Implications of online funding regulations for small businesses

Peter Yeoh (School of Law, Social Sciences & Communications, University of Wolverhampton, Wolverhampton, UK)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Publication date: 4 November 2014



This paper aims to examine the implications of exemptions to facilitate small businesses’ access to crowdfunding (CF) schemes. The aftermath of the 2008 global financial crisis and even now witnessed many small profits and non-profits encountering significant difficulties in accessing funding from the conventional sources and on many occasions have to turn to the newly emerging Internet-enabled donation or product compensation CF schemes. Access to securities-based CF schemes has, however, been seriously difficult due to securities laws obstacles. Regulatory authorities in the USA and the UK have responded with exemptions to facilitate small businesses’ access to CF.


The paper driven by the qualitative doctrinal approach would rely extensively on primary data from the applicable regulations and secondary data from industry sources and other publicly available commentaries.


Securities-based CF schemes hitherto heavily restricted in the USA and the UK are under current regulatory interventions-accorded exemption status, thereby enabling enhanced access for those small businesses seeking alternatives to conventional financing and enhanced investment opportunities for small investors. The paper’s preliminary analysis suggests that the proposed new regulatory rules in the USA and the UK are generally well-balanced with adequate small investors’ protection, while simultaneously not hampering the innovative growth of small businesses with excessive restrictions. Further, the preparedness of the regulators to fine-tune the proposed rules as the CF industry evolves would likely ensure its orderly growth, thereby helping to address various humanitarian and social challenges in these jurisdictions.


The added value of the analysis lies in its substantive evaluation of the proposed rules in both jurisdictions to ascertain the feasibility of securities-based CF schemes as alternatives for small businesses in relation to traditional financing and enhanced investment opportunities for small unsophisticated investors.



Yeoh, P. (2014), "Implications of online funding regulations for small businesses", Journal of Financial Regulation and Compliance, Vol. 22 No. 4, pp. 349-364.



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