ASIC warns on crowd-funding websites

ASIC warns on crowd-funding websites

Summary: ASIC has warned punters of the dangers of getting involved in online crowd-funding programs.

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The Australian Securities and Investments Commission (ASIC) has been monitoring the increase in crowd funding for projects through the internet and social media, and has some advice on how not to break the law.

As crowd-funding sites such as Kickstarter gain popularity, and success stories such as the Android gaming platform Ouya surface, more and more people are looking to get a slice of the action. ASIC commissioner Greg Tanzer said that ASIC has been monitoring crowd-funding programs, and that some might be regulated by ASIC.

"Crowd funding, as a discrete activity, is not prohibited in Australia, nor is it generally regulated by ASIC," Tanzer said. "However, depending on the particular crowd-funding arrangement, ASIC's view is that some types of crowd funding could involve offering or advertising a financial product, providing a financial service or fundraising through securities requiring a complying disclosure document.

"These activities are regulated by ASIC under the Corporations Act and ASIC Act, and may impose legal obligations on operators of crowd-funding sites and on people using those sites to raise funds."

For instance, a crowd-funding site would be considered as a managed investment scheme covered by the Corporations Act if funds contributed are pooled to produce financial or property benefits for the contributors.

Failing to meet obligations under the Corporations Act can lead to fines and/or a prison sentence.

Tanzer said that ASIC has written to Australian-based operators of crowd-funding websites, stating the legal obligations that such investment schemes may have.

Tanzer said that those wishing to take part in crowd-funding projects should be aware of the risks of fraud, the risk of the projects failing to be completed and the possibility that money passed to a crowd-funding website may be lost and not passed on to the project creator, due to fraud or the bankruptcy of the website operator.

Topics: Government, Government AU, Start-Ups

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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  • Ouya a success story???? Since when??

    If that is true .... then Zynga is a money making success story with billions of years of profitability. A company worth investing in .....

    NOT!!!

    The company hasn't even deliver a working demo and anybody can create a similar product in days. All they did was achieve the target $$$$ ... but they haven't deliver anything. How is that a "success story"??
    wackoae
    • Successful

      In that it has exceeded obtaining the funding it was chasing, in spades.
      Josh Taylor
  • Next bubble

    Crowdsourcing is the next financial bubble to be an Internet phenomena after the tanking of Facebook's stock IPO.
    neil.postlethwaite
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