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    <p class=”MsoNormal”>I am designing an equity crowdfunding platform which allows startup companies to raise capital from retail investors. I am awaiting the passing of the new CSEF bill which will enable this.</p>
    <p class=”MsoNormal”>However, another aspect of the platform is that I’d like to allow professional investors to sponsor startup investment opportunities. So, I would like to have a webpage which provides details about a startup and also includes words like “[x] professional investor has also backed this opportunity” and includes a video testimonial by the professional investor. This would be intended to encourage retail investors to invest in the startup.</p>
    <p class=”MsoNormal”>Would this kind of activity require an AFSL? If so, would the AFSL have to be held by the platform or the professional investor? What if the professional investor was already a board member & shareholder of the company – would this make a difference?</p>
    <p class=”MsoNormal”>(The new CSEF Bill does not deal with this so I am assuming that current law will apply.)</p>

    #4770 Reply

    David Court

    Hi Adigi,

    Thanks for your question.

    An AFSL is required if a person carries on a financial services business in Australia.

    Under the Corporations Act 2001, financial services currently include:

    • providing financial product advice to a client;
    • dealing in a financial product;
    • making a market for a financial product;
    • operating a registered managed investment scheme;
    • providing custodial or depository service; or
    • providing traditional trustee company services.

    However the new CSF bill will add providing a crowd funding service as a new ‘financial service.’  As a CSF intermediary your company will be required to hold an AFSL authorising you to provide a crowd funding service.

    Regarding the conduct you intend to engage in, i.e. the publication of testimonials by professional investors, they may also be required to hold a financial services licence if their testimonial constitutes ‘financial product advice’ as opposed to the provision of purely factual information.  As the operator of the website your company would probably also be considered to be providing that advice, especially if the professional investor was an employee or director.

    It is also important that all advertising comply with ASIC regulatory guide 234, which can be found here.

    Please feel free to contact our Financial Services Team.

    Author: David Court

    Co-contributors: Hannah MacPherson and Tamara Cherny

    Keep an eye out for the launch of our new Sydney office on Martin Place in July 2016!!  We are very excited about this opportunity to service our Sydney clients.

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