FAQ for regulatory authorities

An SRO is an organisation that exercises some degree of regulatory authority over an industry or profession. The regulatory authority could exist in place of government regulation, or applied in addition to government regulation. An SRO has the power to create and enforce stand-alone industry and professional regulations, standards and procedures which promote ethics, equality, and professionalism. In the case of ACfA, the association strives for a close working relationship with the national “aprex” regulator which delegates to ACfA some of its functions (approvals of intermediaries and day-to-day supervision, amongst others).

Industry self-regulation is the process whereby members of an industry, trade or sector of the economy monitor their own adherence to legal, ethical, or safety standards.

ACfA’s mandate is to establish and enforce a comprehensive pan-African regulatory framework for securities-based crowdfunding, increase public awareness and market adoption of crowdfunding, and create a more cohesive industry structure in Africa that protects investors and democratises access to capital for all Africans.

Crowdfunding models in which a consumer (investor) is offered a financial return on their investment require a regulatory framework. In most countries, it is illegal for a privately-owned start-up or small business to advertise publicly the sale of their shares or debentures. A regulatory framework for crowdfunding sets out the conditions under which the public offering of shares in private companies may be legal. Some forms of crowdfunding do not typically require a framework, such as donations- and rewards-based crowdfunding, because there is no financial return marketed to the consumer. However, donations- and rewards-based crowdfunding must still adhere to best practices to combat money laundering and the financing of terrorism.

Crowdfunding is a method of raising capital from a large number of people who each contribute a relatively small amount, typically via the Internet or other means of digital communication.
Crowdfunding makes use of the vast networks of people (“the crowd”) through social media and websites to bring investors and entrepreneurs together. Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors beyond the traditional circle of angel investors, private equity funds, owners and relatives.

At present, the only African country with any regulations in place is Morocco – they adopted a bill to create the legal framework for crowdfunding in February 2020. Angola and Nigeria are in the process of drafting regulations. To date, ACfA has engaged 17 African regulatory authorities on the implementation of a regulatory framework. The ACfA Label Framework serves as a useful starting point for any regulator seeking to enable crowdfunding in their jurisdiction.

Crowdfunding models in which a consumer (investor) is offered a financial return on their investment require a regulatory framework. In most countries, it is illegal for a privately-owned start-up or small business to advertise publicly the sale of their shares or debentures. A regulatory framework for crowdfunding sets out the conditions under which the public offering of shares in private companies may be legal. Some forms of crowdfunding do not typically require a framework, such as donations- and rewards-based crowdfunding, because there is no financial return marketed to the consumer. However, donations- and rewards-based crowdfunding must still adhere to best practices to combat money laundering and the financing of terrorism.

The ACfA Label Framework is a set of industry regulations crafted by the African Crowdfunding Association. The Framework draws from the experience of African market practitioners as well as regulatory frameworks from other countries that have successfully grown crowdfunding industries. It aims to foster rigorous yet inclusive regulation of crowdfunding in Africa. The ACfA Label Framework can be used by African regulators as a basis for reflection for their own regulations, or they can recognise ACfA directly as a Self-regulatory organisation (SRO) licenced and regulated by the national regulator with delegated competencies to supervise the crowdfunding industry. In the latter case, the ACfA Label is conferred upon crowdfunding intermediaries by ACfA itself.

Crowdfunding intermediaries are physical persons or businesses that are approved by and registered with ACfA to run crowdfunding operations. They are intermediaries are organisations that prepare businesses (“project sponsors”) to raise capital through crowdfunding; in the case of securities-crowdfunding, this preparation is also called “SME investment-readiness”. Examples of crowdfunding intermediaries include SME finance organisations, business accelerators, start-up incubators, angel investor networks and consultancy firms.

Crowdfunding intermediaries may own and operate their own crowdfunding platform, but this is not a requirement to be considered a crowdfunding intermediary. Crowdfunding intermediaries may simply “list” their project sponsors on crowdfunding platforms that are owned by a third party. On the other hand, crowdfunding platforms cannot be considered crowdfunding intermediaries if they do not provide investment-readiness services to their project sponsor clients.

All crowdfunding intermediaries that operate in Africa may apply to join ACfA. An “ACfA Observer” status is available to organisations that are still in the start-up phase of their operations and that are working towards becoming crowdfunding intermediaries.

ACfA Members are the lifeblood of the organisation and the crowdfunding industry in Africa. All ACfA Members must comply with our Charter of Good Conduct and agree to be audited on their compliance. We also encourage our members to contribute in policy debates, industry surveys and reviewing our publications. ACfA Members join a collective advocacy movement, shape regulations, build relationships with regulatory authorities and the ecosystem at large, and learn from each other in ACfA’s peer-to-peer crowdfunding working group. Members benefit from specialised training by ACfA and its expert partners in order to build a trusted, reliable brand of African crowdfunding.

ACfA Ecosystem members are organisations that provide service(s) to crowdfunding intermediaries and project sponsors, including white label crowdfunding platforms, digital payment system providers, law firms, blockchain-based crowdfunding infrastructure, social media campaign managers, incubators, accelerators, advisory firms etc.

ACfA’s operations are currently funded through a grant from Financial Sector Deepening Africa (FSD Africa) which is a UKAID/DfID funded organisation. ACfA also earns revenue from annual fees paid by its members on an annual basis. ACfA also provides advisory services to the crowdfunding industry and to a wide range of institutional stakeholders.