Regulatory barriers to capital lowered as ASIC issues first crowd-sourced funding licenses

Crowdfunding

Seven companies have become the nation’s first crowd-sourced funding (CSF) intermediaries after receiving Australian Financial Services (AFS) licenses from the Australian Securities and Investments Commission (ASIC).

Under the CSF framework, which commenced in September 2017, Big Start, Billfolda, Birchal Financial Services, Equitise, Global Funding Partners, IQX Investment Services and On-Market Bookbuilds have been authorised to help eligible public companies raise up to $5 million in capital through equity crowdfunding via a hosted online platform. Meanwhile, retail investors will be able to invest up to $10,000 per issuing company per year.

According to Minister for Revenue and Financial Services, Kelly O’Dwyer, the CSF framework has removed regulatory barriers to innovative eligible startups and SMEs obtaining the capital they need to succeed.

“This new source of funding creates opportunities, especially for small businesses in the early growth stage,” she said.

“This is all about delivering more jobs, higher wages and greater growth for our economy by ensuring Australians are able to harness new and innovative ways of developing and growing businesses.”

“The Coalition Government is continuing to build on the equity crowdfunding framework, with legislation to extend the regime to proprietary companies currently before the Parliament, opening up a new source of capital for even more Australian small and medium businesses.”

ASIC commissioner John price described the first round of authorisations as a “significant milestone for crowd-sourced funding in Australia”, explaining that CSF intermediaries “have an important gatekeeper role which will be key to building and maintaining investor trust in crowd-sourced fundraising”.

The newly licensed intermediaries have now been added to ASIC’s register of AFS licensees. ASIC’s free online search can be used by investors, potential crowd-sourced funders and others to confirm the authorisations held by individual licensees. ASIC encourages both CSF investors and companies to check whether their intermediary holds an AFS licence with appropriate authorisation to provide CSF services.

ASIC has issued guidance to assist companies seeking to raise funds through CSF (Regulatory Guide 261 Crowd-sourced funding: Guide for public companies (RG 261). ASIC has also published a template CSF offer document to help companies prepare their CSF offers.