劉奇

Abstract： Crowdfunding is a newly-developed way of raising capital . individuals will pool small funds to become stakeholders. Both China and America have set regulations to guide. Therefore， this article will analyse the differences of regulations and why these differences exist. The findings is aimed to provide reasonable suggestions for stakeholders and optimize the market .

Key words：Equity-based crowdfunding differences Regulations

1、Theory Research

The concept of crowdfunding was first proposed by the Michael Sullivan （2006）， the meaning of Crowdfunding is to raise funds from the public to support a project or an idea （Mitra， 2012） . Equity-based crowdfunding is one of kinds of Crowdfundings ，which gets the most attention and bears the highest degree of risk （Yao，2015）

with the development of crowdfunding in China， equity crowdfunding broadens financing channels for small and micro enterprises and supporting innovation activities （Sun ， 2014）. However， The risk of equity crowdfunding is very high. Some scholars believe loose restrictions will disturb equity crowdfunding （Li ， 2015）. compared to China， equity crowdfunding are more mature in USA. China need to refer to foreign cases of the supervision of the public market.

2.Development of equity crowdfunding In China

On November 19， 2014 Li Keqiang endorsed equity crowdfunding as part of financial innovations. CSRC approved the first eight equity crowdinvesting platforms. Unlike the US， there is no specific policy regarding the use of the internet as a means of selling equity in a private business to the public. in China mainland， its arguable that the lack of a clear policy （and consequent fear of government reprisals from what might be deemed illegal activity） has stalled its development.

3.Differences in the regulations

3.1Requirements for investors

Investors should be certified in China. Though in America， investors arent certified， but there are more limitations. If the investors annual income/net asset is under 100 thousand dollars， they are allowed to make investments up to 2000 dollars （www.sec.gov）.

3.2Requirements for entrepreneurs

the process of application is different. Chinas enterprises are not allowed to issue to the public or to the non-specific. In America， enterprises should be recorded in the SEC and disclose the price ， pricing model ， the amount of money it aims to reach ， the expiration date so on.

3.3Requirements for equity crowdfunding platforms

The main difference in the requirement for equity crowdfunding is that platforms in China have no exemption but those in America have exemptions ， which means they don not have to register as securities trader but they are still thrown the guidance under the SEC. in addition， Chinas platforms are prohibited from providing other service like asset management， providing financial securities and investment consulting.

4.Reasons for the differences

4.1Conflict with current laws and regulations

In China， crowdfunding is not supported to be conducted with equity， bonds， dividends， interest forms as a return item. Under the current situation， there is a limited space for the equity crowdfunding to develop （Qiu & Chen ，2014）.From the legal point ， the equity crowdfunding is a way to raise funds from the public， which must be incorporated into the traditional securities regulatory system. Equity crowdfunding has financial attributes， involving securities， equity， public issuance and other legal sensitive areas （Yang & Su . 2014）， so it has to face more legal risks and need to be regulated with more caution. In China's current legal environment， the equity crowdfunding is undoubtedly subject to many restrictions due to its characteristics of being public and open.

4.2Construction of credit system：

The structure of US credit bureaus and the way to score personal credit quantitatively make its credit system far ahead of our country. In America， every citizen has a social security account used to record their credit score. In China， personal credit information database is only managed by the central bank and the platform has no access to these information. lacking of credit information， platforms cant judge whether the project is reliable.

4.3Investors education level

Group leaders can use bids as an important mechanism to promote listings in their groups. China's equity crowdfunding platforms lack the awareness of reserving talented lenders. some platforms even elect one who invests the largest amount of money as the leader （Liu， 2016）， so the investors do not necessarily have the expertise and strategic vision. So， it is easy for investors to make wrong choices and finally experience financial losses. Regulators dont have the responsibility to improve investors education level and the difference between the US and China is another reason which may account for the different regulations.

4.4The role of platforms

The role of platforms can be explained by agency theory （Jensen & Meckling， 1976）. if mangers are the owners of financial resources， they will work hard . But in reality， Chinas platforms will not share too much. In China， platforms mainly aim at providing service for small and medium-sized enterprises （SMEs） and they have no limit on the public financing projects as to how much money to be raised （Fan， 2015）. Besides， the positioning of platforms in China are different from that in America. Platforms in China just act as service intermediaries so there arent very strict access conditions， but the United States has assigned certain regulatory responsibilities to the platforms which to a certain extent， function as part of the SFC.

4.5Suggestions and Conclusions

From the aspect of the past experience of the United States， it has taken comparative more flexible measures to manage. The government aims to protect investors and set conditional relaxing control to alleviate small micro enterprises of the financing difficulties. Based on actual situations ourselves， the following measures can be taken to improve the framework of regulations in China：

（1）the crowdfunding， especially the equity crowdfunding are classified as securities， because such a division of the crowdfunding can be incorporated into the existing regulatory areas of supervision without any barrier .

（2）Strengthen the responsibilities of platforms： China can learn from the JOBS Act and characterized it as a new fund-raising portal into the audit. Empowerment is critical for an effective response. In addition to giving the platforms more supervision and auditing obligations， its necessary to give them the power to audit the project of equity crowdfunding under the law and formulate strict rules to reduce the risks according to its own characteristics.

（3）information disclose： Asymmetry information （Spence.M， 1973） is the biggest problem that exists between sponsors and investors. So the disclose of the information of those who seek to raised money in the public should be mandatory. This doesnt mean too strict obligations， which may do harm to the fund raising. To be concluded， a proper stadard is needed to keep a balance between the information disclosure and regular operation of fund raising.

（4）Set a limit on investment： Through the actual research， comprehensive financing of the financing needs of citizens and income levels determine the investment and financing limits. the government should stress and clearly require the strengthening of investor protection， and to set the appropriate investment limit

（5）Construction of a system with small-sum exemption： From the JOBS Act， at this stage， equity crowdfunding should be treated differently from the traditional public offering and private placement. it is better for China to seek ‘exemption and set up a specifically applicable system of public offering with small-sum exemption （Luo & Fu， 2015）. It helps facilitate the formation of small micro-enterprises， raising their start-up capital.

References：

[1]Li zhanwei. （2015）. Comparison of Operating Modes of Equity Crowdfunding Platforms and Discussion on Risk Control Mechanism， 5， 36-39.

[2]Liu ziyi. （2016）. Business model comparative analysis of equity crowdfunding platforms in China and America. China Economist， 1， 118-119.

[3]Luo mingxiong & Fu yinghua（2015）. A Review on the Supervision System of the Stock Ownership at Home and Abroad and Policy Proposals. Internet Finance， 11， 94-96.

[4]Mitra， D. （2012）. The Role of Crowdfunding in Entrepreneurial Finance. Delhi Business Review， 2， 67-72.

[5]Sun yongxiang. （2014）. Thoughts and suggestions on the development of equity crowdfunding in China----through comparisons between China and America. Zhejiang Social Scienc， 8， 146-151.