Small businesses are the backbone of Australia’s economy, providing 45.7% of the total employment in the private sector. However, many local entrepreneurs complain that access to capital, especially in the early stage, is sometimes more difficult and inefficient than it should be. Australian start-ups have troubles accessing the VC market and other early stage investors – both almost nonexistent – and, as consequence, many are leaving the country to establish in the USA or in Europe.
Several local entrepreneurs recently expressed their favour for a revision of the current regulation for equity crowdfunding, believing that getting new rules specifically for the sector might help rendering this new financing method more cost-effective and convenient for the many small businesses seeking funds.
CAMAC’s Approach to Equity Crowdfunding
The Corporations and Capital Markets Advisory Committee (CAMAC) – the Australian financial market authority – released in September 2013 a discussion paper about equity crowdfunding and its current regulation, to understand whether there is need to intervene and, if so, what would be the best way of doing it. In particular, the paper looks at both what has been done in other countries to accomodate this innovation and what would be possible in Australia and, based on this, presents the different approaches that CAMAC could take towards this new financing method, such as:
- no regulatory change;
- limiting equity crowdfunding only to sophisticated, experienced or professional investors;
- making targeted amendments to the existing regulation in order to open up equity crowdfunding to all investors;
- creating a self-contained statutory and compliance structure for equity crowdfunding open to all investors.
Russel, L.; Beatty, A.; Tam, B. Crowdsourced Equity Funding in Australia. Mondaq.com.(2013)
Tompkins, A. Equity Crowdfunding in Australia. iPledge. (2013)