ASIC to begin accepting licence applications from crowdfunding platform operators

The Australian financial regulator is advising crowdfunding platform operators to address CSF-specific requirements in its applications to speed up the assessment process.
Written by Jonathan Chadwick, Contributor

The Australian Securities and Investments Commission (ASIC) has announced that it will begin accepting licence applications from crowdfunding platform operators (intermediaries) on September 29, 2017, when the new crowd-sourced funding (CSF) regime comes into effect.

Licence applications can be submitted via the existing ASIC electronic 'eLicensing' portal, the financial regulator said, adding that it would consider the applications as a matter of priority to accelerate the implementation of the CSF regime.

Under the Corporations Amendment (Crowd-Sourced Funding) Act 2017, unlisted public companies with less than AU$25 million in assets and annual revenue can make offers of ordinary shares to retail investors through an intermediary's platform using a CSF offer document containing a reduced level of disclosure compared to a prospectus.

The aim of the minimum information requirements is to facilitate "simple and concise disclosure" through a "low-cost and efficient" process, according to ASIC's proposed guide published in June.

Eligible companies can raise up to AU$5 million in any 12-month period under the new CSF regime, but the government is yet to extend the CSF regime to proprietary companies.

Where previous legislation limited the scope of equity crowdfunding to wholesale or sophisticated investors who earn at least AU$250,000 a year or have AU$2.5 million in assets, under the new CSF regime, retail investors will be able invest up to AU$10,000 per company per year once they have completed a risk acknowledgement, and will have a five-day cooling-off period.

In addition to the standard documentation ASIC requires for all licence applications, intermediaries will need to address CSF-specific requirements [PDF] in its application.

These requirements include that the CSF offer documents that are published on the intermediary's platform contain information in a "clear, concise, and effective" manner.

The financial regulator had previously suggested in its proposed guide that the offer documents contain information in five key areas: The nature of the company's business, including its business model and strategy; the main risks facing the company's business; the capital structure of the company; the financial information of the company; and the use of funds raised under the CSF offer.

Additionally, the CSF applicant must demonstrate that it has in place adequate arrangements for the management of conflicts of interest and that it checks the identity of an offering company and its directors, including whether the company's directors have "knowingly engaged in misleading or deceptive conduct".

A communication facility must also be available for investors to communicate in relation to the CSF offer and make inquiries of the offering company and the CSF intermediary, and that they deal with client money in accordance with the Corporations Act.

The proposed guidance for intermediaries, to be finalised in the lead up to September 29, states that crowdfunding platform operators are responsible for administering protection measures and play "gatekeeper role" to ensure investors are only offered investments in public companies that are eligible to raise funds and are seeking to do so "for legitimate purposes".

ASIC also proposed that all CSF intermediaries provide information to ASIC annually about their activities.

The financial regulator will consider intermediary applications in batches between September 29 and October 27, and those submitted afterwards will be progressed "as soon as possible", it said.

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