Legal Transplantation or Legal Innovation? Equity-Crowdfunding Regulation in Taiwan after Title III of the U.S. JOBS Act

Crowdfunding has caused a worldwide revolution in early-stage startup financing during recent years. In the United States, the expansion of for-profit crowdfunding platforms to fund small businesses and startups prompted Congress to pass the game-changing law on equity crowdfunding, Title III of the JOBS Act in 2012 (“CROWDFUND Act”). While its specific rules and regulations as adopted by the SEC takes effect this year, the substance of the JOBS Act as a whole is geared more towards the goal of capital formation, over the historically promoted goal of investor protection. The use of equity crowdfunding has extended over to Taiwan as well. In 2014, the Taiwanese government created the “Go Incubation Board for Startup and Acceleration” (“GISA Board”), a government-sanctioned public equity crowdfunding platform run by the GreTai Securities Market (“GTSM”), a government-controlled foundation. It first promulgated the GISA Regulations and soon thereafter the Private Portal Regulations to govern the public and private platforms, respectively. Though transplanted from the CROWDFUND Act, Taiwan's legal adaption or innovation reflects its path dependence on a high level of investor protection underlying local securities regulation, placing much more emphasis on investor protection than on capital formation, in theory. From a public choice perspective, the resultant features of Taiwan's legal transplantation could be attributed to lobbying and influence by incumbent securities firms, as well as the GTSM's own political incentives. This Article argues that a comparative and qualitative study of Taiwan's equity crowdfunding regulatory patterns reveals that the transplantation of the U.S. model tends to be more of form than of substance, that is, of copying the text rather than pursuing the goal of capital formation in practice