Crowd funding allowed in selected sectors: CMA

Non profit organisations of societies are not allowed to go for crowd funding as per the law, and only selected categories can seek funds on crowd funding platforms, according to the Capital Market Authority (CMA).

Article 5 of the CMA Regulatory Act has clearly prohibited three categories from crowd funding and violation of the rule is a clear breach of law which invites legal action, a senior executive has said.

“Three entities are prohibited from raising funds through crowd funding platform and they are non profit organisations of societies, public joint stock companies SAOG, and companies and enterprises with no specific business plans,” said Musab Mohammed al Lawati, Director of Supervision and Compliance, which supervises the regulation of crowd funding activity.

Speaking to the Observer on the sidelines of the workshop on ‘Regulatory Frameworks of Crowd funding Platforms, Regional and International Experiences’ organised by the Arab Monetary Fund from March 2 to 3, Musab said the workshop is aimed at highlighting the realities and prospects of crowdfunding platforms in the Arab world and to exchange expertise related to the regulatory frameworks of crowd funding platforms based on best regional and global practices through working papers presented by specialist and researchers from the member countries.

Crowd funding is a window for entrepreneurs and innovators for financing from donors or investors to support their projects through electronic platform which enables the small and medium enterprises (SMEs) to get financing.

The CMA has issued the regulation for crowd funding vide Decision No 153/2021 dated November 21, 2021.

Accordingly, the regulation of the Capital Market Law shall apply on any person licensed to carry out crowd funding activity or desirous of obtaining a licence. The operator may provide crowd funding through one or more methods such as the following: Donation Crowd funding: Donations without expecting any return; Reward Crowd funding: Funding in return for products in the early version of a product or special version or service on commencement of operation or production; Equity Crowd funding: Providing funding in return of getting shares in the capital. Such shares may be convertible or tradable, and Peer-to-Peer Crowd funding: Providing funding in consideration of issuing conventional investment notes or Islamic investment notes including invoice financing which are convertible or tradable. Such funding instruments may be convertible to equity.

A working paper on crowd funding platforms experience presented by Musab al Lawati contained a detailed account on the types of crowd funding platforms in the Sultanate of Oman, the categories of investors, the general features of the regulation for crowd funding platforms and the obligations of applicants for financing.

The CMA has issued the regulation for crowdfunding vide Decision No 153/2021 dated November 21, 2021.

Accordingly, the regulation of the Capital Market Law shall apply on any person licensed to carry out crowdfunding activity or desirous of obtaining a licence. The operator may provide crowdfunding through one or more methods such as the following: Donation Crowdfunding: Donations without expecting any return; Reward Crowdfunding: Funding in return for products in the early version of a product or special version or service on commencement of operation or production; Equity Crowdfunding: Providing funding in return of getting shares in the capital. Such shares may be convertible or tradable, and Peer-to-Peer Crowdfunding: Providing funding in consideration of issuing conventional investment notes or Islamic investment notes including invoice financing which are convertible or tradable. Such funding instruments may be convertible to equity.

A working paper on crowdfunding platforms experience presented by Musab al Lawati contained a detailed account on the types of crowdfunding platforms in the Sultanate of Oman, the categories of investors, the general features of the regulation for crowdfunding platforms and the obligations of applicants for financing.