Equity crowdfunding: caveat emptor?

Author: | Published: 18 Apr 2016

The practice is gaining traction in Hong Kong. A regulatory approach has been proposed, but can it manage investor risks?

A recent paper by the Hong Kong Financial Services Development Council (FSDC Paper No 21) suggests legislative changes are not needed to establish a robust equity crowdfunding (ECF) market in the city-state. Titled Introducing a Regulatory Framework for Equity Crowdfunding in Hong Kong, it states that regulatory oversight is sufficient for the practice to 'operate safely and efficiently' while allowing it 'to develop in an environment that provides a level of protection and supervision appropriate to the risk presented to investors'.

The suggested approach, arrived at after comparison with the US, UK, China and Singapore, comprises four key elements. ECF platforms would be brought within an existing category of activity regulated by the Securities and Futures Ordinance (SFO) to provide a basis for regulatory oversight of the platform. Offering securities...