July 7, 2020

Volume X, Number 189

July 07, 2020

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July 06, 2020

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Crowdfunding Regulation Part 2: Guidance for CSF Intermediaries

The Australian Securities and Investments Commission (ASIC) has published Consultation Paper 289 Crowd-sourced funding: Guide for intermediaries. CP 289 includes a draft Regulatory Guide outlining ASIC’s proposed guidance for crowd-sourced funding platform operators (CSF intermediaries) who can apply to ASIC for a licence from 29 September 2017, including an explanation of the new Corporations Amendment (Crowd-sourced Funding) Regulations 2017.

The Regulations, among other things, provide that:

  • people buying CSF securities must acknowledge that they have read the offer document and understand the risks.
  • CSF intermediaries must conduct certain checks on the offering company, including that the company is eligible to make a CSF offer.
  • there is a required risk warning that CSF intermediaries must display on their offer platform.

The Regulatory Guide explains, among other things, that:

  • ASIC proposes to issue CSF intermediaries with an updated Australian Financial Services Licence (AFSL) authorisation to operate a single CSF platform. Intermediaries may be able to operate multiple platforms after sufficiently demonstrating their ability to operate a single platform in a compliant manner.
  • the standard requirements for AFSL holders will be updated specifically for CSF intermediaries, including by requiring CSF intermediaries have:
    • a cash flow projection for at least the next 12 months;
    • a cash buffer of at least 5% of the cash flow of next 12 months;
    • at least $50,000 be held in surplus liquid funds; and
    • an auditor annually report on compliance with their financial requirements.
  • CSF intermediaries will have to:
    • pro-actively ensure compliance with the cap of $10,000 per investor per company per 12 month period.
    • operate a ‘communication facility’ allowing retail investors to make posts relating to the offer and ask the company making the offer or the CSF intermediary questions. CSF intermediaries will need a further AFSL authorisation if they wish to provide financial product advice on their communication facility.

ASIC invites feedback on CP 289 by 3 August 2017.

For Part 1, click here.

Copyright 2020 K & L GatesNational Law Review, Volume VII, Number 209

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
Michelle Chasser, KL Gates, financial services compliance lawyer, disclosure obligations attorney

Ms. Chasser is a corporate and regulatory lawyer with a focus on the superannuation and financial services industries. Ms. Chasser advises clients on a range of issues including compliance with Australian regulatory and licensing requirements, financial services compliance issues and disclosure obligations.

Ms. Chasser's clients include superannuation fund trustees, banks, wholesale and retail fund managers, as well as financial service providers.

61-3-9205-2086
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...

61-3-9640-4324