On December 21, 2015, the International Organization for Securities Commissions published a statement on addressing the regulation of crowdfunding and a report on its survey conducted on how crowdfunding is regulated in twenty-three IOSCO jurisdictions. The objectives of the statement and the report are to highlight emerging trends and issues in crowdfunding and to enhance IOSCO’s understanding of how jurisdictions have adopted regulations on crowdfunding. Crowdfunding provides an alternative capital raising avenue, particularly for small enterprises and start-ups, which is beneficial in supporting economic growth but which may pose risks for investor protection. IOSCO’s survey found that most jurisdictions had implemented regulations to address issues on conflicts of interest, data protection and fraud. IOSCO believes that more attention is required on the risk of default or failure of start-ups, potential failure of crowdfunding platforms, illiquidity, money laundering, fraud and terrorist financing as well as the suitability of any particular platform for an investor. IOSCO urges policy makers and regulators to consider the steps taken in some jurisdictions to address the risks of crowdfunding, including the imposition of registration requirements for funding portals, setting disclosure requirements for issuers and funding portals and requiring the appointment of a third party custodian to hold investor assets. In addition, the cross-border risks involved in crowdfunding should either be addressed by restricting cross-border fundraising or implementing a coordinated approach between relevant jurisdictions.
IOSCO’s statement is available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD521.pdf and the survey report is available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD520.pdf.