Brazil’s securities exchange commission has released an instruction note which will regulate equity crowdfunding. Other emerging markets should do so too.
With the new instruction, issued last week (July 13) Brazil joins other countries such as Thailand and Malaysia which have already regulated equity crowdfunding (see this earlier post), as well as the US, UK, New Zealand, Australia and several Europeans nations.
The rules released by the Comissão de Valores Mobiliários (CVM) will allow companies with an annual turnover of up to 10 million reals ($3.2m) to raise up to 5 million reals ($1.8m) through online platforms that have been approved by the commission.
The new rules follow a request for public comment on equity crowdfunding rules that the securities exchange commission put out last year.
Leonardo Pereira (pictured above), the president of the securities exchange commission, said the commission believes the security offered by the norms will help create successful new firms by permitting them to raise capital in an agile and simplified way.
To get approval from the securities commission, platforms will have to make available for investment a minimum capital of 100,000 reals.
The rules allow platforms the possibility of making restricted offerings to certain registered investors and in so doing ensure that certain strategic information is not made public. Firms can also make partial offerings if the minimum target value of funding has been reached.
Equity crowdfunding platforms will also be able to charge investors performance fees if investments prove successful.
Investors are limited to investing no more than 10,000 reals via equity crowdfunding platforms per calendar year – except if they are defined as a leader of a group of investors or have more than 100,000 reals in annual income per year.
MIT entrepreneurship teacher and founder of business ideas portal Empreenda Junto, João Vitor Chaves Silva (in a blog post) says the rules – the result of crowdfunding platforms, entrepreneurs, investors, lawyers and the public working together – offer security for those that invest without complicating the process for platforms.
Meanwhile South Africa’s Financial Services Board (FSB) missed a June 30 deadline on considering whether to regulate equity crowdfunding or not.
However Felicity Mabaso, the FSB’s head of department for FAIS Supervision, told local tech publication Ventureburn that the “crowdfunding project” is still a work in progress and that the body is engaging with various parties.
Yet some are pushing ahead none the less. Last week Patrick Schofield, the founder of donations-based crowdfunding site ThundaFund, told Ventureburn that he would unveil South Africa’s first equity crowdfunding platform later this month.
The time is now for South Africa to join Brazil and others and issue regulations on equity crowdfunding. Doing so may help more fast-growing small firms to find finance and grow and create jobs.
Timm is a South African who writes on small business. Click here to sign up for the monthly Small Business Insight newsletter.
Stephen Timm is a