Exploiting the Crowd: The New Zealand Response to Equity Crowd Funding

37 Pages Posted: 16 May 2016 Last revised: 18 May 2016

See all articles by Henry Hillind

Henry Hillind

Victoria University of Wellington, Faculty of Law, Student/Alumni

Date Written: 2014

Abstract

The crowd funding exclusion in the Financial Markets Conduct Act 2013 allows issuers, often innovative start-up businesses, to raise up to $2,000,000 in a 12 month period from retail investors through an internet platform provided by a licensed intermediary service, without the need for the product disclosure statement and on-line disclosures usually required under Part 3 of the Act. In order to protect the interests of investors in a market with a high risk of negligible return, other protections need to be provided. International jurisdictions have imposed investor caps, but New Zealand has failed to do so. This essay argues that, particularly in light of shortcomings with other aspects of crowd funding investor protections, a mandatory investor cap of five per cent of the amount being raised should be imposed, to protect investors both from the high risks of venture capital investing and from their own inexperience in this new and rapidly developing market.

Keywords: Securities, Equity, Investment, Crowd Funding

JEL Classification: K10, K22

Suggested Citation

Hillind, Henry, Exploiting the Crowd: The New Zealand Response to Equity Crowd Funding (2014). Victoria University of Wellington Legal Research Paper, Student/Alumni Paper No. 15/2016, Available at SSRN: https://ssrn.com/abstract=2779896 or http://dx.doi.org/10.2139/ssrn.2779896

Henry Hillind (Contact Author)

Victoria University of Wellington, Faculty of Law, Student/Alumni ( email )

PO Box 600
Wellington
New Zealand

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