The regulatory environment around P2P lending can be quite perplexing and can serve as a deterrent to many trying to enter the industry and launch a successful lending platform. Through this piece, we hope to clear some of the legal mist and provide clarity on the regulations that need to be adhered to.
It’s paramount to remember that P2P lending is interpreted as a sale of securities, and a broker-dealer license and the registration of the person-to-person investment contract is required for the process to be legal. The license and registration can be obtained at a securities regulatory agency such as the U.S. Securities and Exchange Commission (SEC) or the appropriate regulator in the appropriate jurisdiction.
Unsure about the regulatory practices you may have to comply with in order to set up a platform for lending/investing? Look no further. Outlined here are the key federal statutes to which banks and non-bank credit providers may alike but subject to:
State Licensing Requirements:
(Source: State Licensing Requirements)
Licenses are granted on a state-by-state basis. In some states the licensing process is fairly simple and straightforward; in other states it is quite complex. Similarly, in some states licenses can be obtained fairly quickly while in other states (e.g. California and New York) the process can take months. In addition to filing fees, license applicants may be subject to background checks and fingerprinting and may be required to submit business plans and financial statements.
For additional details and discussion on the P2P regulatory environment, have a look at these links:
P2P Lending Basics:
Read more read terms, regulation guidelines and the whole article on Crowd Valley News.
Disclaimer: The information provided in this post is not legal advice, it’s presented here for informational purposes only. You should always consult with licensed counsel if legal issues are involved.
Diversity is one of the many aspects of business life that makes the United States so attractive to investors. There is no shortage of investment options available; from stocks to commodities and from municipal bonds to mutual funds, investors can always add new financial instruments to their portfolios.
Even with all the regulated financial exchanges in the U.S., the small business community is mostly outside of the investment sphere. For all the attention that the financial news media gives to venture capital, investors do not usually find it easy to reach small business owners to inquire about investment prospects.
Outside of Silicon Valley and the reality television series Shark Tank, small business funding is not generally exciting. For the most part, small business owners still believe that commercial loans from banks are their best hope for startup funding; this is despite the fact that American banks have sharply reduced this type of lending over the last few years.
Thousands of entrepreneurs launch interesting startups each month, and yet only a few of them will make it past the first year of operations. Inadequate funding is one of the most common reasons behind the high rates of failure among American small business owners, and this can be blamed on the lack of diversity in terms of financing.
With so many American businesses failing due to lack of funding, wouldn't it be great to have a marketplace where entrepreneurs and potential investors could interact with the benefit of regulation and oversight? Thankfully, that day has arrived.
In 2015, the Securities and Exchange Commission approved a set of rules to govern equity crowdfunding; since then, investors and entrepreneurs have been meeting with some hesitation on a few online platforms while regulators observe the action and make adjustments.
The adoption of equity crowdfunding is intrinsically tied to the legislation passed by Congress in the wake of the global financial crisis. As the situation stands these days, small businesses can raise up to a million dollars each year on crowdfunding platforms that have been vetted by the SEC.
The new equity crowdfunding platforms add a layer of "free market democracy" for American investors, but what about small business owners?
If you are an entrepreneur interested in equity crowdfunding for your business, you should become acquainted with the process of due diligence that is required by the online platform. Insuring your company should be the first step, but you should also become familiar with the financial statements that potential investors will be looking for.
Equity crowdfunding does not have to be the final stage of capital raising for small American businesses. Venture capital firms are paying close attention to the Web-based crowdfunding platforms because it gives them a great opportunity to scout new investment projects. From within these platforms, startup companies may find angel investors who will one day take them to Wall Street.
Read the whole article on TradeUp Blog.
Open Positions in Grow VC Group: For Example, Technology and Financial Analysis Professionals for Real Estate Analytics Business
Grow VC Group companies are looking for new talented entrepreneurial people all the time. You can make an open application here.
At the moment, for example, our new entity, RE Bearing is looking for a key person to the core team to build the business and present to prospective customers. RE Bearing offers advanced data analytics tools for real estate investors. The company has the contacts and experience on the investor side and now it needs more resources with technical and analytical expertise to:
RE Bearing offers with its technology partner a software that analyses real estate investments. It integrates economic trends, historic data (35 years) to optimize the investment portfolio (future value, revenues, risks, new investments, etc).
The software has been in use for the past 15 years, and used by multi-billion institutional clients. Now RE Bearing expands the market by offering the software-as-a-service tool also to all investors (target segment especially real estate investors with USD 5 million to USD 600 million portfolio).
Customers types: Private investors, real estate developers, family offices, consulting firms and investments funds.
You can leave your application here or send email to CEO Edward Cassels.
Bank of Thailand (BoT) Governor Veerathai Santiprabhob at the C asean Forum's "Positioning Thailand's Fintech Ecosystem" event announced more regulation for the growing fintech sector in order to protect consumers, prevent systemic risk and help the development of the market. Following the path of Governments and regulators of the UK, France, Australia and Singapore the intention is to create a regulatory sandbox that can be used as a testing ground for fintech companies.
"Fintech is a new thing for the central bank and we have limited knowledge in this area. Therefore, having the regulatory sandbox will open opportunities for product experimentation and for the companies to ramp up their scale," said BoT Governor Veerathai Santiprabhob.
This model is tested in other countries as well, with the intention of limiting the risk for consumer and the stability of the financial system, with a framework that should not be too stringent in order to let innovation flourish. The first step in building this sandbox should be for fintech firms to register with the central bank.
But that’s not all. An amendment of the the law governing the National Credit Bureau (NCB), which is now waiting for the approval from Finance Ministry of Thailand, will allow P2P lenders to become members of the agency, giving them access to consumers’ credit data for loan risk assessment as part of longer term viability of the market.
Considering the whole picture, the increased interest of governments and financial regulators is definitely positive for the financial technology industry, as it is still in its infancy and requires a good infrastructure in order to continue the significant growth seen in recent times. With Singapore and Malaysia pushing hard toward the growth of the sector, and with Thailand now quickly catching up, the outlook for fintech in Southeast Asia looks promising.
Read the whole article on Crowd Valley News.
By Jeremy Sutter, Business Writer
During the late 1990s, also commonly referred to as the dot-com era, it seemed all one had to do was have an office in San Francisco or Silicon Valley and have an idea for a website that would bring people together for an investor to throw money at it. Then came 2001 and the bottom fell out. Interestingly, the same hot trend of looking for the next big startup continues to keep charging on, but without all the fanfare and definitely without all the after-hour parties.
Two things appear to be driving VC activity, particularly in the realm of extremely new, unheard of startups: the rise of managing and harnessing value from big data, and the demand for new ideas on how to design data infrastructure. Both are technical enough to filter out the fly-by-night chatter; only startups who truly have the engineering or data management background are going to get out of the starting gate with a viable product in these two fields.
So startups are also coming up with new and previously unheard of ideas of how to move electronic data physically as well as digitally. Both scalability as well as speed matter tremendously and these new players are going places were tried and true systems can’t touch because they are locked into existing system protocols and paradigms. That makes for market disruption on a big scale.
The market’s need for new database architecture has also influenced what VC firms are looking at for their next investment opportunities. They are recognizing the need for solutions that meet scalability demands as wells as run more efficiently without bogging down a network. Operating cost is a big factor as well, so those with ideas on how to do more with less are also getting VC attention.
Read the whole article on TradeUp Blog.
Vietnam has a huge young population that is very active on internet, mobile and with highly national enthusiasm for technology, startups and entrepreneurship, and as a result, vietnamese startup ecosystem is rapidly growing in cities like Ho Chi Minh, Hanoi and Da Nang, aiming to become a modern industrialized state by 2020.
In order to achieve that, the national government has planned to develop a functioning national innovation system, fostering its startup ecosystem and supporting the growth of innovation via Startups and SME's. The project has set the following targets for 2020:
Complete the main legal framework for a startup ecosystem; run an online portal for the National Innovative Startup Ecosystem; support about 800 startup projects and 200 startup enterprises, of which 50 will raise follow-on investment from private venture investors or will undergo mergers and acquisitions worth about 1 trillion VND (about 50 million USD). By 2025, the project is expected to have supported 2,000 startup projects and 600 startup enterprises, of which 100 will have raised follow-on investment from private venture investors, or will have undergone mergers and acquisitions worth about 2 trillion VND.
One of the key challenges in this work is to maintain a holistic picture of the constantly developing and evolving ecosystem and measure the results of different actions and sub projects and to share these openly for the benefit of everyone in the ecosystem.
Startup Commons team, due to our proven international track record on startup ecosystem development, supporting tools and holistic digital ecosystem solution used by ecosystems, was selected to carry out this national pilot project.
The collaborative work for Vietnam digital ecosystem is being conducted step by step in very transparent manner to achieve consensus and solid progress within the key stakeholders of innovation ecosystems and it has been splitted into three different phases:
As we are moving to actual pilot phase to implement digital ecosystem solution in Vietnam context, by setting up the base version with geographical scoping in Da Nang, Hanoi and Ho Chi Minh ecosystems, along with Vietnam national ecosystem to showcase these local startup ecosystems and Vietnam as a whole also for further deployments, implement related communication framework and roles to support the platform at core level, define needed key operative roles needed to support the development and management of the different ecosystem functions at different levels, train and empower local teams and people to key roles to take “ownership” of the key functions, showcase how platform implementation and different development tracks can be managed to further accelerate the progress, and support in finding a good balance for PPP (Public Private Partnership) regarding the digital platform in different cities going forward. And eventually, to pass on the ownership and core responsibility of the platform the logical entity, entities or consortium to conclude the pilot phase.
Read the whole case study at Startup Commons Blog.
In the wake of the Brexit, European financial hubs are competing to attract London-based firms looking to relocate in order to ensure the stability of their operations. If the true impact of the Brexit on the Fintech sector cannot be accurately predicted at this point, actors like money-transfer and payment companies might be tempted to move from London to another European city, which could guarantee a more stable political environment.
In the words of Valérie Pécresse, President of the Ile de France Region (in which Paris and the financial district of La Défense are located): “The sensible choice [for businesses] is not to stay in a land that could leave Europe one day, but to make a choice to invest long term in a land that will always stay in Europe.”
Consequently, countries all over Europe aim to attract talents and businesses seeking a more stable footing within the European Single Market. Paris doesn’t always naturally comes to mind as a potential Fintech hub; which is why French government agencies have already decided to publish leaflets listing reasons to choose Paris as a base for companies looking to enter the European market. For instance underlining the fact that “four French banks feature in Europe’s top 10, including two of the top three”, or that “the Paris metropolitan area is home to 12,000 startups”. And indeed, the Paris region is home to nearly 100 business incubators, including Le Cargo, Europe’s largest. Even bigger, the Halle Freyssinet is a structure set to open in January 2017, and that will be able to host up to 1,000 startups.
Despite relatively heavy operating costs, Paris is centrally located and has a well-connected infrastructure; and in its quest to claim London’s Fintech crown, Paris should be able to rely on the credibility of its financial services and the availability of talented employees. Overall, the Parisian financial marketplace is (self) described as “up to speed with new ways of financing SMEs, including private equity and crowdfunding”.
However, only time will tell if France will be able to attract London Fintech firms: other countries like Ireland (with Dublin) and Germany (Frankfurt & Berlin) are also pursuing a similar objective - the strengths and specificities of their respective financial places making them serious contenders to the Fintech crown.
Read the whole article on Crowd Valley News.
Since we set out to modernize financial services in 2012 as Crowd Valley Inc (a Grow VC Group company), and even earlier in 2008 as early entrepreneurs in what’s been now called fintech, we’ve come a long way. Not just as a company, but as a global market calling for new efficient models in finance. However, today we wanted to share a brief update on our progress and focus on Crowd Valley as a company first and foremost.
Through our work of supporting now over 100 innovators and leaders in financial services, we’ve been fortunate enough to see the dawn of fintech in countries around the world. Here are some interesting facts about where we’ve come as a company:
Wide-ranging approval and support - the Crowd Valley Digital Back Office is in use and approved or exempt by regulators in the following countries: the United States, Canada, Mexico, South Africa, the United Kingdom, the EU, Switzerland, Singapore and Japan. Select use cases exist in several further countries. Through our work with leaders in their fields, both partners and clients, we have put a lot of scrutiny on our product development and our testing practices. This means that every time an update to our product is made, over 1,000 tests are run through on various environments to ensure we catch conflicts as soon as possible.
While through long term investments, we’ve been able to establish a robust core of our platform product, we continue to heavily invest in security as well as middle layer products such as web hooks that pull entire arrays of interlinked functions such as compliance lookups or onboarding workflows. Through this work, we expect to make the deployment of fintech products more efficient, but also more sophisticated, secure and compliant.
Partnerships, such as the one with the Government of Estonia and their e-Residency program allow us to be on the cutting edge of fintech and e.g. offer access to the EU market through a virtualized portal rather than the arduous older channels. Through the network of over 80 partners around the world, such as big four consultancies, compliance experts (such as KYC and AML service providers), legal pioneers and fintech leaders in their fields, we are proud to truly be creating an ecosystem around the world.
We are proud to be supporting cutting edge initiatives such as Convergence backed by prominent institutions such as the World Economic Forum, existing leaders in their own sectors such as Galliard Homes with the Property Club and novel innovations in areas such as peer to peer lending exemplified for example by Credit Peers. All our clients are modernizing a specific market segment and providing a fluid service to the end client.
Read the whole article on Crowd Valley News.
According to the news, hackers were able to steal digital currency Ether (on the Ethereum platform) tokens equivalent of more than $50 million in June. The Ethereum community has solutions to freeze and return stolen tokens. The hacker group Anonymous has conducted cyber attacks against terrorist organizations. Technology companies like Facebook and Apple want to protect their users also against governments.
All these examples raise new complex legal and ethical questions regarding who has authority, legal and ethical rights to rule in global digital communities. And now AI is emerging, we have even more complex questions.
Traditionally it is authorities and the courts of a country that have the highest power to decide between right and wrong and then also trigger actions based on that. But when we have, for example, a global digital currency that is not really authorized or regulated by any government, the situation can be very different. The service and currency tokens are distributed to a network of thousands of computers around the world and it is managed by its own community. Can the community have the right to decide about right and wrong and then execute actions based on it, e.g. return tokens to someone that were allegedly stolen.
Some hacker groups have taken actions that many people can feel are ethically right, for example, to make cyber attacks on terrorist organizations. The complexity is that those actions are not based on any local or international legitimate decisions. In that way one can see they are a threat to the traditional international laws and institutions, even they could be ethically right. At the same time, one can argue, no traditional legal system or institution works effectively in this global cyber space.
Apple refused to open iPhone encryption in the San Bernardino terrorist investigation. US authorities were finally able to use a third party to open messages in the phone. Facebook and Microsoft have announced that they inform users if a governmental organization tries to compromise their privacy. These things are also seen as a positive policy from the companies to protect their customers and users. At the same time one can argue they help protect criminals. Then we have a question as to whether these companies have more power and capability to control justice than governments and courts.
Artificial Intelligence raises its own ethical questions. Already ‘an old discussion’ is how a self-driving car should behave, if it must e.g. chose to smash into a bus, or drive over a person who is walking on a pavement. The military is already now active to use semi-automatic and automatic systems to make decisions, when things can happen so rapidly that a human being cannot handle decisions. We remember the War Games movie already from 1980’s. These are real ethical and hard decisions about life and death. And we can also ask if a machine or a tired human being makes better decisions.
The examples above are quite different, but all of them are about new legal and ethical issues in the digital space. They are typically global, not in a territory of a country as traditional justice systems. And they are managed by international companies, loose Internet communities or even by machines. These issues are reality already now, but will be much bigger issues in 5 to 10 years. If governments really try to limit activities in the cyber space, they can damage innovation and development, or just tilting at windmills, like British government that planned to forbid encryption on the Internet to fight against terrorist. It is not an option to stop the development. But it is like the Wild West, governments and legal systems haven’t yet a proper control, and sometimes it is fighting between good and bad boys, and then local communities try to establish common rules and hire a sheriff.
Digitization and global networks can have much bigger impact on life and business than globalization in international trade and international trade treaties that people are now worried in many countries. Often this discussion has been left only to cyber security experts and some governmental agencies. These are significant legal and ethical questions that have impact on every human being and his and her rights, privacy and liabilities. These questions need open and public discussion and democratic decisions. The complexity is that these often require global rules and understanding of technology.
This article first appeared on TelecomAsia.net.
The US House of Representatives passed two bills on Tuesday 5th of July, aiming to make it easier for entrepreneurs to raise money and to improve conditions for SME and startup investing.
The “Supporting America's Innovators Act” (H.R. 4854) passed the House by a vote of 388 - 9, while the “Fix Crowdfunding Act” (H.R. 4855 ) passed the House by a vote of 394 - 4. Both are part of the Innovation Initiative which was launched by Congressman Patrick McHenry of North Carolina and Majority Leader Kevin McCarthy of California. Congressman Patrick McHenry was a vocal advocate for the JOBS Act initiative. The two bills now pass to the Senate where they should be voted again in order to become law.
H.R. 4854 included an exemption from the Investment Company Act by increasing the investor limitation for venture capital funds, from 100 to 250 persons.
H.R. 4855 relates to investment crowdfunding, made with the aim to fix the current perceived issues enacted on May 16 2016 under the Title III (Reg CF) of the JOBS Act.
The bill will permit the use of single purpose funds to participate in the sale and offer of crowdfunded securities. It will also clarify certain requirements under the Exchange Act 12(g), giving companies a longer period before having to comply with the pre-IPO documents required by the SEC.
“Today, the House passed two bills with strong bipartisan support that begin to confront this crisis, [...] Angel investing and investment crowdfunding are both innovative new forms of capital formation that—in the proper regulatory climate—can become vital tools for entrepreneurs and small businesses. My two bills help to ensure investment crowdfunding and angel investing reach their true potential.” added McHenry.
The news has been well-received by the vast majority of the actors in the market. Bobby Franklin, President and CEO of the National Venture Capital Association (NVCA) said: “We are pleased to see Congress focused on proposals to help startups access the capital they need to scale and hire new workers, which is critical for the entrepreneurial ecosystem and the American economy.”
We agree that’s another good step forward towards a more open and accessible capital market in the US and that Congressman McHenry continues to drive a visionary role since 2011 when he started working on investment crowdfunding regulations. Great progress have been made since and there is now a good foundation and multiple opportunities, to deliver more efficient and effective finance services for new audiences.
Read the whole article and find the text of both Acts at Crowd Valley News.
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