Australia: Licensed to Blog - Internet Discussion Sites (IDSs) and Australian Financial Services Licences

Last Updated: 28 November 2016
Article by David Benson and Laura Clarke

Most Read Contributor in Australia, November 2017

ASIC monitors the activities of IDSs closely and is empowered to take enforcement action against Australian IDSs who do not comply with their obligations.

Internet discussion sites (IDSs) are becoming increasingly popular for a variety of reasons, including that sites with large memberships can be used to generate revenue in a variety of ways. One relatively novel way in which IDSs are being used to generate revenue is to provide a forum for listed companies to make contact with sophisticated investors for the purposes of raising capital.

In ASIC's view, a strict reading of the Corporations Act 2001 (Cth) may lead to the conclusion that an IDS needs to operate under an Australian Financial Services Licence (AFSL).

However, ASIC accepts that there are at least two classes of IDS:

  • sites that are used as another means of making professional securities advice more accessible to people; and
  • those which are not directed to providing such advice, but to providing a forum for persons not engaged in the provision of financial services to discuss their experiences as investors in particular companies.

ASIC has stressed that the first class of IDS would need to be operated under an AFSL. As to the second class, ASIC appreciates that to require the operator of such an IDS to hold an AFSL would create an unnecessary burden and may result in the benefits of IDSs not being "fully realised". Accordingly, ASIC has published guidance, in the form of ASIC Regulatory Guide 162 (RG162), as to the circumstances in which it will allow an IDS to operate without an AFSL.

What is an IDS for the purposes of RG162?

An IDS is a website that provides a forum for people to communicate. This may include, for example, chat rooms, blogs and web-based bulletin boards.

An IDS must comply with RG162 even where access to the forum is restricted to members of the IDS. That being said, RG162 is not intended to regulate private communications between smaller groups of individuals (eg. communications through emails or real-time chat sessions).

When can the operator of an IDS avoid holding an AFSL?

ASIC has determined that an IDS relating to financial products is not required to hold an AFSL if the activities of the IDS only extend to allowing people who are not securities industry professionals to discuss their experiences as investors. This may naturally involve users exchanging opinions and advice about securities. However, the IDS must comply with RG162.

The conditions imposed by RG162 are directed to ensuring the protection of consumers and market integrity and require (amongst other things):

  • disclosures and warnings to people who view posts on the IDS in relation to matters such as the authenticity, accuracy and reliability of posts;
  • disclosures and warnings to people who post on the IDS in relation to responsibility for posts made;
  • the keeping of records of persons making posts;
  • moderation of the content posted;
  • the provision to ASIC of free access to archived member information and postings together with search facilities; and
  • that ASIC be notified of certain matters including that the IDS is intended to be operated within the guidelines and of certain complaints that may be received.

When must an IDS hold an AFSL?

If the activities of an IDS involve giving professional securities advice to consumers (or other licensed activities such as dealing in securities), the operator must hold an AFSL.

ASIC has also determined that any IDS operated by an entity that already holds an AFSL carries on that IDS as a licenced activity, such that the operation of the IDS automatically attracts the obligations that would apply to a holder of an AFSL.

The rationale for this policy outcome is that IDSs operated by AFSL holders will, in ASIC's view, pose a higher risk to users because of the likelihood that consumers will consider that the information contained on such an IDS will have greater authority than the information contained on other types of non-licensed IDSs.

Of course, the use of IDSs as a means to contact sophisticated investors to promote capital raising would be an activity that would require the operator of the IDS to hold an AFSL.

Regulatory requirements in other countries

Operators should be careful to ensure that their IDS does not unintentionally breach regulatory requirements in other jurisdictions. This could occur if users outside of Australia participate in discussions on the IDS or if users discuss securities traded in overseas jurisdictions on the IDS. If the IDS is not intended to reach overseas users, operators may wish to have a statement on the site specifying that the IDS is not intended for users outside of Australia. Further, IDSs should carefully moderate any posts regarding securities traded in overseas jurisdictions to ensure that the IDS does not inadvertently become subject to regulatory requirements in those jurisdictions.

What this means for you

ASIC monitors the activities of IDSs closely and is empowered to take enforcement action against Australian IDSs who do not comply with their obligations. This may include banning or shutting down the IDS. To ensure compliance with your obligations, Australian IDS operators should consider:

  • whether the site publishes user-generated content or advice given by professionals;
  • whether the site is intended to reach users from countries other than Australia;
  • whether the postings discuss securities that are offered or traded in countries other than Australia;
  • whether the site contains appropriate terms and conditions that users are required to accept before interacting on the platform; and
  • whether the IDS collects and maintains sufficient information regarding the identity of users and posts.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions