Thursday, May 22, 2014


(This one is for remembering. The passing of my friends from the Deuce. Your peace is my strength.)

The US Memorial Day is almost here. Americans are getting ready for their barbeques and weekend shopping excursions—red, white and blue litter the streets, patriotism litter people’s facebook pages.

Fireworks are bought, plans are set; news reporters are busy checking gas prices and weather conditions. They do sprinkle a few feel good stories about crippled vets. Ballparks salute the few uniforms chosen to represent the armed forces. Everyone is ready to play.

It’s a heck of a weekend.

Memorial Day is not unique to the United States. Other countries have dedicated their respective one-day to token their dead soldiers. But I venture to guess most are like the madness we witness here—remembering is just an act, an excuse to be delighted for some time off work and celebrate the liver’s capacity to tolerate the delicious brews in large quantities.

I dread this day. It’s a day I count my friends living and dead. Not just the ones that passed in Iraq, but those who ventured to fight for something meaningful and paid for a better world with their lives.

Bhagat Singh, Vladimir Bogoyavlensky, Jean Francois De La Barre, Sun Yat-sen . . . need I go on?

I dread this day, this week, and these months. This is supposed to be a time when we hold on to the things we love, the things that make us who we are, and the things we never want to lose. But how soon do my Chinese friends forget the Cultural Revolution? How quickly do they ignore the man standing in front of the tanks on Tiananmen?

How soon do my American friends forget the decisions we made in Vietnam, Iraq, or Afghanistan?

But hey, don’t let me stop you from having fun. Go and enjoy it. Because people sacrificed much for you and you should have the time of your life. Don’t waste it. Don’t forget it.

It was Max Payne who said “The flames can not burn away the past. They only make the shadows leap higher.” Above all, we remember then. No weapons in the world are so powerful as the courage of free men and women. But freedom is not the inebriated desire to enjoy what we have; it’s about the sober state of knowing that we have the ability to think and remember for things as they are and grow as we see fit.

Freedom lies in being bold – Robert Frost.

Wednesday, May 21, 2014

Equity Crowdfunding in the International Space - Pt. 4 Italy

Italy is the first country in Europe to operate equity based crowdfunding laws and one of the few countries in the world that has passed specific regulations for EBCI platforms.

In 2012, the Italian Parliament passed a decree (2012 Decreto Crescita) which included the recognition and legalization of equity-based crowdfudning. The Commissione Nazionale per le Societa e la Borsa (CONSOB) issued regulatory provisions for the implementation of the decree.[1]

Under the Italian law and regulations, only high-tech businesses will be authorized to offer equity through crowdfunding platforms. In addition, companies in existence for more than 48 months will not be eligible and companies with total output of €5 million will not be eligible.[2]

The Italian crowdfunding market is not as active as in places like the United Kingdom or the United States. As of 2012, there were only 16 active crowdfunding platforms in Italy and most of them are concentrated in northern Italy. But activity in Italy is picking up. The number of platforms has tripled in 2013 totaling 41. Of the 41 platforms, 27 are active and 14 are in their launch phase. Among those launching, majority are equity based platforms triggered by the recent CONSOB regulations.

Twintangibles, an Anglo/Italian research and advisory firm, surveyed 30 platforms and recorded more than 52,000 projects submitted to various platforms in Italy. Most of these projects were submitted to lending-based platforms. Twintangibles warns that availability of platforms in Italy may be outstripping the availability of suitable projects and states that success rate is higher for projects in lending-based models than those projects in donation-based and reward-based models.

The Italian equity based crowdfunding platform worth mentioning is Siamosoci. It offers investors access to unlisted companies and provides rating service based on objective criteria to assess the information provided by companies. Siamosoci also monitors investments and facilitate communication between investors and companies soliciting funds. Some of the funded projects include: a trip advisor web application, patented plate metal for racing sailboats, sales analytics service based customer behavior recorded by cameras, route planning web application for small fleets of vehicles.


[1] CONSOB, Regolamento (delibera n. 18592 del 26 giugno 2013) in material di “Raccolta di capitali di rischio da parte di imprese start-up innovative tramite portal on-line” (equity crowdfunding).

[2] Daniela Castrataro & Ivana Pais, Analysis of Italian Crowdfunding Platforms, (Nov. 2012) available at

Sunday, May 11, 2014

Equity Crowdfunding in the International Space - Pt. 3 United Kingdom

United Kingdom has one of the more active online crowdfunding markets. From as early as 1997, British artists have been using the Internet to fund their projects through donations.[1] Today, the Unite Kingdom boasts US based platforms Kickstarter.

UK’s own equity based platforms are finding niches to stay competitive. Take Space Hive for example, it has limited its outreach to development of community space and has seen successful funding for a single project for nearly £800,000. Abundance Generation is another equity based platform that focuses on sustainable energy projects in the UK. Proclaiming a “democratic finance” model, Abundance Generation has funded projects for up to £1.4 million.[2] UK’s arts and entertainment community and the interactive gaming industry have also recently joined in a series of proposals to facilitate crowdfudning to further their commercial and cultural reach.[3]

Other notable UK based equity based crowdfunding platforms include: Crowdcube, Seedrs, and Bank to the Future.

Crowdcube is approved by the Financial Services Authority (“FSA”) and operates like an open forum. Investors are able to view projects, idea pitches, and engage.

Seedr is also FSA approved and is operating fully registered and authorized. It is limited to investors who can pass a vetting process. Microcosom is one of its more notable projects. It is an interest based social networking platform which received £50,000, with 10% equity offered (funded as of 01/09/2013) in the first round of crowdfunding and received £100,000, with 5% equity offered (funded as of 10/03/2013) in the second round of crowdfunding offering. Seedr’s funded projects also include Escape the City, a social networking site helping professionals transition to a new career away from the urban areas. Offering 24% equity, it raised £600,000 in less than 2 weeks after turning down two venture capital funding offers.

Bank to the Future is an equity based platform started by Sir Richard Branson—Delorean not included.

Securities offerings in the UK are governed by the FSA under the guidance of the Financial Services Act of 2000 (“FSMA”). The FSMA generally prohibits anyone from carry on a regulated activity in the United Kingdom unless that person is an authorized person or is an exempt person. Under the FSMA, any invitation to invest is a regulated activity and is considered financial promotion under the statute.

The UK regulations are similar to the US regulations under the SEC and they aim to prevent unauthorized or nonexempt individuals from making an offering to the public. The FSMA does not specifically contemplate equity based crowdfunding, but its provisions have been loosely adapted to crowdfunding. Similar to the U.S. SEC rule’s exemption for accredited and sophisticated investors, certain offers to individuals are exempted if the offeror file a certificate of compliance with the FSA. The exempted offers involve individuals with certain income level or status with the financial industry (i.e., persons with income of €100,000 or assets of €250,000 excluding their pensions and any insurance policies or persons with a connection to the financial industry or is an individual employed by the financial institution). There are also limits to the number of people who can invest under exempt categories and the total amount of equity that can be offered under the exemptions. The UK regulations also include carve-outs for offerings made to friends and family or other “connected persons.”

Other than under a specific exemption, equity based crowdfunding platforms in the UK must be a FSA approved entity (e.g., Crowdcube, Seedrs). Some offerors gets around the regulations by “click-wrapping” their offers with a user certification at the front end: the user is asked to certify that they meet the exemptions before they proceed to use the platform and make investments.[4] Whether this will draw regulatory scrutiny remains to be seen. UK regulations also allow a “collective investment scheme” akin to the U.S. investment contract under the SEC rules. Similar to how investment contracts are regulated in the U.S., collective investment schemes receives much more regulatory attention than its generic counterparts under Section 21 of the FSMA.[5]

A few scholars have pointed out an ambiguity in the UK regulatory scheme regarding crowdfunding. Under a set of FSA rules governing what constitute “arranging” or “making arrangements” to introduce investors to investees, equity based platforms may escape regulations by claiming to be a passive conduit between investors and equity offerings.[6] There is very little case law and FSA has recently stated that it will need to revisit its guidance regarding this issue.

Aside from the regulatory schemes surrounding securities, U.K. also has very specific tax relief scheme offered to individual investors who purchase new shares in early stage companies. The Seed Enterprise Investment Scheme (“SEIS”) was introduced in April of 2012 and was meant to help small, early-stage, companies to raise equity finance. It complements the UK’s existing Enterprise Investment Scheme (“EIS”) which offers tax reliefs for investments made to higher-risk small companies. Equity based crowdfunding platforms in UK often cite to this particular tax provision as incentive for crowd investors.

The future of equity based platforms in the UK depends on the FSA’s guidance and clarifications on provisions of the FSMA. In August of 2012, the FSA noticed the public regarding equity based platforms and suggested that these platforms target only sophisticated investors who can value start-up businesses and understand the risks involved.[7] In addition, the FSA is also aware of firms operating equity based platforms without authorization but does not indicate how the issue will be handled upon revisiting the issue of equity based in the UK.

[1] Rock band Marillion raised over £35,000 in 1997 to go on tour in the United States supported by a dedicated U.S. fan base. Jake Wallis Simmons, Crowdfunding: How the Kindness of Strangers is Changing Business, Telegraph (Oct. 24, 2012), available at

[2] Abundance Generation,!/complete (last visited Feb. 16, 2014). According to its website, Abundance successfully funded five projects: (1) Oakapple One, solar, raised £480K; (2) Wunderenergy, solar, raised £216K; (3) BNRG, solar, £385K; (4) Padero Solar, £500K; (5) The Resilience Center, Wind, £1.4M. It also claims to be a secondary market for buyers and sellers to connect and trade debentures in funded projects.

[3] Association for UK Interactive Entertainment, UKIE Crowd Funding Report: A Proposal to Facilitate Crowd Funding in the UK (Feb. 2012), available at

[4] For example: Trapoline Systems requires a self-certification process for its crowdfunding platform. It asks users to certify that they meet the criteria for “high net worth individuals” or “sophisticated investors”. See Trampoline Crowdfunding Full Details, Trampoline Sys., (last visited Feb. 17, 2014).

[5] The regulations governing collective investment schemes restrict promotion of the schemes by authorized persons. This effectively prohibits distribution of any prospectus detailing a collective investment scheme originating from outside the United Kingdom. See Justin Aronson, Lessons for the United Kingdom: How Registration and Prospectus Requirements Have Inhibited Condo-Hotel Investment Offerings, 35 Syracuse J. Int'l L. & Com. 95, 114-15 (2007).

[6] See Ross Weinstein, Crowdfunding in the U.S. and Abroad: What to Expect When You’re Expecting, 46 Cornell Int’l L.J. 427, 439-40 (2013). See also Jake Green, The Regulated Activities Order: Arranging Deals in Investments, Nabarro LLP, 2 (June 17, 2009), available at

[7] James Hurley, FSA: ‘Crowdfunding’ for Sophisticated Investors Only, Telegraph (Aug. 17, 2012, 9:57 AM), See also Crowdfunding: Is Your Investment Protected? FSA,

Thursday, May 8, 2014

Equity Crowdfunding in the International Space - Pt. 2 Australia, ASSOB

Australian's equity based crowdfunded investment market is older than most.  Australia also boasts an unique small offering board that has very high start-up success rate--the ASSOB--doubling the success rate of non-ASSOB offerings. 

Australian Securities & Investments Commission (“ASIC”) regulates equity based crowdfunding in Australia under the Australian Corporations Act (“Corporations Act”). Under the Corporations Act, public companies can raise funds from the public by filing a prospectus. Section 708 of the Corporations Act exempts small scale offerings from the disclosure requirements.

There are three types of exempted investors under this Section 708:
(1) known investors (family and friends);
(2) sophisticated investors (certified by accountant);
(3) professional investors.
Oh yeah, rich people gets their own ink: Section 708(11) exempts offers made to professional investors who has assets or control of at least $10 million.  Silly people, money is for rich people.

In addition, Class Order 02/273 provides an exemption for persons involved in offers of securities through a business introduction service. The persons exempted under this Class Order are:
(1) operators of the service (“Operator”);
(2) the issuer through a publication or at a meeting publishes or conducts the offer in accordance with the conditions of exemption for Operators (“Issuer”);
(3) professionals who endorse information for the introduction services (“Seller”); and
(4) people who sponsor or publish introduction services (“Endorser”).
Operators must not have any pecuniary interest in the outcome of the investment schemes and must make certain disclaimers (e.g., the investment is high risk) to be afforded the exemption.

The exemption for Issuers contains a $5 million cap for a single investment scheme. Issuers must also ensure the offer publication does not contain any false or misleading statements.

Sellers must ensure the accuracy of statements related to an offering under the exemption and there is a 20 investor cap for the offer issued in the preceding 12 months.

The Endorsers may only publish offers and related statements authorized by an Operator, Issuer, or a Seller.

The Australian Small Scale Offerings Board (“ASSOB”) operates its platform in compliance with Section 708’s exemptions and under the prescriptive requirements of ASIC Class Order 02/273. The ASSOB is often cited in the media outside Australia as an early example of equity based crowdfunding platform.

The ASSOB is organized like a stock market and hosts unlisted Australian companies. It claims to be the only facility in Australia for “secondary” sales of unlisted issued securities on its platform. ASSOB does not market investment opportunities and it does not provide financial advice to investors using its platform. This is because Section 708 does not entitle a company to freely advertise its offers. The only offers that may be openly advertised are those with Disclosure Documents lodged with the ASIC and meet the conditions of the relevant provisions of the Corporations Act. ASSOB therefore only provides investment opportunities to those listed under its subscription service.

ASOB limits each equity offering to twenty (20) non-sophisticated investors per year and promote capital raising campaigns of up to $5 million for unlisted companies. It prohibits participation by foreign companies that are not subject to the Australian Corporation Act 2001. It has a stringent vetting and quality assurance process. Companies listed under ASSOB must submit a quarterly report to include statement confirming solvency, summary of how investor funds have been spent and explanation of any deviations from the use of funds schedule disclosed with the offer documents. The quarterly reports must also include general summary of company’s progress towards stated milestones and any changes that affects the company in any way.

The ASSOB claims to have raised over $137 million to date. According to the World Bank Report, ASSOB shows that 86% of companies crowdfunded on its platform were still operating in 2012, compare to the 40% of noncrowdfunded (non-ASSOB) companies that fail after 3 years.

 The Australian Government, Corporations and Markets Advisory Committee, distinguishes the equity based crowdfunding model under the ASSOB from those anticipated elsewhere in the world. Because Australia has fared well through the recent global financial crisis, equity based crowdfunding schemes anticipated elsewhere (i.e., those allowed to openly market their offers on the Internet) will not likely be as influential in Australia. This assumes equity based corwdfunding schemes are a direct response to decreased investor activity due to global financial crisis.

Some would like it to be an opportunity for the poor to gain access to opportunity and equity.

Silly rich people, 
money is for people.


The Australian government recently did acknowledge the possibility of a flattened world and international forces may impact its equity crowdfunding market place. We shall see. . . 

Syllogisms aside (Updated 5/8/2014)

(This was originally written in 2011? I updated it because, well, it sucked. It's a bit better now, but there is always room for improvement.)

I like the concept of crowd-sourcing; the idea of a group of people getting together because their convictions are so strong that they are willing to invest time and effort to make it happen. It’s something they can’t teach you in school; not because they don’t want to, but because finding convictions is a private affair—no one can initiate and undertake such a task but one’s self.

The intrinsic interest is something, if taught, would defeat its purpose.

Wednesday, May 7, 2014

Equity Crowdfunding in the International Space - Pt. 1 France, CIGALES

(Given the US equity crowdfunding rules under the JOBS Act will soon be released by the Security and Exchange Commission, I thought I put togehter a mini-series on equity crowdfunding in different countries. The countries included in this mini-series will be France, Australia, Italy, England, and some other places.

I had written a larger paper for a law review for publication and this mini-series is a selection from that law review article. There is not much creativity here but I hope this will help people understand the equity crowdfunding landscape better and sort out some cross boundaries issues for themselves in a practical sense. The work here does not constitute legal advice of any kind. It's simply my accumulated knowledge provided for your learning.)


France is the third most active nation in terms of crowdfunding platforms, but in terms of uniqueness, the French takes the prize for its community-style investing and lending.

For more than 20 years, the “club d’investisseurs pour une gestion alternative et locale de l’epargne solidaire” (CIGALES) movement has had a strong presence in France. The CIGALES movement was founded by Patrick Sauvage in 1980. Sauvage’s vision was “a world where everyone finds the freedom to drive his destiny and takes part in the economy of his environment.”[1]

CIGALES operates as federation of investment clubs in which investors pool their resources to support small community businesses or other microenterprises. Each CIGALES club is not an investment club, but a club of investors. The distinction is its focus on the members and their goals prevailing over finances as opposed to money being the eventual goal of the project. These clubs are democratically governed (one person one vote, regardless of the amount of investments) and most of the projects are ethically operated local small businesses or businesses with particular social or cultural goals.

The Federation of CIGALES (the “Federation”) is entrusted with the growth and development of the movement and approves new CIGALES clubs. The process of chartering a CIGALES club includes registering the club’s by-laws with the tax authorities. There are approximately 180 clubs in operation at the end of 2011.

CIGALES clubs operates on the investment savings scheme. Instead of calling for funding for a particular project or venture, each club solicits contributions from its members on a periodic base. On average, each member contributes €25 per month. The average size of the clubs is 13 members.

Generally, members do not expect a return on their investments. Equity is permissible, however, under the French Monory law. The Monory law was enacted in 1978 to allow indivisibles entities (“Indivisions”)—based on the unanimity in democratic decision making (one person one vote)—to invest mutual funds in stock markets. Banks uses this system to start investment clubs for their large clients similar to angel funds. The CIGALES clubs use this system to directly invest in small firms and projects.

There are tax incentives to make these investments through CIGALES. Through the Madelin law, investors can deduct 25% of their investments; through the TEPA (travail, emploi, pouvoir d'achat—work, employment, purchasing power) law, investors can deduct 50% of their investment on the wealth tax.

In addition to the CIGALES clubs, WiSeed is a notable equity based corwdfunding platform for investors. WiSeed is not a CIGALES club and its legal status is unclear. Some notable projects funded by WiSeed in clued ANTABIO—a biopharmaceutical antibacterial drug discovery company in France.

[1] Arvind Ashta et al., Social Innovation Lessons from Microangels? An Institutional Entrepreneurship Case Study of the CIGALES Movement in France, 14 (Burgundy School of Business, Working Paper No. 25, 2012), available at

Tuesday, May 6, 2014

I No English.

(This story is not about sustainability, but it's a story I wanted to tell for some times now. Enjoy)

There is a hill to climb in Cincinnati. In the winter of 1992, I had to walk up that hill to get to the place where other kids waited for the school bus.