of US$1 million on issuers.
82
The lowest investment caps have been
imposed in countries such as Malaysia (approximately US$698,000)
83
and
Thailand (approximately US$588,000).
84
As most start-ups have a seed capital requirement of around US$1.5
million,
85
it seems clear that in at least some countries the investment cap
has been set too low to justify the use of CEF by SMEs. In these instances,
the low investment cap imposed should be reconsidered.
(c) Type of business
The third limitation imposed relates to the types of businesses that are
allowed to access CEF and, in general, the restrictions may be stricter in
certain instances than those that apply to the traditional economy.
Some countries, such as New Zealand, have adopted a liberal approach,
allowing all types of companies to raise capital through CEF. Other juris-
dictions have prohibited certain types of businesses from accessing funds.
For example, in the United States, companies disqualified from accessing
CEF include foreign issuers, Exchange Act reporting companies, and
investment companies.
86
Still other countries have taken an even more restrictive approach. For
example, Australian regulation currently excludes 99.7 per cent of its
129
80 Decreto-Legge, 18 ottobre 2012, n. 179 (`decreto crescita-bis'), article 25.
81 `New German Law on the Protection of Small Investors Passed' Companisto, 6 May
2015, at .
82 JOBS Act 2012 (US) s. 302(a); Securities Act 1933 (US) s. 4(6).
83 Securities Commission Malaysia, `Guidelines on Regulation of Markets under
Section 34 of CMSA (SC-GL/2-2015)' (10 February 2015), Cl 11±17.
84 Regulations on Offer for Sale of Securities through Electronic System or Network
(No. TorJor. 7/2558), cl. 7.
85 CAMAC, op. cit., n. 14, p. 58.
86 Securities Act, op. cit., n. 82, s. 4A(f); Securities Exchange Commission, RIN 3235-
AL37, at .
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
companies from accessing this form of finance.
87
This degree of restriction is
problematic, however, as it may affect the viability of the CEF market. For
instance, in Italy, CEF was initially only available to certain types of busi-
nesses classified as `innovative start-ups'.
88
The strict classification meant
that the market for CEF was very small: over the course of several years,
fewer than 20 projects were able to rely on CEF to raise the capital necessary
to get off the ground, while the total amount raised through the CEF
exemption during that time was less than ¨1.5 million.
89
Consequently, in
2015, the Ita lian gover nment expan ded the eligi bility cri teria from
`innovative start-ups' to `innovative SMEs'.
90
Care must be taken when
limiting the types of businesses that can access CEF to ensure that there is a
viable market for this alternative form of finance, otherwise the CEF
legislation would not be able to compete with the traditional economy. The
Australian government is now considering proposals to broaden the pool of
entities able to access CEF.
91
2. Regulation of intermediaries
Regulation has also been imposed on CEF platforms in view of the key role
intermediaries play in bringing together businesses and investors. There is
agreement that such online platforms need to be registered. The character of
the people running the platform is to be assessed to ensure that they are of
good fame and character and have the know-how to run the platform.
However, this is the extent of the consensus, as there is no agreement
regarding the nature of the intermediary: is it a financial market, a broker, a
financial service or something new?
92
Most countries considered in this
article have preferred to reflect the principles that apply to and regulate the
traditional economy to intermediaries.
For instance, Malaysia views the intermediary as a market operator, and
as such the platform has a range of obligations including the operating of an
130
87
M. Nehme, `The Rise of Crowd Equity Funding: Where to Now?' (2017) 13 Inter-
national J. of Law in Context 253, at .
88 Decreto-Legge. op. cit., n. 80. For further discussion, see Ministero Dello Sviluppo
Economico, `Executive Summary of the New Italian Legislation on Startups'
(No vem ber 2 012 ), at ttp :/ /ww w.m ise .go v.i t/i ma ges /st ori es/ doc ume nt i/
Exective_summary_ENG_FINAL.pdf> 2±3.
89 M. Curti and V. di Vito, `Sector Comment: Italian SME ABS ± The Extension of
Equity Crowdfunding to Innovative SMEs is Only Mildly Positive for Italian ABS
SME Securitisations' Moody's Investors Service, 8 April 2015, at
wp - c on t e nt / b lo g s .d i r /5 8 2 5/ f i le s / 20 1 5 /0 4 / Mo o d ys _ I nn o v at i v e- S M E_
Crowdfunding_Full-Report.pdf>.
90 Decreto-Legge, 24 gennaio 2015, n. 3.
91 Commonwealth Treasury, `Extending Crowd-Sourced Equity Funding to Proprietary
Companies ' (9 May 2017), a t ww.treasu ry.gov.au /Consulta tionsand
Reviews/Consultations/2017/Extending-CSEF-to-proprietary-companies>.
92 For a discussion on the meaning of the intermediary, see Heminway, op. cit., n. 55.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
orderly, fair, and transparent market.
93
In Australia, the platform is viewed
as a financial services provider and thus it is required to ensure that the
financial services covered by its licence are provided efficiently, honestly
and fairly.
94
In the United States, intermediaries must be registered with the
Securities and Exchange Commission as either a broker or funding portal.
95
Other countries such as New Zealand have attempted to create a new licence
regime for CEF intermediaries. It has required such platforms to apply for a
licence specifically designed for CEF.
96
Once the int ermediar y has been reg istered, l icensed or r eceived
authorization, other obligations specifically targeted at CEF intermediaries
come into play. Some obligations require the platform to fulfil certain
financial requirements. For instance, in the United Kingdom, the platform
must always be able to meet liabilities as they fall due.
97
In New Zealand,
the platform must maintain adequate levels of liquidity to cover con-
tingencies.
98
In Thailand, an intermediary's registered capital should not be
less than approximately US$148,000.
99
Other jurisdictions such as New Zealand,
100
the United States,
101
and
Australia
102
have imposed due-diligence obligations on intermediaries to
ensure that they research the background of each issuer. This obligation may
vary from a simple check to more complex reviews of the information
provided by issuers. Another obligation that may be imposed is a require-
ment to ensure that investors review investor education information and
confirm that such investors understand the risks involved.
103
In reviewing all these obligations, it is important to recall that while
investor protection is important, so too is the promotion of this form of
shared economy: for the correct balance to be struck, the obligations im-
posed on intermediaries must be reasonable and not too onerous. Although
beneficial to investors, some obligations relating to licensing, due diligence,
and investor education may create barriers to entry into the industry. This, in
turn, may negatively impact upon competition between intermediaries and
may create a monopoly if regulation is not set at an appropriate level.
131
93 Securities Commission Malaysia, op. cit., n. 83, cl. 3.01(a).
94 For general obligations, see Corporations Act 2001 (Cth) s. 912A.
95 JOBS Act, op. cit., n. 82; Securities Act, op. cit., n. 82, s. 4A.
96 Financial Market Conduct Act 2013 (NZ) s. 396.
97 Crowdfunding and the Promotion of Non-Readily Realisable Securities Instrument
2014 (UK) cl. 12.2.1.
98 Financial Market Conduct Act, op. cit., n. 96, s. 201.
99 Regulations on Offer for Sale of Securities through Electronic System or Network
(No. TorJor. 7/2558) 13.
100 Financial Market Conduct Act, op. cit., n. 96, s. 186(1).
101 JOBS Act, op. cit., n. 82, s. 4A.
102 Corporations Act, op. cit., n. 94, s. 738Q.
103 JOBS Act, op. cit., n. 82, s. 4A.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
3. Regulation of investors
CEF regulation has also imposed restrictions on investors. Once again, the
degree of regulation has varied between jurisdictions, with some countries
choosing to place very few limitations on investors while others have more
restrictive rules that curtail investors' freedom. In the former category is
New Zealand, which allows investors to invest in CEF as long as they have
signed a document acknowledging the risk that this form of finance
involves.
104
However, such an approach is the exception rather than the rule,
and most jurisdictions have adopted a very restrictive model, safeguarding
investors by the imposition of a cap on the CEF investments a person can
make in any 12-month period. For example, in the United States, the
aggregate amount sold to an investor should not exceed the greater of
US$2,000 or 5 per cent of the annual income or net worth of the investor if
annual income or net worth is less than US$100,000. If the annual income or
net worth of the investor is equal to or more than US$100,000, a person can
invest up to 10 per cent of his or her annual income or net worth (to a
maximum of US$100,000)
.
.
105
In the United Kingdom, investors should not
invest more than 10 per cent of their net assets in non-readily realizable
securities in a period of 12 months.
106
South Asian countries have begun to adopt a similar model. For instance,
in Malaysia, an investor is allowed to invest no more than approximately
US$1,210 in each company and no more than an aggregate of approximately
US$12,100 each year.
107
Similarly, in Thailand, investors can invest a
maximum of approximately US$1,520 in any company with a maximum
total annual investment in CEF of approximately US$15,200.
108
The imposition of investment caps stems from the fear that the crowd is
irrational in its choices and needs to be protected,
109
especially in an online
environment where investors may be trading more actively and specula-
tively.
110
With CEF and financial markets in general, history has demon-
strated that there is a seemingly irresistible movement of the crowd toward
bad investments, with investors being `sucked into the vortex of the market
132
104 Financial Markets Conduct Regulations 2014 (NZ) reg. 197(1).
105 JOBS Act, op. cit., n. 82, s. 302.
106 Financial Conduct Authority, Conduct of Business Sourcebook (COBS) (2017)
4.7.7, 4.7.10.
107 B. Twoon and J. Chow, `The Equity Crowdfunding Bandwagon: South East Asia
Jumps on Board' Crowdfund Insider, 12 January 2016, at
insider.com/ 2016/01/800 77-the-equit y-crowdfundi ng-bandwago n-south-east -asia-
jumps-on-board/>.
108 id.
109 R. Thaler and C. Sunstein, Nudge: Improving Decisions about Health, Wealth and
Happiness (2009) 66.
110 B. Barber and T. Odean, `Online Investors: Do the Slow Die First?' (2002) 15 Rev.
of Financial Studies 455, at 456.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
whirlpool'.
111
The crowd has also been viewed by some as destructive and
impulsive. It will in fact exhibit a new persona separate from its members as
the individual consciousness vanishes from it.
112
However, the crowd is not always viewed as irrational.
113
For instance,
rushes toward bad investments in the past may not have been conducted by
an irrational crowd. A crowd may have based its judgement on promising
leads and had rational reasons that guided it to particular decisions.
114
A
crowd may even be wise.
115
The aggregate judgement of the crowd may be
more accurate than the judgement of each individual in the group.
116
Further,
with CEF, individuals in the crowd come together from different back-
grounds wit h different k nowledge a nd experien ce.
117
This divers ity
improves the ability of the group to solve problems, as each individual in
the crowd brings new information and knowledge which will ultimately
enhance the crowd's decision-making process.
118
Accordingly, the diversity
of people that will be attracted to CEF may result in better outcomes for
investors. Taking all these considerations into account, it is argued that
regulation imposing restrictions on investors should be less paternalistic and
more open to the needs and desires of the public.
4. Listening to the crowd: an essential component
Recent attempts at CEF regulation have sought to manage and control the
great wave of interest people around the world have in CEF, especially
because a majority of CEF investors are people who have never previously
invested in the market. However, this approach is problematic as it goes
against the wishes of the public. It is, in certain instances, putting hurdles to
the expansion of CEF and indirectly favouring the traditional economy.
This is particularly so in respect of the caps imposed on investors.
Regulators would do well to remember that individuals' compliance with the
law is linked to their normative values and social relations, that is, what an
individual views as right or wrong and the influence the judgements of others
133
111 D. Dreman, Psychology and the Stock Market: Investment strategy beyond Random
Walk (1977) 99.
112 G. Le Bon, Psychologie des Foules (1895), tr. Digireads as The Crowd: A Study of
the Popular Mind (2008) 13, 18.
113 Y. Benkler, The Wealth of Networks: How Social Production Transformed Markets
and Freedom (2006).
114 See, for example, E. White, Crashes and Panics: The Lessons from History (1988).
115 J. Surowiecki, The Wisdom of Crowds (2005).
116 F. Galton, `The Ballot-Box' (1907) 75 Nature 509.
117 C. Davis-Stober et al., `When is a Crowd Wise?' (2014) 1(2) Decision 79, at 80.
118 S. Page, Diversity and Complexity (2011); L. Hong and S. Page, `Groups of Diverse
Problem Solvers Can Outperform Groups of High-Ability Problem Solvers' (2004)
101(46) Proceedings of National Academy of Sciences of the United States of
America 16385.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
such as friends, family, and peers may have on the individual.
119
Legal
authorities are partially dependent therefore on public goodwill to enhance
compliance with the law, and even more so in the context of CEF investment
caps, as they are difficult to monitor.
120
Further, the popularity, appeal and utility of CEF have been documented,
and it is interesting that many of the investors attracted to CEF would not
previously have been considered typical investors. Supporters of CEF may
view this alternative form of finance as a way to `yield utopian outcomes',
121
through empowering ordinary people. However, the current laws do not
seem to acknowledge this reality and instead have introduced obstacles to
the use of CEF. This may lead stakeholders to game the system. We have
already started to see such a movement in Australia, with Australian
businesses who do not qualify for CEF in Australia contacting New Zealand
intermediaries to raise capital through the New Zealand market. As this
indicates, a lack of support of stakeholders for the legislation may result in
wilful breach of the law or compliance with the letter rather than the spirit of
the law. This is not an outcome desired by those seeking to make regulatory
improvements.
CONCLUSION: WHAT NEXT?
Various jurisdictions have implemented laws allowing CEF to be relied upon
as an alternative form of finance. The approach taken by the regulation has
varied from one jurisdiction to the next, with some countries such as New
Zealand taking a liberal approach to CEF and others such as the United
States adopting a more conservative approach. Many of these jurisdictions
are struggling with the question of whether the regulatory changes they have
made seeking to promote and assist CEF have struck the right balance
between the protection of consumers and the promotion of business. Already
Italy has implemented further changes to readjust the balance initially struck,
and Australia too is considering more changes in this area. Channels for
dialogue between regulators and regulated must be created and remain open
to ensure the regulated community's normative values are being considered
throughout this process.
Further, as CEF allows people from all over the world to invest in local or
international enterprises, a country's physical borders may potentially be
blurred. However, due to the lack of coordination between jurisdictions,
walls have been built to prevent organizations from raising funds through
134
119 T. Tyler, Why People Obey the Law (2006) 25.
120 id.
121 J. Schor, `Debating the Sharing Economy' (2014) Great Transition Initiative
website, at 1.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
foreign CEF systems. This may be counterproductive as it flies in the face of
the support the crowd has provided for this form of finance.
What is required is, first, to view CEF as separate from traditional modes
of finance. Further, a more collaborative approach across jurisdictions is
needed to effectively regulate this emerging industry, beginning with a
thorough review of the regulation imposed on CEF worldwide. This review
should move away from regulatory concepts that we are familiar and
comfortable with such as disclosure obligations and the imposition of caps,
and listen to the needs of the stakeholders in this sphere. Lastly, an `outside-
the-box' solution may be needed to regulate this emerging industry: innova-
tive solutions must be considered, and it is hoped that future research will
highlight alternative ways to regulate CEF, building on the voice and norms
of the crowd and the various stakeholders to truly allow this form of sharing
economy.
135
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School

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