By Wisdom ANKU
Crowdfunding platforms and intermediaries like other alternative investment intermediaries are entities that facilitate investments in assets other than traditional stocks and bonds.
Examples of alternative investment intermediaries include private equity funds, venture capital funds, and hedge funds.
While crowdfunding intermediaries can provide diversification benefits to investors and the much-needed capital for startup businesses and SMEs in general, they are also associated with higher risks due to the illiquidity of the investment assets and inadequacy of regulation in many African countries.
Regulation of crowdfunding intermediaries and platforms in African capital markets is a complex and evolving area. In general, the regulation of crowdfunding intermediaries and platforms in Africa is often fragmented and varies significantly from country to country.
However, there are some common regulatory frameworks and practices that are being implemented across the continent to ensure that crowdfunding intermediaries and platforms operate in a safe and sound manner.
In many cases, existing frameworks serve as guides to the extent of applicability. One key regulatory framework that is used to guide crowdfunding intermediaries and platforms in Africa is the Collective Investment Schemes regulation.
This regulation requires crowdfunding intermediaries and platforms to be licensed and regulated by the relevant securities’ regulatory authority in the country where they operate.
Nigeria and Kenya currently appear to be leading in this regard, having established regulatory laws and guidelines over the last couple of years. In Ghana, the Securities and Exchange Commission recently adopted and launched the Crowdfunding Guidelines to regulate crowdfunding intermediaries and crowdfunding platforms. The regulation sets out various requirements for Crowdfunding Intermediaries, Crowdfunding Platforms, Investors, and Issuers.
The Crowdfunding Guidelines which has now been fully operationalized by the Securities and Exchange Commission (SEC Ghana) stipulates details including minimum capital requirements, disclosure requirements, and investment restrictions among others.
Another important framework that is guiding the regulation of crowdfunding intermediaries and platforms is the existing Directives for other Alternative Investment Fund Managers. This sets out various requirements for crowdfunding intermediaries and platforms, including transparency requirements, risk management requirements, and investor protection requirements.
In addition, there are other existing regulatory frameworks that are being employed across Africa to regulate crowdfunding intermediaries and crowdfunding platforms. These include regulations related to anti-money laundering and combating the financing of terrorism, regulations related to corporate governance and ethical standards, and regulations related to the supervision of service providers to crowdfunding intermediaries and platforms.
In spite of advance efforts to regulate crowdfunding intermediaries and crowdfunding platforms in several African economies including Nigeria, Kenya, Ghana and South Africa, there is still a long way home.
For African economies to leverage the full potential and benefits of Investment Crowdfunding as is the case in developed economies like the United States, UK and Australia, it is crucial to urgently harmonize regulatory frameworks not only in the individual countries but across the entire African market.
>>>the writer is CEO of Propartners Exchange Limited, a Crowdfunding and Equity Partnership platform based in Accra, Ghana. He can be reached via [email protected]
