Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


The UK 10% equity crowdfunding rule and what NZ can learn

The UK 10% equity crowdfunding rule and what New Zealand can learn from it

The Financial Conduct Authority in the UK recently released regulations that prohibit unsophisticated investors from investing more than 10% of their savings into equity crowdfunding. While majority of the UK platforms welcomed this as a suitable idea, Barry James, Founder of the Crowdfunding Centre, said the rule would lock ordinary investors out.

“Make no mistake, the infamous 10% rule, however it's dressed up, takes the crowd out of equity crowdfunding.”

On the other end of the spectrum, are the Equity Crowdfunding regulations passed in New Zealand. These regulations do not specify investor caps at all, thus making New Zealand one of the only countries in the world with such a liberal law.

The MBIE’s commentary document, while listing the various options for investors caps being considered by the FMA noted that the proposed limits were significantly above what many investors would be able to lose without detriment to their overall savings. So the reasoning behind this decision to have no cap, seems to be, that since caps were not going to help protect investors anyway, might as well do away with them completely. This, in my opinion, sends out a very dangerous message.

As part of a company looking to be a major part of the Equity Crowdfunding market in New Zealand, it might seem contradictory to my own interests to advocate for investors caps.

However, I believe, we do need regulations similar to the “10% Rule” to sustain Equity Crowdfunding as an industry. No first time investor should be investing more than 10% of his savings in any single high risk-reward investment vehicle, and THAT INCLUDES Equity Crowdfunding.

The first signs of mum-and-dad investors being materially affected by the failure of equity crowdfunded companies will kill this new and potentially disruptive capital raising mechanism.

Our focus until now has been on investor and entrepreneur education via endeavours such as Fundakiwi.com, a virtual Equity Crowdfunding platform. In a similar vein, the 10% rule should be seen as a tool towards investor education, and not as an indication of the investors’ inability to make decisions for themselves. In this very early-stage marketplace, it also puts the onus on platforms to educate their investors about the risks of Equity Crowdfunding.

This education will not only help Joe Bloggs learn about Equity Crowdfunding and reap its rewards, but also help in protecting him from its risks.

ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

What Winter? Temperature Records Set For June 20-22

The days around the winter soltice produced a number of notably warm tempertaures. More>>

Conservation Deal: New Kākāpō Recovery Partnership Welcomed

Conservation Minister Maggie Barry says the new kakapo recovery partnership between DOC and Meridian Energy is great news for efforts to save one of New Zealand’s most beloved birds. More>>

ALSO:

Tech Sector Report: Joyce Warns Asian Tech Investors View NZ As Hobbits And Food

Speaking in Wellington at the launch of a report showcasing the value of the technology sector to the New Zealand economy, Joyce said more had to be done to tell the country's technology stories overseas. More>>

ALSO:

Mediaglommeration: APN Gets OIO Approval For Demerger Plan

APN News & Media has received Overseas Investment Office approval for its plan to split out its NZME unit ahead of a potential merger with rival Fairfax Media's New Zealand operations. More>>

New Paper: Ninety-Day Trial Period Has No Impact On Firms' Hiring

The introduction of a 90-day trial period has had no impact on hiring by New Zealand companies although they are now in widespread use, according to researchers at Motu Economic and Public Policy Research. More>>

ALSO:

Corrections: Serco Exits Equity Stake, Remains As Operator

Serco has sold its equity stake in the company that holds the contract to design, build and run Wiri Prison in South Auckland but continues as sub-contractor to operate the facility. More>>

GDP: NZ Economy Grows Faster-Than-Forecast 0.7%

New Zealand's economy grew at a faster pace than expected in the first quarter of 2016 as construction expanded at the quickest rate in two years. The kiwi dollar jumped after the data was released. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news