Crowd-Sourced Funding in Australia: An Analysis of Regulatory Regime

Running Head: CSF 0
CROWD-SOURCED FUNDING
AUSTRALIA
[School]
[Course title]

CSF 1
Introduction
In this assignment the discussion will be made upon the effectiveness of the current regulatory
regime which could be made applicable in the crowd sourced funding in Australia. All this
would be done in relation to the unlisted public and proprietary companies. In short the
discussion will basically be focusing upon the adequacy of balance which was struck between
those safeguards which are inserted in the place for the protection of the investors while they are
encouraging the innovation in the companies.
The most eminent and the emerging form of funding is the CSF Crowd Sourced Funding and a
number of reviews are been undertaken for ascertaining the benefits of having a legislative
framework which is basically designed to facilitate the funding and its various types. CSF is very
successfully implemented in many nations and taking guidance from them Australia has also
introduced or it became possible for the Australian to adapt it for themselves. Thus the
Government of Australia for making their nation a progressive one and also for building a digital
future for their nation adopted this legislative policy of CSF for themselves.
Crowd sourced funding in Australia
The very term “Crowdfunding” means that practice which can help in raising the funds from the
pooling of finance from a large number of investors in the financing business for the smaller
financial contributions, or it can also be defined as commercialization of new product which can
basically be done through the online platforms. It can basically be of four types i.e. first reward
based, second donation based, third is based on equity and lastly it can be based on lending1.
The Corporation act of 2001 was amended in the year 2017 and had brought about certain minor
changes in the Australian Securities and Investments Commission Act 2001 and hence had
1 Anne Matthew, Crowd-Sourced Equity Funding: The Regulatory Challenges Of Innovative Fintech And
Fundraising, (2017) < http://www9.austlii.edu.au/au/journals/UQLJ/2017/3.pdf>.

CSF 2
provided a basic framework to the Crowd-sourced Funding. Basically this regime is used to
diminish the regulatory requirements and for raising funds for the general public for maintaining,
protecting and measuring the appropriate investments in the Australian Financial Services2.
The basic requirements of the Crowdfunding in Australia are firstly the securities must be
offered by the company making offer, secondly the company at the time of making an offer must
be deemed fit for becoming CSF company. Thirdly all the conditions mentioned in the regulation
must be properly satisfied by the companies. Fourthly, the ‘issue cap’ must be compliant along
with the offer etc.
There are a number of obligations given to the intermediaries under the CSF region and those are
as follows firstly they are considered gatekeepers who are obligated with non-disclosing or
ceasing the existing issue relating to the offers in the documents of the intermediaries. Secondly
they are to make provisions for enhancing the necessity of the communicating facility. Thirdly
they are also obliged for sending a notice to the potential investors relating to all the rights, risks
regarding the occurrence of fees and interest in the company where the issues are raised and
lastly they can terminate or suspend an offer which are needed and can be held responsible for
processing the money so received in the application. Etc. 3
Application of CSF and its effectiveness as related to the unlisted public and proprietary
companies
Unlisted public companies
It was September 29. 2019 when the corporation act of 2001 was amended by the corporation’s
amendments (Crowd-Sourced Funding) Bill in the year 2016 for creating a framework for the
2 Christopher Brown and Harry New, Crowd-Sourced Funding For Proprietary Companies – Why You Might Or
Might Not (2018) < https://hallandwilcox.com.au/thinking/crowd-sourced-funding-for-proprietary-companies-why-
you-might-or-might-not/>.
3 Madeleine Hunt, Update: Crowd-Sourced Equity Funding – Public and Private Companies (2017) <
https://legalvision.com.au/update-crowd-sourced-equity-funding-public-and-private-companies/>.