Less is More? Different Regulatory Responses to Crowdfunding and Why the Hong Kong Model Stacks Up Well

Abstract

This article debunks the myth that securities regulation in Hong Kong is less accommodating to crowdfunding (CF) activities when compared to regulation in other international financial centres. While the Securities and Futures Commission has been less proactive in responding to calls for lighter regulation on CF, this article shows that Hong Kong’s existing securities regulation does not lag behind in providing gateways for CF activities. Among the gateways available, while the small-size offering exemption threshold is lower than those provided in other jurisdictions such as the United Kingdom or Singapore, when it comes to raising capital from accredited investors — the type of investors most coveted by entrepreneurs and start-ups — the Hong Kong regime is more friendly. In fact, it is arguably broadly on the same page as the accredited investor exemption regime in the United States. This article examines how the key exemptions to securities regulation in Hong Kong can be fully utilised in the context of CF, especially after the recent Court of Final Appeal decision in Securities and Futures Commission v Pacific Sun Advisors Ltd. As it appears that the market has not fully grasped the purport of Pacific Sun, this article attempts to untangle the regulatory thicket. Hopefully, small and emerging companies will see the potentials of Hong Kong as a platform for capital raising via the Internet.