Regulating Crowdfunding - Crowdfunding: Deep cr ?· Proposition •Crowdfunding is new and better...

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Transcript of Regulating Crowdfunding - Crowdfunding: Deep cr ?· Proposition •Crowdfunding is new and better...

  • Tim Wright

    Regulating CrowdfundingKey Considerations

    Deep Impact - India 21st March 2015

  • Proposition

    Crowdfunding is new and better finance.

    Bad regulation will damage it, constrain it,

    and reduce its inherent benefits.

    Regulation of crowdfunding requires new

    thinking.

  • Is Regulation a Good Thing?

  • Unique Value of Crowdfunding

    New money

    More diverse

    Novel expectations of return

    Closer to market

    Lower cost

    Quick money

    Slow money

    Often locally focused

  • Why Regulate?

    Mitigate risk

    Build confidence

    Grow the market

  • Crowdfunding Risk Mitigation

    Atomisation

    Transparency

    Crowd scrutiny

    To Grow Crowdfunding Requires

    Low transaction costs

    Low barriers to participation

  • Four Models of Crowdfunding

    GIFT

    PERK

    LOAN

    EQUITY

  • Who can participate

    How to Regulate?

    How they behave

    What they are told

  • How to Respond?

    Two approaches

    Common Law

    Napoleonic Code

  • The Common Law Approach

  • Outsourcing regulated activities

    Becoming regulated bodies

    Changing the nature of the investment

    vehicle

    Operating below thresholds

    Gating access

    Satisfy a Mix of Regulation

  • The Associated Press

    British Library

    Photo: Ian Sewell, Wikipedia

  • Common misconception that UK equity

    crowdfunding was unregulated prior to April 2014

    UK equity crowdfunding exists in spite of regulator not because of it

    10%

  • Rewriting Law

    Introducing Law

    Awaiting Tier 3

    Need to extend law

  • Increases risk Reducing transparency

    Reducing participation

    Reducing diligence

    Drive up investment size

    Reduces the value of crowdfunding Reduce engagement

    Reduce participation

    Reduce diversity

    Increase cost

    Distort novel expectation (the usual suspects)

    Crowdfunding Being Treated Like Old Finance

  • http://www.altfi.com/data/analysis/747

  • Currently 2,500

    Average Investment Size

    Individual offers have averaged 8,500

    January 2014

    2,687

    February 2012

    1,854

  • They will not understand the

    philosophy or the procedures of this (Grameen) bank,

    Muhammad Yunus

    You cannot create the bank of the poor with the same architecture as the

    bank of the rich.

    On bank regulators also regulating

    microcredit institutions

  • Tim Wright

    tim@twintangibles.co.uk

    07717 814 595

    @twintangibles

    Questions?