Crowd funding – equity based
The Treasurer announced on Monday 21 March, that the Federal Government is actively considering the following changes to Australia’s equity-based crowd funding regime:
- increasing the capital raising thresholds (currently fixed at $5 million in any 12 month period)
- reducing the cooling off period for investors
- permitting intermediaries and platform operators to cancel an investment for legitimate reasons
- reducing the $5 million asset and turnover test applicable to issuers.
These reforms would have the effect of significantly expanding the scope of Australia’s equity-based crowd funding regime.
Crowd funding – debt-based
Relevant to debt-based crowd funding, ASIC also issued on Monday 21 March 2016, an important guidance on ‘peer-to-peer’ lending or market place lending platforms.
Peer-to-peer lending or market place lending platforms are often conducted under the guise of debt-based crowd funding, and are typically structured as unregistered managed investment schemes or an arrangement through which retail or wholesale investors invest money, which is then lent to borrowers.
Market place lending arrangements commonly involve the use of an online platform, such as a website, on which loan requests can be made. Loan requests are then matched against offers to invest. Investors either select the loans they wish to invest in or they are marked with loans that meet specified criteria.
Peer-to-peer lending: key issues addressed in the ASIC guidance
|Licencing||Providers of marketplace lending products will generally need to hold:
|Registration as a managed investment scheme||Registration as a scheme is:
|Specific AFSL authorisation required in the case of operation of registered scheme||Marketplace lending arrangements provided through a managed investment scheme will generally require a tailored AFSL authorisation to operate a registered scheme that matches investors and borrowers.|
|Operation of unregistered scheme||If marketplace lending is made available to wholesale investors only, there is no requirement to register the scheme. However, the marketplace lending provider will nonetheless need an AFSL to cover financial product advice, and dealing in interests in the scheme.|
|Consumer loans||Where consumer loans are made, the marketplace lending provider must comply with the responsible lending practices and requirements provided for in the National Consumer Credit Protection Act and the National Credit Code.|
|ASIC relief||A marketplace lending provider may be able to demonstrate that it is unreasonable to comply with a requirement under the Corporations Act or National Consumer Credit Protection Act or National Credit Code. Examples of relief provided by ASIC include:
|Advertising||Promoters of marketplace lending products must ensure advertising and promotional material fairly represents the products. Risks of investing in the product must be explained, in addition to the benefits:
|Security||Loans marketed as secured loans must be properly secured.|