Monday, 18 December 2017
Australia’s New Crowd-sourced Funding Regime – Key Points for Punters (Part 2: Intermediaries)
Date : 18 April 2017
Author/s : Daniel Goldberg, Ryan Doherty
Type : Focus Paper
 

 

If you caught Part 1 of this series (which related to fundraisers), you’ll know that Australia’s crowd-sourced funding (CSF) regime is set to come into force later this year.

 

The new regime will allow eligible unlisted public companies to raise a limited amount of equity capital from the “crowd” at large, including from retail investors, without providing prospectus-level disclosure.

 

The legislation also creates a role for dedicated CSF “intermediaries”: licensed operators of platforms which publish fundraisers’ CSF offers and provide the interface between fundraisers and potential investors.

 

In this paper, we set out some of the key points to be aware of if you’re thinking of participating in the CSF regime as an intermediary.

 

Key points for CSF intermediaries

 

The CSF regime introduces a new concept into Australian corporations law – that of the CSF intermediary. The role of intermediaries will essentially be to operate and manage the platforms which publish fundraisers’ CSF offers, collect and deal with CSF investor application funds, and facilitate communication between CSF participants.

 

Here are some key points for prospective CSF intermediaries to bear in mind:

 

  • Intermediaries must be licensed: Intermediaries will need to hold an Australian Financial Services Licence expressly authorising them to provide crowd-funding services. Depending on the nature of their activities, intermediaries may also need to hold an Australian Market Licence.

    However, the CSF regime also includes an amended exemption power which allows the Minister to grant tailored exemptions from some or all of the market licensing requirements. This would potentially allow for exemptions in relation to, for example, the secondary trading of CSF securities on intermediary platforms.

 

  • Gatekeeper obligations: Intermediaries will be subject to certain gatekeeper obligations, including conducting prescribed checks before publishing offer documents. The full details of these obligations will be fleshed out in regulations, which have not yet been released. What is clear is that the intermediaries will play a key role in regulating CSF raisings and will have significant responsibilities and potential liability in relation to them.

 

  • Platform requirements: Intermediaries will need to display on their platform a prescribed investor risk warning and information about a retail investor’s cooling-off rights, ensure that their platform includes an application facility to allow investors to apply for securities under CSF offers, and provide a communication facility to allow investors to communicate about CSF offers.

 

  • Fee and interest disclosure: Intermediaries will need to disclose on the platform any fees paid to them by fundraisers, and any interests that the intermediaries have or intend to take in fundraisers.

 

  • Process for conducting CSF offers: As mentioned in Part 1 of this series (relating to CSF fundraisers), the CSF regime sets out rules regarding the conduct of CSF offers which apply equally to intermediaries. In addition, however, intermediaries must ensure that they deal with application money received from investors in accordance with their obligations as Australian financial services licensees and in the manner set out by the CSF regime.

 

What now?

 

If you’re interested in becoming a CSF intermediary and would like further guidance about the new CSF regime, please contact us.

 

If you’d rather take advantage of CSF by investing in CSF fundraisers, keep an eye out for the next and final instalment in this series, where we’ll take a look at key points for CSF investors – including some of the things to consider before investing your hard-earned in a CSF campaign.

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