Easier Access to Crowd-Sourced Funding in Australia

The Australian Parliament, through the voice of Treasurer Scott Morrison, recently introduced a bill aimed at removing the regulatory barriers to Crowd-Sourced Funding (CSF). CSF is a fundraising model that allows individual investors to directly invest in small companies, which might otherwise struggle to access affordable sources of funding. The concept of CSF is better known as ‘equity crowdfunding’ in other countries, and is for instance described as such in the American legislation.

Once in effect, the new legislation will lift some regulatory requirements (reporting, compliance, and governance) for issuers that meet the following criteria:

• to be an Australian public company limited by shares;
• to have less than AU$ 25 million in gross assets (or $18 million);
• to have less than AU$ 25 million in annual revenues.

On the other hand, individual investors cannot invest more than AU$ 10,000 (or $7,200) per issuer and per platform over the course of a given year. In April 2016, research and consulting firm Scott & Sullivan released a study that estimated the market size of the Australian fintech sector around $184 million in 2015 but also expected it to represent more than $3 billion in 2020 with an average annual growth of 76.36%. Prior to the recent change in regulatory requirement, one of the main drivers for growth was the improvement of the currently low adoption of alternative finance in the country. Indeed, Australian alternative finance volume per capita was four times lower than in neighboring New Zealand, and 7.5 times lower than in the USA, who leads the rankings with its more mature alternative finance industry. 

Today more than ever, Australia’s potential to become a major fintech hub is fueled by the activity of its local actors. And it seems that recently passed legislation will give them sufficient flexibility to adopt innovative solutions. In the words of Treasurer Morrison: “From today, all eligible businesses will be able to test a range of financial or credit     services (with up to 100 retail clients and unlimited wholesale clients for up to twelve months) without the need to apply for an Australian Financial Services Licence or Australian Credit Licence and without seeking approval from ASIC (the regulator)”.

In practice, it means that Australia went beyond the frame of usual sandboxes where approval from the regulator is needed prior to beginning the experimentation of innovative services. Here, there is only a need to notify the regulator when the testing phase begins.

Thanks to its world-leading infrastructure and an international network of expert partners, Crowd Valley is ideally positioned to assist investors, issuers, and intermediaries in entering the Australian CSF market. Any interested party shouldn’t hesitate to contact us.

Read the whole article and more details on Crowd Valley News.
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Photo: Melbourne (from Wikipedia).