According to media reports from China The China Securities Regulatory Commission (CSRC) will soon begin inspecting online equity financing platforms to address risks brought by illegal activities.
Last month China announced new Internet finance guidelines calling for closer supervision of the sector while also pledging to support its development. The guidelines clarified the division of responsibilities among regulatory agencies, whereby the CSRC would be responsible for equity-based crowdfunding, which allows investors to receive a stake in a company funded by pooling money from many people via the Internet.
The CSRC has recently told provincial governments to forbid institutions and individuals from illegally issuing stocks under the guise of equity-based crowdfunding.
According to CSRC spokesman Deng Ge some institutions are operating in the name of "equity-based crowdfunding" to raise private equity funds, and hence do not fall within the scope of equity-based crowdfunding activities allowed by the recently-announced guidelines which aim to promote the healthy development of Internet finance.
The inspection of online equity financing platforms aims to discover and correct illegal activities, minimise risks and lead platforms to perform better in serving the real economy. This will include determining whether the online fund raisers have promoted themselves publicly, whether the accumulated number of equity holders has exceeded 200, and whether they have collected private equity funds in the name of equity-based crowdfunding.
