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

 

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Convention Centre: Major New SkyCity Hotel And Laneway For Auckland

Today SKYCITY Entertainment Group Limited revealed plans to build a new hotel and pedestrian laneway of bars, restaurants and boutique shopping on land it owns in the Nelson and Hobson Streets block, expanding the SKYCITY Entertainment Precinct. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news