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Regulating Crowdfunding Key Considerations - Tim Wright Deep Impact India Conference March 2015
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Tim Wright Tim Wright Regulating Crowdfunding Regulating Crowdfunding Key Considerations Key Considerations Deep Impact - India 21 st March 2015
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Transcript of Regulating Crowdfunding Key Considerations - Tim Wright Deep Impact India Conference March 2015
Tim WrightTim Wright
Regulating CrowdfundingRegulating CrowdfundingKey ConsiderationsKey Considerations
Deep Impact - India 21st March 2015
Crowd EconomyCrowd Economy
•CrowdfundingCrowdfunding•CrowdsourcingCrowdsourcing•Open InnovationOpen Innovation•Knowledge TransferKnowledge Transfer
Management ConsultancyManagement Consultancy
PropositionProposition
• 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?Is Regulation a Good Thing?
Unique Value of CrowdfundingUnique 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?Why Regulate?
Mitigate risk
Build confidence
Grow the market
Crowdfunding Risk MitigationCrowdfunding Risk Mitigation• Atomisation
• Transparency
• Crowd scrutiny
To Grow Crowdfunding RequiresTo Grow Crowdfunding Requires
•Low transaction costs•Low barriers to participation
Four Models of Crowdfunding
GIFTGIFT
PERKPERK
LOANLOAN
EQUITYEQUITY
Who can participate
How to Regulate?How to Regulate?
How they behave
What they are told
How to Respond?How to Respond?
Two approaches• “Common Law”
– If you satisfy any relevant law can do it• “Napoleonic Code”
– The law needs to say explicitly that you can do it
The Common Law ApproachThe 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 Common misconception that UK equity crowdfunding was unregulated prior to April 2014crowdfunding was unregulated prior to April 2014
UK equity crowdfunding exists in spite of regulator not because of it
10%
Rewriting Law
Introducing Law
Awaiting Title III
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 FinanceCrowdfunding Being Treated Like Old Finance
http://www.altfi.com/data/analysis/747
Currently £2,500
Average Investment SizeAverage 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
![M&A Trends ]v Z W ]. - ZICOzico.group/.../uploads/...MA-Trends-in-the-Pacific.pdf · Between early 2015 and mid-2016, Malaysia became the first ASEAN country regulating equity crowdfunding](https://static.fdocuments.in/doc/165x107/60406dc69c838e42f50d0837/ma-trends-v-z-w-between-early-2015-and-mid-2016-malaysia-became-the.jpg)
