Crowdfunding Regulatory Arbitrage

Author: Simon Deane-Johns
October is ‘crowdfunding month’ out there in the regulatory world. The European Commission is consulting. The SEC is consulting. Some US states are consulting. And today, the FCA is consulting.
The European Commission is still in fact-finding mode, so should have the luxury of plucking all the good bits out of the US and UK approaches.
Ironically, the SEC’s approach looks too much like small beer to enable fund-raisers to take on the entire US market, but enabling them to raise $1m every 12 months could be really helpful on an intra-state basis (and, indeed, possibly for many EU-based start-ups). On the other hand, it would probably be tough to market anywhere the investor limit of $2,000 or 5 percent of annual income or net worth, for those with annual income/net worth of less than $100,000.
On some ground the FCA’s approach might look somewhat better, but in my view, the FCA has not struck the right balance in its proposals to regulated peer-to-peer lending and crowd-investment.