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The fight for the equity-based crowdfunding model

At you can find the UK crowdfunding platform that proponents of an equity-based crowdfunding model see as a role model. Kevin Lawton in particular can be counted among these proponents and their spiritual fathers. Crowdcube as a role model can therefore also be found regularly in discussions about submissions to the American SEC (Securities Exchange Commission) when attempts are made to induce them to relax their approval and publication regulations for public offers of bearer securities. The public offering of shares of a company on a crowding platform would usually trigger an immediate approval and prospectus preparation obligation for the company in accordance with the SEC regulations. Most startups cannot afford such a process financially or in terms of time. For this reason, only "projects" are offered on the approximately 200 existing US crowdfunding platforms on a support / reward basis or also on a revenue sharing basis: So for the money received there are various forms of consideration, but never ownership shares in the Companies that run these projects. Kevin Lawton and his colleagues see the future of the crowdfunding movement primarily in the possibility of acquiring shares: the private investor should have the opportunity for the risk that he takes on with his investment in the sometimes high-risk projects such as professional business angels or VCs to make an above-average profit by investing in stocks. It should be possible to turn the shares of startups into a public asset. Small investors should also be able to buy shares in startups. Accordingly, there are a wide variety of initiatives such as the International Crowdfunding Regulatory Petition promoted by Kevin Lawton, in which it is proposed that public offers of up to USD 100,000 and individual investments of up to USD 100 do not exist Approval, prospectus and publication obligations arise. To date, the SEC has defied these demands. Kevin continues to tirelessly collect support for it through the blogosphere and social media. For example on LinkedIn, where he founded his own group with the International Organization CrowdFunding Commissions.


Whoopi Goldberg likes crowdfunding

However, there are the fiercest for and against debates on this subject, which in the United States, where the economy is much more deeply woven into everyday life, have already reached the realm of celebrities. In the March 28, 2011 Businessweek article, Whoopi Goldberg is cited by journalist Susan Antilla as a proponent of a change in SEC regulations. Ms. Antilla, however, rather shares the view of the SEC employees she also interviewed about the immaturity of small investors. The reason for this debate about the Oscar winner and talk show lady was a bill introduced by the House Committee on Financial Services, which should make it possible for public offers of securities up to an issue amount of USD 50 million in the USA to be easier and with a mere entry of unaudited balance sheets should be handled.


CrowdFunding is also difficult terrain in Europe

Most European countries also have a difficult legal situation for equity-based crowd funding. Before every public offer of securities, for all publicly offered company shares and before every listing on a regulated market within the EU, a prospectus must be published in accordance with the (EU) Prospectus Directive. It should be noted here that, in the opinion of BaFin (Federal Financial Services Agency), advertising measures for a security or other financial instrument are viewed as a public offer and can thus trigger the prospectus requirement. There are now minor differences in the exemptions to the above directive, depending on the country within the EU: e.g. an offer to buy bearer securities to the public is not subject to approval according to the BaFin regulations if there are no more than 20 private investors, and there is no obligation to publish a prospectus for " Small “offers (minimum investment of € 200,000 or total investment of max. 100,000 euros in 12 months or only to family and friends) ((Section 8f (3) VerkProsG). In Austria, the corresponding provisions can be found in Section 3 Capital Market Act - KMG : Exceptions to the prospectus requirement: Paragraph (1) Z9: an offer of securities or investments aimed at investors who purchase securities or investments from a minimum amount of € 50,000 per investor (keyword: minimum investment) with each separate offer, as well as an offer of securities or investments with a minimum denomination of € 50,000 or § 3 (1) Z 10 KMG: an offer of securities or investments with a total value of less than 100,000 euros, with this upper limit being calculated over a period of twelve months.

The UK platform “crowdcube” has to work within these exceptions, it should be noted that I have not found anything on this sensitive topic on the Crowdcube site or in the press releases (?).

The reference to the Swiss situation is also interesting: the fact that Switzerland is not subject to EU regulations also explains the increased occurrence of equity-based crowdfunding platforms in this country (c-crowd,, etc.). In Switzerland, if the company does not wish to be listed on the stock exchange, only a simplified sales prospectus is to be drawn up and stored on the platform.

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