The revamp of New Zealand's 34-year-old securities law looks set to capture a relatively new way of raising small amounts of money from hordes of people if it strays into the territory of offering returns.
Crowdfunding, where individuals turn to large, primarily web-based networks for small donations, has mainly been used to pay for community projects and artistic endeavours - the most famous local example was when film director Taika Waititi used it to help pay for the US distribution of his movie 'Boy'.
The international experience has seen crowdfunding drift into capital raisings, something the local financial markets regulator expects it will be able to keep tabs on through the passage of the Financial Markets Conduct Bill.
Parliament's Commerce Committee recommended Commerce Minister Craig Foss consider prescribing crowdfunding intermediary services to let providers apply for a licence, in its report back on the legislation last month.
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Financial Markets Authority head of legal Liam Mason told BusinessDesk local crowdfunding operations are typically for one-off community or creative projects, but that the new bill is flexible enough to cater for a shift into equity raising and would let the government license crowdfunding providers.
"If it takes the next step, and it seems probable, for small scale investment where you're directly getting an investment return, then it most likely will be through a licensed intermediary," Mason said. "It comes back to seeing how it evolves."
New Zealand's securities law overhaul comes as US policymakers introduced a crowdfunding exemption for its own legislation as part of its "Jumpstart Our Business Startups Act". The US exemption would let people raise capital through registered online funding portals or brokers, subject to other conditions such as an annual cap on how much one person can invest.
If New Zealand instituted similar regulations, that would see certain disclosure exemptions for people looking to raise money through crowdfunding portals.
Anna Guenther, cofounder of local PledgeMe, said the Wellington-based crowdfunding platform wouldn't shy away from a licensing regime. It hasn't been used to raise investment capital, though Guenther said there are "people that want to do that sort of crowdfunding," mainly in the tech space.
PledgeMe has raised more than $460,000 for about 100 social projects, more than half in creative industries.