On The Legal Risk And The Regulatory Logic Of Equity-based Crowdfunding

Equity-based crowd funding is new type of financing which begins with Internet finance innovation and results from market demand.It has grown very fast and has been noticed by the financial regulator.It effectively saves the Chinese medium-sized and small enterprises from the trouble of financing,realizes the financial democracy and equality of those enterprises and the ordinary investors,and changes the traditional financial ecosystem of China to some extent.However,since traditional finance restrains the regulatory policy,equity-based crowd funding has always been in legal limbo.Under the strict financial regulatory system,it has been suspected of illegal securities issuance,facing with a train of legal issues and risks.The potential risks and the booming market demand make it clear that the legislation system of equity-based crowd funding needs to be established and the logic of legal regulation needs to be rebuilt.In the meantime,the law,as an institutional arrangement from the perspective of the institutional economics,has to correspond with the demand of market and society.Equity-based crowd funding is essentially a new financing arrangement with the characteristics of low-cost fundraising and flexible procedure,which is different from the traditional one.As for those medium-sized and small enterprises,it is an objective needs.As in the international practice,equity-based crowd funding has gradually played a vital role in the development of national industries.And from the macroscopic view,to advance the development of medium,small and micro-sized enterprises benefits China in the economic development and the promotion of social welfare.Considering the foreign legislative practice,it is not difficult to find that the balance of encouraging the innovation,facilitating the funding and protecting the investors is the main point of the regulatory legislation of equity-based crowd funding all the time.But when looking at the traditional financial regulatory system in China,the value orientation of maintaining the financial stability instead of facilitating funding makes the financial repression the long-term policy in regulation,which leads to a series of adverse system reactions and lots of potential legal risks in the development of equity-based crowd funding.Therefore,considering the fast-rising equity-based crowd funding,traditional thinking of regulation apparently can’t conform to the basic requirements of its development any more.The thesis,based on the equity-based crowd funding,is to rebuild the logic of financial legal regulation and to find out a new format of innovative financial regulation by means of systematically analyzing the concept,the current practices and the legal risks of equity-based crowd funding.The thesis proceeds in the following four parts.Introduction elaborates the source and research value of the legal risks and the regulatory issues of equity-based crowd funding,as well as the references and the research approach and methods of the thesis.The second part is the overview of equity-based crowd funding theory,which explores the meaning of equity-based crowd funding theory,concludes its core elements,and clarifies the basic legal relation between the funding party and the investing party from the perspective of theory and existing law.Meanwhile,it discriminates between the platform of equity-based crowd funding and the stock exchange and the broker etc.which have some overlaps in function and have similar legal concepts,laying the theoretical foundation of the following discussion.The third part discusses the legal risks of equity-based crowd funding in China.Analyzing the current practice of equity-based crowd funding of the country,the author believes that because of the mismatch of financial legal regulatory mechanism,the contradiction of excessive punishment and insufficient regulation results in the exogenous and the endogenous risks of equity-based crowd funding.The systematic analysis of the cruxes of the two risks helps to generate the discussion the logic of legal regulation of equity-based crowd funding.The fourth part is to form the logic of legal regulation of equity-based crowd funding.Using the foreign experience of legislative regulation as a reference,the author suggests changing the traditional idea of financial regulation,implementing soft law thinking,rebuilding the logic of legal regulation and laying the theoretical basis of equity-based crowd funding regulation.In the meantime,the author also gives some advices on regulating the method of legal regulation based on the practical issues of equity-based crowd funding.