Research On Legal Issues Of The Equity-based Crowd-funding

The crowd funding began with a beautiful dream of a common futures trader., during the process of realizing whose dream the first crowd funding platform “Kick Starter” was established. The first crowd funding in China was born in Beijing and put on line in 2011, leading a booming and vigorous domestic development of public network platforms. Nowadays there are about hundreds of crowd funding websites, characterized by their low market access, diverse investment types and abundant human resources they have brought brand new energy to the transitional China market in a changing cyber world. Among all crowd funding modes, based on the returning types from fund raisers to investors, they could be divided into four main type as follows :retribution-based-crowd-funding,donation-based-crowd-funding,creditor-based-c rowd-funding and equity-based crowd-funding, it is the crowd funding that develops the best. Equity-based crowd-funding originated from the United States, different from other patterns its financial nature is much stronger. In the big social background that lots of medium and small sized Chinese enterprises are meeting pervasive financing problems, its distinctive characters such as pattern innovation, general financial benefit and public spreading makes it highly outstanding and influential among all the industries, it offers a brand new financing opportunity for the healthy development of Chinese enterprises, it provides ceaseless motivation and support for the transformation of Chinese economy.At present our country lack the definite evaluation to the legal nature of crowd funding which without systematic legal supervision and management often walking 2around the grey zone of law. The society has not made the most use of the financing function of crowd funding. As a brand new financing mode crowd funding plays a vital role in breaking up development bottleneck under the Chinese new normal economy and possess great promotion to the transformation and upgrade of Chinese industries. Therefore it should be utilized more efficiently to fully exert its grass-root financing character and serve the development of real economy. Due to the reason that people lack a complete understanding of the investment value of crowd funding, have not enough common sense to its content and nature, pay little attention to its investment risk, it probably will bring about potential threat to financial stability and social harmony. Because of the deficiency of the legal guidance, value function and risk education Chinese crowd funding now develops in a disorder state which contains huge legal risk and commercial crisis.Through the discovery and organization of relevant document literature, the author found that there is not much academic study for the crowd funding. Neither is there any legal provision or regulation guiding it. This article will start with the summary of basic function pattern of crowd funding, gradually analyze the legal risk behind it based on a study of related parties and finally offer my personal suggestion and advice to the construction of its legal system.Except the introduction and conclusion parts, the main article content could be divided into three parts:The first part is the basic operational mode of crowd funding. This part introduces its definition and classification, mainly focus on its connotation and three characteristic. Then the author analysis the characteristics of the raise public network platforms, includes innovative model, financial benefits and public spreading., discusses the main frame of the raising public network platforms, such as the people who raise project capital, people who invest the public, the raise public network platforms and the institutions which manage funds. At last the author analyzes three major financing modes namely: personal direct mode, collective direct mode and fund indirect mode.The second part is the analysis on legal issues of the equity-based-crowd-funding platforms in China. First starts a preliminary study on the legal relationship of equity-based-crowd-funding platforms, taking Jingdong Mall as an example. Based on that initiate a deep research about the legal risk existed in Chinese equity-based-crowd-funding platforms including the deficiency of legal guidelines and unified management regulation, capital raisers illegal security issuance, the possibility of fraudulent capital-funding to investors and the compliance risk of managing platforms.The third part is the legal proposals for the building of the raise public network platforms in China. This section concludes that it is necessary to determine the legal status of the raise public network platforms. Then the author provides some suggestions to the building of the raise public network platforms. It can be done through developing reasonable access standards and filing system on the raise public network platforms, setting the third-party review of information obligations to the raise public network platforms, strengthening the business management standards of the raise public network platforms. In addition to the author proposed some recommendations to perfect the information disclosure system. In my opinion, it is very important to establish a systematic, hierarchical system of information disclosure which including the people who disclosure, the content what disclosure, the ways how disclosure and the liability when violating the laws. At the same time, we should strengthen the special protection of investors, such as designing management at different levels, setting a period for investors to cool off, strengthening the education about risk investment and forcing the raise public network platforms to purchase fidelity guarantee insurance. At last, this paper introduces the promoting effect on the raise public network platforms which from the industry associations.