Name
Global FinTech Guide
Country _ Name
Hong Kong
SectionTitle
Crowdfunding/crowdinvesting/crowdlending
Body
FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.

Crowdfunding is not a defined financial service, but generally used to describe donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).


Introduction

Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms

On 14 April 2022, the Secretary for the FSTB, Christopher Hui ('Secretary Hui'), wrote in a blog post that '[t]here have been calls in the community requesting the Government to review the situation and formulate appropriate legislation and regulatory arrangements, so that legitimate crowd-funding activities can be conducted in accordance with the law while unlawful acts can be tackled.'

According to Secretary Hui, crowdfunding needs to be regulated in order to prevent money from being used for activities endangering national security or supporting terrorist activities.

The FSTB has issued a public consultation paper on December 2022 and the consultation period ended on March 2023.


Legal affairs

Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above

Hong Kong has not yet introduced specific laws or regulations on crowdfunding but the FSTB has issued a consultation paper with the intention to regulate crowdfunding.

In May 2014, the SFC issued an 'Notice on Potential Regulations Applicable to, and Risks of, Crowd-funding Activities', highlighting that some types of crowdfunding activities, in particular equity crowdfunding and peer-to-peer lending may be subject to the following Hong Kong regulatory provisions:

  • restrictions on offers of shares or debentures to the public under the Companies (Winding Up and Miscellaneous Provisions) Ordinance without compliance with the 'prospectus' requirements;
  • prohibition on the issue of unauthorised invitations to the public under section 103(1) of the SFO;
  • prohibition on carrying on a 'regulated activity' under the SFO without being licensed/registered to do so by the SFC; and Miscellaneous Provisions) Ordinance without compliance with the 'prospectus' requirements;
  • prohibition on the issue of unauthorised invitations to the public under section 103(1) of the SFO;
  • prohibition on carrying on a 'regulated activity' under the SFO without being licensed/registered to do so by the SFC; and
  • the prohibition on carrying on a money lending business without a money lender's licence under section 7 of the Money Lenders Ordinance (Cap. 163).
Depending on the business nature, crowdfunding platform operators may be required to be licensed to carry on one or more of the following types of regulated activities:

  • Type 1 (dealing in securities)
  • Type 4 (advising on securities)
  • Type 6 (advising on corporate finance)
  • Type 7 (providing automated trading services)
  • Type 9 (asset management)
The SFC has comprehensive requirements on how to obtain a licence and comply with the relevant regulatory obligations. The core statutory requirements are found in the SFO, the subsidiary legislations and the codes, guidelines, circulars, and other forms of guidance published by the SFC from time to time. See its website: https://www.sfc.hk.

Pursuant to the consultation paper issued by the FSTB in December 2022, since the lack of regulation of crowdfunding activities constitutes a number of risks, it is proposed that (1) a Crowdfunding Affairs Office will be set up to centrally process and coordinate regulatory and administrative matters relating to crowdfunding activities and monitor the conduct of such activities and (2) a fundraiser must obtain permission from the Crowdfunding Affairs Office to conduct crowdfunding activities. Such new crowdfunding regime will cover crowdfunding activity publicised online (including via a crowdfunding platform, social media or a bulk sending function to publish an electronic message) or offline, whether it is located within or outside of Hong Kong and irrespective of the declared intent of the crowdfunding.

Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

N/A


Economic conditions

Market size for crowdfunding, crowdinvesting and crowdlending platforms and biggest companies in this business area

There is no publicly available information.

Additional comments regarding the economic situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

N/A



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