Crowdfunding portals eager after SEC rules rejig

Five funding portals are keen to set up crowdfunding in Thailand after the Securities and Exchange Commission (SEC) removed some of the regulations that obstructed online fundraising activities.

The five portals plan to talk with the regulatory watchdog about their systems before officially applying for licences, Tipsuda Thavaramara, the SEC’s deputy-general, told the Bangkok Post.

The amendments included allowing the crowdfunding portals to use blockchain and smart contract technology to manage the fundraising process instead of escrow agents, of which there are only a few in the country and the price for service is quite high.

Crowdfunding is an alternative fundraising channel with cheaper financial costs for small and medium-sized businesses and startups.

To increase the liquidity of crowdfunding portals, the SEC plan to allow them to have share-trading platforms on the secondary market, but the share sales will be limited for retail investors.

The SEC also expects to have a public hearing for this issue.

According to Fintechnews.SG, the top crowdfunding sites in Thailand are Indiegogo, Asiola, Dreamaker Equity, Kickstarter and Phoenixict. Asiola and Dreamaker are the only two crowdfunding portals based in Thailand, Indiegogo and Kickstarter are American, and Phoenixict are based in Singapore.

Paralee Sukonthaman, the SEC’s assistant secretary-general, said investors in early-stage companies must be prepared to lose all their money as such startups are high-risk.

To protect retail investors, the SEC has capped the amount a retail investor can pour into crowdfunding at 50,000 baht in a single startup and 500,000 baht total during a 12-month period. Moreover, they can cancel share subscriptions at any time, except if the remaining offering period is less than 48 hours.

Those who are entitled to purchase shares are required to pass a test that shows they understand the risks.

“Investors in equity crowdfunding have to understand these platforms carry high risks. Overseas studies found only 20-30% of startups via crowdfunding are successful, meaning there is a risk investors will not get their money back. But if the business is successful, the return is usually very good,” said Ms Paralee.

SEC regulations call for approved equitybased crowdfunding portals to screen companies intending to raise funds through their facilities, providing mechanisms for proceeds obtained from shares subscription. Investors must become members of crowdfunding portals to gain access to share-offering information and, prior to investing, must pass knowledge tests on the risks associated with the investment.