FMA approves equity crowdfunding licence to PledgeMe and Snowball Effect
By Suze Metherell
July 31 (BusinessDesk) - The Financial Markets Authority has awarded its first equity crowd funding licences to two
platforms, nearly five months after the process first began.
Wellington-based PledgeMe and Auckland-based Snowball Effect gained licences under the new Financial Markets Conduct
Act, which came into effect on April 1, providing a regime where projects can raise a maximum of $2 million offering
equity through crowd sourcing platforms. The platforms have the potential to build a secondary market, where investors
could trade equity in projects, but neither planned to immediately offer that service.
"It did take a while, but we are building a new industry, so in some ways that makes sense," Anna Guenther, head of
PledgeMe, told BusinessDesk. "Companies can now raise capital more easily, transparently and interactively than making a
public offering of shares or running a private seed through friends. People in the crowd will have the potential for
PledgeMe will launch its first equity-based campaigns in two weeks time. The crowd funder has already raised $2.5
million over the past two years through reward-based crowd funding through a 40,000 crowd.
Snowball Effect, which was set up to take advantage of the equity crowd funding legislation, expects to launch
mid-August and had ticked past 1,000 registered investors.
The licensing is part of the regulator's expanded brief to bolster New Zealand's capital markets but the new platforms
do carry risks for lenders. Much of the licensing process has been ensuring platforms in both equity crowd funding and
peer-to-peer lending, also introduced under the legislation, inform investors of the risks and the regulator will
continue to monitor businesses' compliance with their licences.
"The FMA is satisfied that both PledgeMe and Snowball Effect have met the criteria for a licence and have demonstrated
how they'll meet the minimum standards set out in our licensing guide," Elaine Campbell, director of compliance, said in
a statement. "It's also our role to remind investors that these are higher-risk investments and that the public should
do their homework before investing their money."
The first peer-to-peer lending licence, which matches lenders with borrowers with a $2 million cap on the amount allowed
to be borrowed, was awarded to Harmoney earlier this month. The Auckland-based online lender only offers personal loans,
and grades interest on the credit risk of the borrower.
Still waiting to hear from the regulator on their equity crowd funding applications is Armillary Private Capital, which
has partnered with the UK-based Crowdcube and Lendit, which counts entrepreneur Selwyn Pellet as an investor and has
applied for both licences.