The past few months have seen considerable movement on the regulation of crowd-sourced equity funding on both sides of the Pacific. In the U.S., the SEC has adopted rules which allow companies to crowdfund through a registered portal while in Australia, the Australian Government has introduced a bill into Parliament which significantly enhances the viability and attractiveness of crowdfunding.
How Much can be Raised and how Much Invested
U.S. companies are restricted to raising no more than US$1 million while Australian public companies will be able to raise up to AUD5 Million.
Investor limits per crowdfunding offering in the U.S. are based on the individual’s annual income or net worth with individuals with annual income or net worth of more than US$100,000 being allowed to invest up to 10% of their income or net worth in a particular offering. Overall investment in crowdfunding is limited to US$100,000 in a 12 month period.
In comparison, Australia proposes a flat AUD10,000 limit per investment in crowdfunding for all retail investors.
In the U.S. crowdfunding offerings must be made through an intermediary registered with the SEC, usually an online platform.
Australia is proposing a similar structure with offerings permitted through an intermediary which holds an Australian Financial Services Licence with the new authorisation for ‘crowd-funding service’. The regulated role of the intermediary in Australia will be to:
- undertake prescribed checks on the issuer
- monitor compliance for investments
- provide generic risk warnings to investors
- disclose fees paid to it by an issuer.
The intermediary will also be prohibited from providing investment advice or lending to investors.
The SEC Rules to Permit Crowdfunding can be found here.
The Australian bill on crowd-sourced equity funding here.