China Legal Science 2020年第3期｜股权众筹显性化路径：三位一体的法律界定

日期:20-07-17 来源: 作者:zzs

THE DOMINANT PATH OF EQUITY CROWDFUNDING: THE THREE-IN-ONE LEGAL JUDGMENT

Zhao Yin

I. INTRODUCTION

In the process of the development of Internet finance, while encouraging and protecting innovation, the State should also carefully control the risks contained in financial innovation. Furthermore, it shall be to set up the safe harbor for financial innovation and to draw the red line for regulation. Internet equity financing is a kind of securities issuance action, whose objects of issuance may be specific, or may not be specific. According to the provision of article 10 of the Securities Law, there is also the distinction between ‘public offering’ and ‘private placement’. However, in the practice of the past few years, the nature of public offering and private placement of equity crowdfunding is generally not distinguished, and the mixed use of the expression ‘equity crowdfunding’ often appears. The confused judgment of Internet equity financing makes it difficult for regulatory authorities to carry out effective supervision, and there is much financial chaos, which directly damages the interests of investors. In order to change the status quo, various departments have continuously issued policies on Internet equity financing in recent years, and clarified the nature and scope of the two types of public offering and private placement under the Internet equity financing.

On December 18, 2014, the Securities Association of China enacted the Measures for the Management of Private Equity Crowdfunding (for Trial Implementation) (Consultation Draft) (hereinafter referred to as the Consultation Draft), which first recognized the non-public offering nature and legal status of private equity crowdfunding. And in the Measures for the Recordation Administration of Over-the-Counter Securities Businesses promulgated on July 29, 2015, the private equity crowdfunding was included in the scope of over-the-counter securities business. On April 20, 2015, the Securities Law (Revised Draft) (First Deliberation Draft) (hereinafter referred to as the Revised Draft) added the exemption clause for public equity crowdfunding, and recommended that Internet equity crowdfunding can be allowed to issue securities in a public manner, so as to provide possibility for public equity crowdfunding to gain legal development space in China. On July 18, 2015, ten ministries and commissions issued the Guiding Opinions on Promoting the Sound Development of Internet Finance (hereinafter referred to as the Guiding Opinions), which defined equity crowd financing as ‘the activity of public small-amount equity financing through the Internet’, and it was clearly supervised by the China Securities Regulatory Commission (CSRC). Subsequently, on July 24, 2015, the CSRC officially declared at a press conference as follows: equity crowdfunding are characterized as being ‘open, small-sum, and public’. Currently, those activities conducted by some institutional market players in the name of equity crowdfunding are private equity financing or the offering of private equity investment funds as conducted via the Internet, instead of the equity crowdfinancing as specified in the Guiding Opinions. On August 10, 2015, the Securities Association of China issued the Notice on Adjusting a Clause of the Measures for the Recordation Administration of Over-the-Counter Securities Business proposing to revise private equity crowdfunding to Internet non-public equity financing, excluding private equity crowdfunding from the conceptual category of equity crowdfunding. So far, the term ‘equity crowdfunding’ has been defined as ‘public offering’ under the current rule system in China, which only refers to the public equity financing in the form of Internet. While private equity crowdfunding has gained legal status and survives and develops in the name of Internet non-public equity financing. In the current practice, the so-called equity crowdfunding platform is essentially the Internet non-public equity financing. It can be found from the existing businesses of these platforms that they basically follow the rules of Internet non-public equity financing and impose certain constraints on the public. The real equity crowdfunding (Internet public equity financing) is still in the pilot preparation stage, which is in conflict with the current Securities Law on the regulation of public issuance of securities.

II. THE DIFFERENTIAL POSITION OF EQUITY CROWDFUNDING AND INTERNET NON-PUBLIC EQUITY FINANCING

According to the Research Report on Equity Crowdfunding of the People’s Bank of China Financial Research Institute, the securities issuance market needs to be further stratified on the basis of the two types that are public offering and private placement of traditional financial investment, so as to form a multi-layer issuance mechanism of ‘public offering, small public offering, large private placement and private placement’ in the future. Compared with traditional public offering and private placement, there are important differences between equity crowdfunding and Internet non-public equity financing. Although equity crowdfunding is to raise funds from non-specific social public, it can be exempted from issuance approval, and the issuance conditions are simplified and the amount of financing is limited, corresponding to large public offering. Internet non-public equity financing, on the other hand, loosens the conditional restrictions of traditional private placement on qualified investors and expands the range of financing objects, corresponding to ‘large private placement’.

According to the requirements of regulatory authorities on Internet equity financing in the policy documents in recent years, it can be observed that China has not made a choice between equity crowdfunding and Internet non-public equity financing, but chose the regulatory path of parallel development of the two. In terms of academic theory, there is also much agreement on this point. It holds that both equity crowdfunding and Internet non-public equity financing have their own special advantages, and the choice of the dual definition of Internet equity financing can meet the needs of different market players. Specifically, equity crowdfunding is inclusive and can centrally integrate and redistribute the small and scattered social idle money through Internet technology to achieve efficient integration of funds at low cost. With its advantages of high efficiency and low cost, it can effectively improve the problem of difficulties in financing of micro, small and medium-sized enterprises. At the same time, it opens up a new channel for the public to participate in financial investment activities. Internet non-public equity financing is targeted at qualified investors with certain investment experience and risk tolerance. And compared with traditional private placement, the integration of Internet technology significantly reduces the financing cost of enterprises and enables investors and financiers to contact each other more quickly and accurately. Especially for those high-tech enterprises which need more financing and are more interested in angel investment and venture capital, the amount of investment in Internet non-public equity financing is unlimited, the number of investors is small, the cost of exchange is low, and the trading objects with certain maturity and experience can provide guidance and help for issuers, so it has specific commercial advantages that cannot be replaced by equity crowdfunding.

The difference between investors is a question which needs special consideration. In the field of equity crowdfunding, investors generally lack the ability to judge the quality of financing projects and the risk-taking ability. And the main demand for regulation is to deal with the problem of information asymmetry and investors’ irrational decision-making behavior. In order to give full play to the superiority of equity crowdfunding and control the losses of investors, some scholars believe that it is necessary to strengthen supervision on the basis of lowering the threshold for equity crowdfunding, that is, to choose the supervision path of ‘easy entrance and strict supervision’. In contrast, the essence of Internet non-public equity financing is equity financing by means of non-public issuance through the Internet, and financing information can be effectively spread and fully competitive in the market, so as to expand the scope of financing information acquirers. At the same time, qualified investors in the Internet non-public equity financing have reached the required asset size or income level and have certain professional ability. Based on this, the idea of supervision of Internet non-public equity financing should be to give full play to its superiority, ensure financing efficiency, and adopt the supervision path of ‘wide access and strict control’.

In practice, the Internet equity financing platform obtains operational legitimacy in the form of Internet non-public equity financing. On the surface, all crowdfunding platforms basically follow the requirements of non-public equity financing and restrict the publicity to some extent. However, in essence, most crowdfunding platforms evade the limitations of the current legislation by establishing limited companies or limited partnerships, setting the lower limit of investment amount and other ways. In fact, the number of investors in financing projects has already exceeded the upper limit of 200 stipulated in article 10 of the Securities Law. At the same time, the openness of the Internet determines that once the financing information is released on the crowdfunding platform, it can be regarded as being released to a non-specific majority, which is in line with the nature of public issuance. It can be said that most of the equity financing platforms adopt a disguised way to conduct public equity financing under the cloak of Internet non-public equity financing, which is a kind of alienated equity crowdfunding model. Owing to the unclear legal judgment and the lack of corresponding norms, the advantages of equity crowdsourcing cannot be fully developed. In view of this, China needs to learn from the Jumpstart Our Business Startups Act (hereinafter referred to as the JOBS Act) in the US, the Regulatory Rules for Crowdfunding of the UK and other advanced practice, and rationally absorb the experience provided by the practice of non-public equity financing in China, clarify the legal definition of equity crowdfunding from the perspective of market access and explore the rule system suitable to China’s national conditions in order to adapt to the needs of the development of market economy.

III. THE LEGAL JUDGMENT OF EQUITY CROWDFUNDING PRODUCT

The current Securities Law in China adopts a simple legislative model of extension enumeration to define the security concept. It does not stipulate the general concept and constituent elements of securities. The scope of securities is mainly limited to stocks, bonds and securities investment fund shares listed in the provisions. As a result, the connotation of securities is unclear, and the extension is extremely narrow. This legislative model has not been changed since the Securities Law was issued and implemented in 1998. However, with the development of Internet financial market in China, such definition of securities has been difficult to adapt to the actual needs, especially turned into the shackles of the legalization of equity crowdfunding. In the future, to bring equity crowdfunding products into the regulation system of the Securities Law, the legislative model of securities definition should be reformed first. The definition of securities should be reconstructed by adopting a generalized and enumerated way, and not only the connotation of securities needs to be clarified, its extension also needs to be expanded.

A. Reconstruction of Security Concept

The first one is to clear the security connotation. To discuss the security connotation, the key is to clarify the nature of security rights. According to the traditional security theory, the security includes the ownership of security itself that the security holders have and the rights that the security holders can enjoy or exercise according to the securities, that is, there are two kinds of rights that are the ownership of security and security rights. Among them, security rights can better reflect the essential attributes of security, and reflect the special significance of the close combination of rights and vouchers. The Securities Law takes capital securities as its regulative object, so the nature of securities rights should be defined as investment rights. As rights holders, investors can obtain reasonable return through investment behavior. For example, the equity of the substantive content represented by the stock is the typical investment rights.

Thus it can be seen that the key to determine the nature of security rights lies in investment. Security investment action means that the investor delivers the capital to others according to the arrangement of contract, and the party who obtains the capital uses the capital to engage in business activities and seek reasonable operating profits for the investor. Therefore, in the general description of the security concept, the foothold should be vouchers or investment contracts to reflect the close combination of investment rights and vouchers, so that the connotation of security concept can be clarified and the scope of adjustment of the Securities Law can be reasonably delineated, in order to better adapt to the development of security market and the innovation of financial products.

The second one is to expand the security extension. For the expansion of security extension, scholars have carried out relatively extensive and profound discussion and research. Many scholars advocate that financial products that have appeared in practice should be included in the adjustment scope of the Securities Law to reflect the status of the Securities Law as the basic law of the capital market. For example, some scholars advocate that financial products which have been widely recognized in the security market should be included in the concept of securities, such as bank financial products, trust financial products and those asset shares like art shares which benefit from operation based on investment contracts and can circulate in the capital market, can enter the scope of the adjustment of Securities Law. However, for the specific way to expand the security extension and bring as many financial products as possible into the adjustment scope of Securities Law, scholars mainly put forward the following different views: Firstly, the legislative model of listing and underwriting provisions is adopted. All security financial investment products conforming to the characteristics of investment contract shall be included in the regulation scope of the Securities Law. So that financial investment products generated in the internal or cross-cutting areas of securities, trusts, and insurance industries under mixed operation, and investment securities with financial functions sold or issued by non-financial institutions are included in the scope of regulation. Secondly, it is advocated to introduce the concept of collective investment scheme by referring to the Japanese model. On the one hand, the collective investment scheme shares that meet certain conditions are listed as specific types of securities. On the other hand, the abstract and generalized concept of collective investment scheme is introduced to expand the definition, scope and applicable objects of securities. Thirdly, the specific types of securities are classified and enumerated. In addition to general provisions and general descriptions of securities, when listing the specific types of securities, they should be synthetically classified and enumerated according to the different security rights carried on securities. To be specific, it should be divided into equity securities, creditor’s rights securities, trust income rights securities, derivative securities and investment contract securities.

In this regard, the Revised Draft submitted to the Standing Committee of the National People’s Congress on April 20, 2015 made some responses. Article 3 of the Revised Draft stipulates as follows: For the purpose of this law, ‘securities’ means vouchers or investment contracts that represent specific property rights and interests and can be equally divided and transferred or traded. This law shall apply to the issuance and trading of the following securities, and matters not included in this law shall be governed by the Corporate Law of the People’s Republic of China and other laws and administrative regulations: (i) The common stocks, preferred stocks and other stocks; (ii) The corporate bonds, enterprise bonds, corporate bonds with the option to be converted into stocks and other bonds; (iii) The depositary receipts of stocks and bonds; (iv) Other securities as lawfully recognized by the State Council. The present law shall apply to the issuance and trading of beneficiary certificates and warrants, such as asset-backed securities, and the listing and trading of government bonds and shares of securities investment funds. In case there is any special provision in any other law or administrative regulation, such special provision shall prevail.’

The advantages and progress of article 3 of the Revised Draft are relatively obvious. Especially, it provides general provision and general description for securities. It uses ‘can be equally divided and transferred or traded’ as the general characterization of securities and defines securities as ‘vouchers or investment contracts’. This makes the connotation of the concept of securities clear and makes up the deficiencies caused by the lack of connotation of security concept in China for many years. At the same time, this provision expands the extension of the concept of securities. On the basis of the types of securities explicitly listed in the current Securities Law, it supplements some other types of securities that are relatively mature in the capital market and not covered by the current law.

B. Confirmation of the Security Properties of Equity Crowdfunding Product

Under the framework of the security concept reconstructed in the Revised Draft of 2015, the investment contract as the foothold of security properties, its security properties have been confirmed, so it provides space and path for the legalization of equity crowdfunding. In accordance with the Howey standard established by the US Supreme Court in the case of SEC v. W.J Howey Co., the investment contract must meet the four requirements, that is the cost input, for common undertakings, the expectation of return and the income mainly come from the efforts of others. According to such standard, equity crowdfunding product can be included in the category of investment contract in the Securities Law. Firstly, as an investment arrangement, investors and financiers enter into investment contracts in order to obtain returns, and such returns are mainly due to the efforts of financiers. Secondly, the capital invested by investors for crowdfunding projects constitutes the common undertaking. Meanwhile, the equity crowdfunding investment contract which represents specific property rights and interests is a kind of rights and interests certificate that can be standardized, equally divided and transferred. Therefore, the equity crowdfunding investment contract should be defined as the ‘investment contract’ in the Securities Law, which has security properties and conforms to the economic essence of securities, and should be included in the adjustment scope of the Securities Law and regulated by the Securities Law. In this way, under the framework of the reconstruction of security concept, the investment contract is used as the entry point to analyze and explain the nature of equity crowdfunding products, which provides a way of thinking for the legalization of equity crowdfunding. However, it is not enough to bring equity crowdfunding into the system of Securities Law only from the perspective of securities connotation. In order to avoid possible disputes and differences in academics and practice, it is suggested that when the Securities Law will be finally revised in the future, besides taking investment contract as the qualitative foothold when stipulating the security connotation in article 3, the equity crowdfunding products should be explicitly included when expanding the security extension and listing the types of securities and their security properties should be directly confirmed. In this way, the primary shackles and obstacles of the legalization and specific regulation of the equity crowdfunding products can be removed, so that the equity crowdfunding will not go so far as to be free from the adjustment scope of the Securities Law and to not be governed by the law. Otherwise it will go against the protection of investors’ rights and interests, and will also hinder the innovation and development of the security market.

IV. THE LEGAL JUDGMENT OF EQUITY CROWDFUNDING ACTION

A. Acknowledgement of the Public Issuance Nature of Equity Crowdfunding Action

Under the framework of the reconstruction of security definition, equity crowdfunding should be brought into the system of the Securities Law, and its issuance and trading rules should be regulated by the Securities Law. Regarding the method of security issuance, article 10 of the Securities Law in China makes a distinction. It can be divided into public issuance and non-public issuance, namely public offering and private placement, according to whether the objects of security issuance are specific. As mentioned earlier, China adopts a regulatory approach of differentiated treatment and parallel development for Internet equity financing. Therefore, the term ‘equity crowdfunding’ is limited to public offering under the current legal system in China, which only refers to public equity financing in the form of Internet, while private equity crowdfunding gains its legal status and survives and develops in the name of Internet non-public equity financing.

It is necessary and inevitable that equity crowdfunding adopts the public offering. The term ‘equity crowdfunding’ derives from the English ‘equity-based crowdfunding’, while the term ‘crowdfunding’ is a combination of ‘crowdsourcing’ and ‘microfinancing’. Under normal circumstances, crowdfunding refers to raising funds from the public, especially small-amount funds raised for the purpose of supporting individuals, charitable organizations or commercial enterprises. While equity crowdfunding is the financing method in which financiers sell equity or equity-like equity shares to a large number of potential investors through the Internet platform. From the concept of equity crowdfunding, we can glimpse its grassroots finance attribute with open, small-sum and public. Compared with the traditional financing methods, equity crowdfunding is carried out through the Internet platform, so the openness of the Internet determines the openness of equity crowdfunding. As the entire Internet is built on the basis of freedom and openness, its audience group is difficult to limit and define, which determines that the investors of equity crowdfunding are the non-specific public. The basic model of equity crowdfunding is to collect small-amount funds from many investors through the Internet, which needs to use the openness of the Internet for project promotion. Therefore, anyone who pays attention to the information of equity crowdfunding projects is likely to become an investor of equity crowdfunding, and the scope of potential investors is difficult to be defined and investors cannot be specified. Since investors are not specific to the public, equity crowdfunding action constitutes public issuance in the Securities Law.

B. Introduction of the Exemption System of Small-Sum Issuance

The first one is the necessity of introducing the exemption system. The securities issuance review system in the Securities Law of China is the confirmation system, which stipulates public issuance of securities shall meet the requirements of the relevant laws and administrative regulations, and shall be reported to the department in charge for examination and approval according to law. Through the Measures for the Administration of the Initial Public Offerings and Listing of Stocks, the Securities Regulatory Commission further clarifies the specific requirements on the subject qualification, operating status, financial accounting and capital utilization of issuers. There is a conflict between the current securities issuance system in China and the public offering nature of equity crowdfunding behavior. The small scale of equity crowdfunding is difficult to meet the high threshold of public offering conditions, which forms another legal obstacle to the legalization of equity crowdfunding. To put it more specifically:

Firstly, equity crowdfunding is the small-sum financing mode that is mainly suitable for startup enterprises or small and micro enterprises. The equity crowdfunding system was initially generated and developed based on small-sum financing needs of startup enterprises. Most of the financiers are innovative startup enterprises or small and micro enterprises, whose establishment time, registered capital, operating income, internal management and other aspects are difficult to meet the current conditions and procedures of public issuance. At the same time, the financing needs of startup enterprises especially innovative startup enterprises are very urgent in the early days of its establishment. These companies are unable to meet the urgent financing needs through traditional financing methods, so they choose equity crowdfunding as an alternative financing scheme. For this reason, if financiers in the equity crowdfunding still need to meet the strict issuance conditions and procedures under the traditional financing model, it will run counter to the original intention of the establishment of the equity crowdfunding system.

Secondly, the core advantage of equity crowdfunding lies in the combination of low cost and high efficiency. To be specific, equity crowdfunding provides a financing mode for financiers to obtain a large amount of small-sum capital with more convenient procedures and lower costs. What supports this advantage is the efficient dissemination of investment and financing information brought by the development of Internet information technology. In this way, a low-cost direct communication channel is established for both sides of investors and financiers through the financing mode mediated by the Internet. The publication and examining of financing projects, information disclosure, the investor suitability management, the transfer of funds and stocks, etc. do not rely on traditional intermediaries. Financiers simply display their entrepreneurial or business ideas through the Internet, and they can attract relevant investors and directly obtain funds. By means of the advantage of the Internet, equity crowdfunding greatly reduces the marketing cost and transaction cost of the traditional financing model, enabling both investors and financiers to exchange information directly through low-cost communication channels, not only tapping a large number of potential investment and financing needs filtered out by the traditional financing mode because of the high cost in the capital market, but also significantly reducing the information asymmetry and improving the transaction efficiency. Therefore, if such strict issuance requirements for equity crowdfunding financiers are still put forward and approved by the CSRC, it will not be in line with the principle of cost-effectiveness, and the core advantages of equity crowdfunding will no longer exist.

In order to solve the legal dilemma of the application of equity crowdfunding which is caused by the public issuance system, a lot of countries and regions have constructed the exemption system of small-amount issuance as the necessary complement to equity crowdfunding, exempting issuance behavior that satisfied the corresponding conditions from approval or registration. It makes the financing of startup enterprises more convenient and efficient, and provides space of corner overtaking and surpassing for the development of startup enterprises. The exemption system of small-amount issuance in the US is established by the JOBS Act. According to the act, the issuer can exempt the registration of securities issuance if the total amount sold to all investors within 12 months is not more than 1 million dollars. The Regulatory Rules for Crowdfunding of the UK stipulates that the exemption is applied to the small-amount raising behavior of crowdfunding capital under 1 million pounds. It is stipulated in Taiwan of China that the company which is exempted from registration through the creative counter board or security dealer fundraising platform shall not raise more than 30 million New Taiwan dollars in the latest year. The Financial Commodity Trading Act of Japan stipulates that the relevant equity crowdfunding issuers can be exempted from submitting an application if their issuance amount does not exceed 100 million yen.

The second is the specific design of exemption system in China. Firstly, it should be combined with the reform of the securities issuance review system. The current Securities Law stipulates that securities issuance shall adopt the confirmation system, but the Third Plenary Session of the 18th Central Committee of the Communist Party of China has clearly proposed the reform direction of the registration system of stock issuance. The Revised Draft of 2015 also preliminarily stipulates the registration system, and the reform of the registration system of stock issuance has become imperative. China should grasp the opportunity of the comprehensive revision of the Securities Law and introduce the exemption registration system of small-amount issuance on the basis of the reform of securities issuance from the confirmation system to the registration system, so as to further break the shackles of the current legal system on the development of equity crowdfunding.

Secondly, the authorized legislation mode in the US and Taiwan of China can be used for reference, which can be realized through the synchronous improvement of laws and departmental rules. In other words, on the basis of the general provisions on the exemption system of small-amount issuance in the Securities Law, the CSRC is authorized to formulate specific detailed rules. In this regard, articles 1323 and 1424 of the Revised Draft respectively include the corresponding provisions of ‘crowdfunding exemption’ and ‘small-amount exemption’, and outline the rudiment of the exemption registration system of small-amount issuance in China. Specific conditions and procedures of exemption should be cleared in the rules which shall be otherwise developed by the CSRC.

Thirdly, the CSRC should pay more attention to mastering the degree when designing specific exemption conditions. The specific design of the exemption system should provide qualified startup enterprises or small and micro enterprises with more convenient procedures and lower costs to achieve efficient financing, but at the same time it should not cause the absence of regulation of equity crowdfunding and the damage of investors’ interests. At present, the capital market in China is more volatile and the specific content of the registration system reform is not yet clear. Under this background, it is not appropriate to excessively reduce the exemption conditions and loosen the supervision, and a more cautious attitude should be adopted to design the exemption conditions as a whole. The introduction, implementation, and improvement of a system are not at one stroke, also do not change. The department in charge can first make more prudent provisions on the exemption conditions, and then make timely adjustments in the implementation process, so as to make the exemption system of small-amount issuance better conform to and promote the development of equity crowdfunding and Internet finance in China. Based on such overall consideration, it is suggested that China should impose a double restriction on the time and the amount of financing for the exemption of small-amount crowdfunding issuance, and stipulates that financiers whose accumulative amount of financing does not exceed 3 million yuan in 12 months may not be subject to the regulatory restriction of public issuance registration. This can not only meet the initial financing needs of startup enterprises or small and micro enterprises, but also prevent excessive financing.

Certainly, the exemption of small-amount issuance is only the exemption of the relevant registration requirements of qualified enterprises, and does not reduce the information disclosure obligation of financiers. On the contrary, it is necessary to strengthen the continuous disclosure obligation of information centered on the financiers who are exempted registered, which is the core of introducing the exemption of small-amount issuance into the equity crowdfunding. As for the regulation of continuous disclosure of information, it will be discussed in detail.

V. THE LEGAL JUDGMENT OF EQUITY CROWDFUNDING PLATFORM

Completing the entire financing process through the Internet platform and achieving more efficient financing with more convenient procedures and lower costs are the most core characteristics and advantages of equity crowdfunding. The equity crowdfunding platform, supported by Internet technology and efficient dissemination of information, serves as the intermediary between both investors and financiers. It should not only provide information communication channels for both investors and financiers and make use of the Internet platform built by it to broker transactions and facilitate financing. At the same time, it should also fulfill certain project review responsibilities and provide corresponding services. It can be said that the equity crowdfunding platform is in the core bond position of the whole process of crowd financing and has become a new type of subject in the emerging market field in the era of Internet finance and the core of equity crowdfunding supervision. However, due to the absence of relevant legal norms in China, the development of equity crowdfunding platform is faced with two major legal dilemmas: One is the absence of basic system of platform. Although a large number of Internet non-public equity financing platforms have been well developed in practice, they can provide some experience and lessons for the development of the equity crowdfunding platform. However, in the future, when constructing the equity crowdfunding platform in the true sense, it is necessary to clarify the nature and legal status of the equity crowdfunding platform in the legislation and to set the mode and conditions of platform access, so as to provide the basis for legalizing the equity crowdfunding platform. The other one is the absence of platform supervision. It is mainly manifested in the lack of normative guidelines for specific actions of equity crowdfunding platforms, and the lack of corresponding regulatory systems and specific rules for rights and obligations, prohibited behaviors, information disclosure and fund management of the platforms themselves. It can be found that the complete platform basic system is the basis and premise for the supervision of the platform, and the characterization and access of equity crowdfunding platform are directly related to the setting of rights and obligations of the platform and specific regulatory requirements. Therefore, we must first clarify the nature of equity crowdfunding platform so as to confirm its legal status, and specify the access mechanism of the platform. The specific regulation for equity crowdfunding platform will be studied in detail.

A. Confirmation of the Independent Legal Status of Platform

There are several main understandings about the characterization of equity crowdfunding platform all around the world as follows: The first one is the broker or dealer. The US and Canada are typical representatives. In the US, equity crowdfunding platforms need to be registered with the Securities and Exchange Commission (SEC) as brokers, dealers or special funding portals to engage in equity crowdfunding transactions. In Canada, Province of Ontario requires the equity crowdfunding platform to be registered as the restricted dealer and registered dealers engaged in equity crowdfunding activities elsewhere except for Ontario belong to exempt market dealer. The second one is the information intermediary. According to the JOBS Act, equity crowdfunding platform in the US can choose not to register as broker but as funding portals, a new type of organization created specifically for equity crowdfunding under the JOBS Act. According to the regulations, funding portals play the role of conveying information to investors and the SEC. It cannot provide investment advice to investors, participate in the issuance of financing projects, or hold funds or securities of investors. The third one is the qualification accreditation intermediary or reputation intermediary. In order to reduce the risk of financing fraud through equity crowdfunding, the US has endowed crowdfunding platforms with the corresponding accreditation function in the Crowdfunding Act, that is, crowdfunding platforms were required to carry out due diligence on behalf of investors, resulting in the change of crowdfunding platforms that became reputation intermediaries similar to securities underwriters. Investors depend on the trust of crowdfunding platforms to some extent when making investment decisions and the platform therefore has to bear certain fiduciary duties. The fourth one is the investment consulting institution. As a typical representative, the Regulation on Participatory Financing of France stipulates that equity crowdfunding platform should be registered as Participatory Investment Consulting Institution (PICI), which is a new type of investment consulting institution similar to financial investment consulting institution. It has no capital requirements but cannot engage in other activities. The fifth one is the exchange. In equity crowdfunding, the equity crowdfunding platform as an intermediary controls a large number of investment opportunities, and also controls a large number of financing opportunities, which can be provided to both investors and financiers. Hence, there is a view that the equity crowdfunding platform can be regarded as a kind of financial market similar to ‘the exchange’.

Through the analysis above, it can be found that equity crowdfunding platform has multi-functional attributes. It is similar to the broker in the brokerage contract, but at the same time it goes beyond the scope of brokerage. In addition to the brokerage action of providing investors and financiers with information on two-way investment and financing needs, the equity crowdfunding platform also plays other role and function. For example, equity crowdfunding platforms bring together many investors and financiers and facilitate their securities trading, similar to the role of the stock exchange. From the perspective of financiers, the platform essentially plays the role of using its own channels to help financiers sell their shares to investors, which is similar to the function of securities underwriters. From the perspective of investors, the platform receives instructions from investors to help them buy the equity of the investment project and transfer the funds to the account of financiers. At this time, the platform plays a similar role as a securities broker. Although the equity crowdfunding platform has similarities or overlaps with the functions of the above-mentioned subjects, it is still different from stock exchanges, securities underwriters, securities brokers, etc. Considering its core functions, it still relies on Internet information technology to build a low-cost direct communication channel for investors and financiers to facilitate information exchange and demand matching between them, so as to solve the problem that is the waste of capital resources caused by information asymmetry. Under the current legal framework in China, it is difficult to definite it as the existing traditional securities service institution. Based on this, China should characterize the equity crowdfunding platform as the information intermediary that provides information exchange and matching of investment and financing needs. Its main function is to optimize the allocation of surplus capital between investors and financiers by using the rapid development of Internet information technology, thus endowing it the independent legal status as a new type of market subject. However, characterizing it as the information intermediary does not mean that the function of the equity crowdfunding platform is singular. On the basis of information exchange as its core function, it is necessary to endow it with appropriate supervision responsibilities and supervision obligations, such as the obligations of investor eligibility review, financing project review, assistance and scrutiny of information disclosure, etc. In other words, in the supervision system of equity crowdfunding, in addition to being the status of the regulated, the platform should also play certain role as the market regulator.

B. Setting of Market Access Conditions for Platform

The equity crowdfunding platform should be judged as the information intermediary that provides information exchange and matching for needs of investment and financing. As a new type of market subject, equity crowdfunding platform should be endowed with independent legal status and regulated by market access. In the choice of access mode, countries around the world mainly have two practices of registration and licensing. The first one is the registration. Typical representatives are the US, Canada and Italy. As mentioned above, equity crowdfunding platforms in the US need to be registered with the SEC as brokers, dealers or special funding portals to engage in equity crowdfunding transactions. Equity crowdfunding platform of Canada is also required to be registered as restricted dealer or exempt market dealer. The Italian equity crowdfunding platform must be the investment companies, banks or other companies that conform to the relevant requirements registered with the CONSOB to provide financing services for startup enterprises. The second one is the licensing. It is mainly represented by the UK, New Zealand and other countries. The crowdfunding platform of the UK must be authorized by the FCA to sell securities to investors. New Zealand also requires the license to the Financial Markets Authority.

Whether it is a country with the registration system or the licensing system, it aims to confirm and standardize this new market subject and clarify its legal status to better integrate it into regulation. In order to coordinate and adapt to the reform of stock issuance registration system in China and the construction of the exemption system for small-amount issuance, it is suggested that China should explore the establishment of the platform registration system and combine it with the standardized industry supervision. To be specific, the CSRC is responsible for the unified registration of domestic equity crowdfunding platforms. At the same time, external supervision should be strengthened to ensure the stable operation of equity crowdfunding activities within the legal framework. Regarding the setting of specific registration conditions for the platform, the provisions on access for Internet non-public equity financing platforms in the Consultation Draft can be taken as a reference. Article 7 of the Consultation Draft sets standards for the organization form, net assets, professionals and managers as well as the management system of the platform, which can provide some reference to the establishment of access conditions of the equity crowdfunding platform. However, as the intermediary service organization, the equity crowdfunding platform itself does not need too much assets to support the operation, so the regulation of ‘net assets shall be no less than 5 million yuan’ in the draft is too strict. Especially after the removal of the minimal registered capital requirement in the Company Law, the regulation of the higher asset conditions for the equity crowdfunding platform makes it difficult to maintain the fair competition of market subjects. Moreover, restricting the equity crowdfunding platform on the access threshold cannot really protect the interests of investors. Therefore, it is suggested to lower the threshold of access to the platform to 1 million yuan. In addition, many countries have exemption policies on registered capital of the platform. For example, France does not require registered capital for equity crowdfunding platforms with a total amount of less than 1 million euros. In order to encourage the continuous innovation and development of equity crowdfunding, it is suggested that China can stipulate that the equity crowdfunding platforms with total annual financing amount is less than 5 million yuan can be exempted from registration.

VI. CONCLUSION

As a model of inclusive finance, the functional advantages of equity crowdfunding can only be brought into full play under the premise of legal recognition. In order to promote the comprehensive development of equity crowdfunding, the legislation should first clarify the status and property of equity crowdfunding on the threshold of access. With regard to the equity crowdfunding product, under the framework of the reconstruction of the security definition, the security connotation shall be clarified and the foothold of the security concept shall be judged as voucher or investment contract. Moreover, the security extension shall be expanded and can be equally divided and transferred or traded can be used as the general description of its properties. When listing varieties of securities, equity crowdfunding product shall be explicitly included and its security properties shall be directly confirmed. With regard to the equity crowdfunding action, combined with the background of the reform of securities issuance review system, the nature of the public offering of equity crowdfunding action shall be confirmed and the exemption system of small-amount issuance shall be introduced. It is suggested that the exemption of small-sum crowdfunding issuance should be imposed a double restriction on the time and the amount of financing and financiers within a certain amount of financing can be free from the regulatory restrictions of public offering registration shall be stipulated. With regard to the equity crowdfunding platform, referring to the extraterritorial experience and the judicial viewpoint in China, we should get a clear understanding of the multi-functional attributes of the equity crowdfunding platform and the role of the regulatory center and endow it with the independent legal status as a new type of market subject. Moreover, the reasonable market access conditions shall be set up and platforms whose total financing amount below a certain amount each year can be admitted to be exempted from registration.

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