Equity crowd funding in New Zealand: Reviewing the investment cap

Abstract

Many small and medium enterprises (SMEs) struggle to raise capital in New Zealand’s private capital markets. These SMEs are also generally too small to viably list on the public markets. The Financial Markets Conduct Act 2013 (FMCA) and the regulations made under that Act partially addressed this problem by allowing businesses to equity crowd fund up to $2,000,000 per annum from retail investors through licensed intermediaries, without having to comply with the FMCA’s Part 3 disclosure requirements. This paper argues that after examining the apparent success of crowd funding in New Zealand and weighing up the risks to investors of the more limited disclosure requirements that apply to crowd funded offers, that there is a strong case for raising the cap to $5,000,000 per annum.