Could New Zealand's Equity Crowdfunding Regulations Be the Model for the Developing World?

Jonathan A Ande & Zehra G Kavame Eroglu, Could New Zealand’s Equity Crowdfunding Regulations Be the Model for the Developing World?, 29 New Zealand Universities Law Review 557 (2021)

36 Pages Posted: 7 Sep 2021

See all articles by Jonathan Ande

Jonathan Ande

Deakin University, Geelong, Australia - Deakin Law School

Zehra G. Kavame Eroglu

Deakin University, Geelong, Australia - Deakin Law School

Date Written: August 12, 2021

Abstract

Without Equity Crowd-sourced Funding (ECF), investing in promising small companies is an option available only to a small group of professional investors such as venture capitalists. Providing small companies alternative ways to access capital has become especially important today, owing to the impact of the COVID-19 pandemic on small businesses. This article compares the ECF regulations of four common law countries, namely the United States, United Kingdom, Australia and New Zealand. It finds that New Zealand and the United Kingdom have had the highest ECF investment per capita, however the United Kingdom has had a significant number of failed crowdfunded companies. Neither the United States or Australia has had much success in attracting ECF investment per capita-- although things may change in Australia. What is unique about the New Zealand system is that a strong and defined gatekeeping role is given to the crowdfunding platforms. This approach lowers compliance and supervisory costs for fundraising companies and regulators respectively. In turn, platforms who are successful in their gatekeeping role develop a reputation for bringing successful companies to the market, making their service more appealing to the ECF market. The approach in New Zealand exemplifies how countries with a modest venture capital market, a dearth even more significant in developing economies, can successfully develop ECF as an effective alternate source of capital for small companies.

Keywords: equity crowdfunding, ECF, crowdfunding regulations, gatekeepers, crowdfunding platforms, comparative

JEL Classification: K2, K22, K20, M13, M48, G28, O38,

Suggested Citation

Ande, Jonathan and Kavame Eroglu, Zehra G., Could New Zealand's Equity Crowdfunding Regulations Be the Model for the Developing World? (August 12, 2021). Jonathan A Ande & Zehra G Kavame Eroglu, Could New Zealand’s Equity Crowdfunding Regulations Be the Model for the Developing World?, 29 New Zealand Universities Law Review 557 (2021), Available at SSRN: https://ssrn.com/abstract=3904063

Jonathan Ande

Deakin University, Geelong, Australia - Deakin Law School ( email )

221 Burwood Highway
Burwood
Burwood, Victoria 3125, Victoria 3125
Australia

Zehra G. Kavame Eroglu (Contact Author)

Deakin University, Geelong, Australia - Deakin Law School ( email )

221 Burwood Highway
Burwood
Burwood, Victoria 3125, Victoria 3125
Australia

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