Financial System Reform – Recommendation 18- facilitate crowdfunding for debt – SME finance – Marketlend well poised for the future.

Financial System Review – click for the full report

Government should continue its current process to graduate the fundraising regime to facilitate securities-based crowdfunding. This would enable entities to make public offers of securities to a potentially large number of people (the ‘crowd’). The risks associated with crowdfunding investments would require some adjustments to consumer protections, including capping individuals’ investments and clearly communicating the risks.

Government should then use the policy settings for securities as a basis to assess wider fundraising and lending regulation to ensure it facilitates other forms of crowdfunding, including peer-to-peer lending.

A range of crowdfunding models are emerging globally. Crowdfunding facilitates the funding of projects or businesses, where small amounts of money are raised from the ‘crowd’ via an online facilitator (or platform).⁶⁸ Financial crowdfunding models include:

• Securities-based crowdfunding, where the ‘crowd’ invests in an issuer in exchange for securities — either equity (crowd-sourced equity funding, CSEF) or debt.⁶⁹
• Peer-to-peer lending, where an online intermediary facilitates lending between individuals, often in the form of unsecured personal loans, potentially to fund a business.⁷⁰

Objectives

• Graduate fundraising regulation to facilitate innovations in fundraising emerging from new technologies and ensure policy settings are consistent across funding methods.
• Provide firms, particularly small and medium-sized enterprises (SMEs), with additional funding options.