The regulation of equity crowdfunding in the US: remaining concerns and lessons from the UK

Abstract

ABSTRACT Equity crowdfunding (ECF) provides small to medium-sized enterprises (SMEs) with affordable access to funds, but it may expose investors to various risks. To promote capital formation for SMEs while maintaining adequate investor protection, the US has adopted a special ECF regime under the JOBS Act of 2012 and more recently made some amendments to it. However, two key problems of this regime remain to be addressed. One lies in the mandated issuer disclosures under the crowdfunding exemption. The other relates to the unduly burdensome funding portal regime. This article turns to the regulation of ECF in the UK to explore whether it has anything for the US to learn from. The comparative analysis demonstrates that, despite some high-level similarities, the two regimes have notable differences that determine the different impacts on ECF market actors. Drawing insights from the UK experience, the article makes recommendations for improving the US regime.