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Looking to Become Crowd Sourced Funding Intermediary Under New Australian CSF Regime? PART 3

Central to the new CSF regime is the inclusion of the AFS licence holder who acts as the intermediary (i.e. the gatekeeper). The intermediary must hold an AFSL with the correct authorisations in order to carry out this role. After 28 September 2017, ASIC will be able to accept AFS licence applications from entities wanting to provide CSF services.

Considering acting as a CSF intermediary? There are a number of things you may wish to consider, including:

  • AFSL: Do you have an AFSL with the appropriate authorisations? Existing AFSL holders will likely need to apply for a variation.

  • Due Diligence: As a CSF intermediary you will need to conduct appropriate checks before publishing a CSF offer document. While the CSF intermediary generally takes no part in drafting the CSF offer document, it must not publish a CSF offer document unless it is satisfied that:

    • the company making the offer exists and is eligible to utilise the CSF regimeYou may consider performing ASIC company searches and request financial information to satisfy yourself of the eligibility status the company.

    • the CSF offer document is not misleading or deceptive or likely to mislead or deceive. You may consider requiring the company’s directors to attest to the accuracy of the CSF offer document by asking them to complete a due diligence questionnaire and provide verification certificates and materials.

    • the company’s officers are “of good fame or character”While no guidance has been issued on what might satisfy this requirement, similar to ASX listing admission and Responsible Manager appointment requirements, it may be prudent to carry out bankruptcy searches on the officers of the Company and require police checks and statutory declarations from the officers attesting to their good fame and character.

  • Liability: The CSF intermediary can in certain circumstances be held liable for loss or damage suffered by an investor due to a defective CSF offer document.

  • Australian Market Licence (AML): If you are considered to be operating a market (e.g. because you facilitate secondary trading) then an AML may be required. ASIC has not yet given any guidance about when an AML will be needed.

  • Pro-forma documentation: You will need to have adequate arrangements recorded in writing to ensure that you are complying with your obligations as a CSF intermediary.

Claire de Koeyer is co-author of this article. 

Part 1: Whats is the New Australian Crowd Sourced Funding Regime?

Part 2: Looking to Raise capital Under New Australian Crowd Sourced Funding Regime?

Copyright 2017 K & L Gates

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About this Author

Rania Seoud, KL Gates, Finance Transactions Lawyer, public capital markets attorney
Senior Associate

Ms. Seoud is a corporate and transactional lawyer with a focus on equity capital markets.

Ms. Seoud has experience in public capital markets, including initial public offerings (IPO) on the Australian Securities Exchange (ASX), rights issues, corporate governance, placements, corporate restructures, funds management, takeovers, mergers and general corporate law and ASX listing rule compliance advice. She also advises on private equity transactions for unlisted companies including mergers and acquisitions and private capital raisings, as well as...

61-3-9640-4209
Daniel Knight, KL Gates, financial services industry lawyer, retail fund managers attorney
Senior Associate

Mr. Knight is a commercial and regulatory lawyer with a focus on the financial services industry. He advises a range of wholesale and retail fund managers, banks, financial advisers, superannuation fund trustees and other financial services firms.

Mr. Knight concentrates on commercial transactions in the industry and on advising clients about Australian licensing, disclosure, and compliance obligations. He regularly advises international fund managers about offering their products in Australia.

Mr. Knight also has extensive experience advising multinational organisations about bribery, corruption, and anti-money laundering (AML) issues and the governance and compliance measures necessary to prevent these issues from arising.

61-3-9640-4324