On 11 January 2018, the Australian Securities and Investments Commission (ASIC) announced that it has licensed the first batch of crowd-sourced funding (CSF) intermediaries under the CSF regime which came into effect in September last year.
The CSF regime allows eligible unlisted public companies with less than $25 million in assets and annual revenue to offer shares to retail investors through a licensed CSF intermediary’s platform, using an offer document. The regime is designed to reduce the regulatory burden for early stage companies making public offers, while ensuring adequate protections for retail investors.
Eligible public companies are able to raise up to $5 million in funds through equity crowdfunding, with retail investors able to invest up to $10,000 per issuing company in any 12 month period. This provides significant opportunities for entrepreneurs and new innovative business to obtain vital growth capital.
In order to host eligible companies’ offers, CSF intermediaries are required to hold an Australian Financial Services Licence with an authorisation to provide a crowdfunding service. The first crowdfunding intermediary licences have been issued to Big Start, Billfolda, Birchal Financial Services, Equitise, Global Funding Partners, IQX Investment Services and On-Market Bookbuilds.
The Government currently has legislation before Parliament which, if passed, will extend access to the CSF regime to eligible proprietary companies. Given the widespread use of the proprietary company corporate structure, the expansion of the CSF regime has the potential to allow a large number of small and medium sized Australian business to access a previously untapped source of capital.
The equity crowdfunding regime is part of a broader policy landscape designed to develop the FinTech market and encourage innovation – which includes the FinTech regulatory sandbox and tax incentives for early-stage investors. The Government’s review into the implementation of an Open Banking regime is also due for release soon, which could further shake up how the financial services industry operates in Australia and represents an opportunity for innovative businesses to challenge traditional banking models.
If you are seeking to raise funds through CSF and want to understand and comply with your obligations under the new regime, or you are an intermediary seeking to provide CSF services, we can help.
Our team has extensive experience in financial services regulation, including assisting with licensing applications, regulatory relief and submissions to Government regulators. We have successfully applied for many financial services and regulatory licences, and assist a broad range of wholesale and retail financial services businesses with their ongoing compliance obligations and queries on an ongoing basis.
If you would like to know more, please contact Hillary Ray of our Financial Services team.