Licensees beware of crowd-funders: The Fold
Australian financial services licensees (AFSL) need to be wary of equity-based crowd-funding platforms that may want to piggy-back off them as a temporary home, a legal firm warned.
The Fold Legal's solicitor director Charmian Holmes said AFSLs should take into account the risks and responsibilities of appointing a crowd-funding platform, including guaranteeing their authorised representative agreement and management system meet strict criteria.
Licensees should look at the how much investment advice can be given by the platform, and how qualified they are to provide that advice.
Furthermore, any remuneration earned by the platform should be revealed to retail clients in the financial services guide, and on the website.
They should also carry out a comprehensive risk-based assessment.
"ASIC views crowd-funding as a financial service if the offer has a financial product purpose and it involves fundraising through a corporate structure and/or other facility that pools investor contributions," Holmes said.
"In other words, if it involves issuing shares in a company or interests in a managed investment scheme, it's definitely on their radar."
Licensees should also make sure they have the authorisation for the product and client types of crowd funding activities like retail clients, securities and unregistered or registered managed investment schemes.
"Licensees may also need to seek legal advice on any areas they are not sure about," Holmes said.
Australian crowd-funding sites include venturecrowd, ozfund, pozible, thinkable, and thunderfunds.
AUTHOR
Malavika Santhebennur
Recommended for you
An adviser has received a written reprimand from the Financial Services and Credit Panel after failing to meet his CPD requirements, the panel’s first action since June.
AMP has reported a 61 per cent rise in inflows to its platform, with net cash flow passing $1 billion for the quarter, but superannuation fell back into outflows.
Those large AFSLs are among the groups experiencing the most adviser growth, indicating they are ready to expand following a period of transition and stabilisation after the Hayne royal commission.
The industry can expect to see more partnerships in the retirement income space in the future, enabling firms to progress their innovation, according to a panel.
