Fundraising on the world wild web not immune from ASIC intervention.
Crowd funding is a practice in which people pool resources in support of an organisation or event, usually via the internet, like an online fundraising drive. While other jurisdictions like the United States are modifying their laws to facilitate this practice, Australian crowd funders should be wary.
ASIC has pointed out that some types of crowd funding will involve advertising a financial product or an investment scheme which would be illegal without compliance with the disclosure and other requirements of the Corporations Act.
Websites supporting this activity may also be at risk.
Whilst this may seem heavy handed for what might be a fairly minor activity, ASIC has expressed concern at the risk of fraud where funds are raised without any ability of investors to manage their risk by doing proper checks and ensuring the promoters are clearly named and accountable.
It may be that in the light of the ASIC warnings, the websites promoting crowd funding will develop safeguards such as disclosure requirements and monies raised being held in a trust account pending completion and delivery of the project.
ASIC make it clear that not all crowd funding activities will be illegal. Clearly promoters and investors will need to take care as the internet and social media again change the way business is done.
Selwyn Black (sblack@codea.com.au) Ph: 8226 7359
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
