Equity crowdfunding generally refers to schemes by which start-up companies and investors are connected through the internet so that funds may be collected from a large pool of investors, each generally contributing a small amount. The Amendment Act enables those crowdfunding intermediaries that conduct public offerings or private placements solely through the internet (or other designated electronic means) within the prescribed amounts (to be determined by cabinet order, although the Amendment Act is planned to be applicable for total offerings of less than ¥100 million for which the amount of investment per investor is ¥500,000 or less) to register. They may register as either a Type I crowdfunding operator, where equity interests are offered, or, where fund interests are offered, as a Type II crowdfunding operator. The Amendment Act exempts registered Type I and Type II crowdfunding operators from certain restrictions applicable to other financial business operators, including: (i) restrictions on conducting other business activities; (ii) regulations on posting signs at business offices; and (iii) capital adequacy requirements.
The Amendment Act also introduces new regulations to prevent the fraudulent solicitation of investments by crowdfunding operations through the internet. These include: (i) the obligation to provide certain disclosures; and, (ii) the obligation to maintain certain internal control systems (details to be determined by cabinet order, but are expected to include conducting certain confirmatory inspections on the subject entity and implementing internal rules and regulations).
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