In September 2013, the Corporations and Capital Markets Advisory Committee (CAMAC) – the Australian financial market authority – released a discussion paper about equity crowdfunding and its current regulation, to evaluate it and understand whether there is need to intervene.
A few months later, CAMAC is now calling for the government to pass a regulation that would allow every adult in Australia to invest through equity crowdfunding.
A few months later, CAMAC is now calling for the government to pass a regulation that would allow every adult in Australia to invest through equity crowdfunding.
The proposed legal framework
Currently, in fact, securities crowdfunding in Australia is limited only to professional investors, that is investors with more than AUD $2.5 million in investable assets or annual earnings of around AUD $250,000. This requirement certainly restricts the potential of this new financial source to fuel local private companies. Having acknowledged this fact, CAMAC is proposing to change the regulatory framework, allowing anyone to invest through crowdfunding. In particular, the proposed rules include the following:
Reactions
Many Australian crowdfunding stakeholders received the news as a positive sign, since it indicates that the authorities are looking into this new financial method and are working to allow it to become a valid early stage capital source for many businesses. This helps avoiding the risk that Australian companies flee offshore to other countries where securities crowdfunding is possible, for example close-by New Zealand.
However, there has been some criticism and worried reactions as well. Some local crowdfunding experts believe that the fact that companies are forced to convert in “exempt public companies” to be able to use equity crowdfunding will act as a barrier. In fact, the process to become an “exempt public company” is long and expensive, which can be a great obstacle for many small businesses. Furthermore other stakeholders deem the investment limit of AUD $10000 too low to allow crowdfunding to unleash its potential.
Nevertheless, Crowd Valley believes this is a good starting point. Things in the crowdfunding market evolve so rapidly, that also Australian authorities soon or later will need to adjust accordingly the proposed rules.
References
Cowan, P. (2014). Govt advisors recommend crowdfunding regulation. ITnews.com
Keating, E. (2014). Government considers easing crowdfunding rules for SMEs. Smartcompany.com
Image credit to: Steve Arnold http://bit.ly/1rZG5lk
Currently, in fact, securities crowdfunding in Australia is limited only to professional investors, that is investors with more than AUD $2.5 million in investable assets or annual earnings of around AUD $250,000. This requirement certainly restricts the potential of this new financial source to fuel local private companies. Having acknowledged this fact, CAMAC is proposing to change the regulatory framework, allowing anyone to invest through crowdfunding. In particular, the proposed rules include the following:
- Investors can invest a maximum of AUD $2500 per company, with an annual cap of AUD $10000.
- Companies can raise up to AUD $ 2 millions in a 12 month period
- Issuers will need to convert to “exempt public companies” to be able to raise capital through equity crowdfunding.
Reactions
Many Australian crowdfunding stakeholders received the news as a positive sign, since it indicates that the authorities are looking into this new financial method and are working to allow it to become a valid early stage capital source for many businesses. This helps avoiding the risk that Australian companies flee offshore to other countries where securities crowdfunding is possible, for example close-by New Zealand.
However, there has been some criticism and worried reactions as well. Some local crowdfunding experts believe that the fact that companies are forced to convert in “exempt public companies” to be able to use equity crowdfunding will act as a barrier. In fact, the process to become an “exempt public company” is long and expensive, which can be a great obstacle for many small businesses. Furthermore other stakeholders deem the investment limit of AUD $10000 too low to allow crowdfunding to unleash its potential.
Nevertheless, Crowd Valley believes this is a good starting point. Things in the crowdfunding market evolve so rapidly, that also Australian authorities soon or later will need to adjust accordingly the proposed rules.
References
Cowan, P. (2014). Govt advisors recommend crowdfunding regulation. ITnews.com
Keating, E. (2014). Government considers easing crowdfunding rules for SMEs. Smartcompany.com
Image credit to: Steve Arnold http://bit.ly/1rZG5lk
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.
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