Equity Crowdfunding in Hong Kong: Potential, Challenges and Investor Protection

Posted: 7 Aug 2018

See all articles by Emily Lee

Emily Lee

The University of Hong Kong - Faculty of Law

Date Written: February 3, 2017

Abstract

Equity crowdfunding is a relatively new investment format that allows investors to purchase unlisted securities from a company that does not meet listing requirements for an initial public offering. Equity crowdfunding offers investment rewards but also has risks of fraud, herding, insolvency and dilution of shareholder equity. Regulation is a natural response to negative externalities like systemic risk caused by asymmetric information, adverse selection and lemon problems. While the US and the UK have extensive crowdfunding regulations, Hong Kong does not, although crowdfunding is not specifically banned under the Securities and Futures Ordinance. This article focuses on the current state of equity crowdfunding in Hong Kong but draws inspiration from legal requirements for equity crowdfunding in the US, the UK and Singapore, as well as the Korea Startup Market in South Korea. The author makes regulatory suggestions for consideration by Hong Kong’s law-makers and policy-makers.

Keywords: equity crowdfunding, crowdfunding risks, investor protection, FinTech, financial law reform

JEL Classification: K22, G02, G24, G32

Suggested Citation

Lee, Emily, Equity Crowdfunding in Hong Kong: Potential, Challenges and Investor Protection (February 3, 2017). Available at SSRN: https://ssrn.com/abstract=3216417

Emily Lee (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01257

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