Crowd Sourced Equity Funding: Submission to the Consultation

This submission responds to the Australian Government’s consultation paper on a regulatory framework for crowd-sourced equity funding (CSEF), answering the paper’s 23 questions. Research Australia maintains that CSEF should be treated as a hybrid of crowdfunding and equity raising, and that most investors will be motivated by support for a new product or service rather than by financial return, so clear generic risk warnings will protect them better than detailed disclosure. It suggests that small companies developing medical devices and technologies could benefit significantly, noting that a lack of capital for small innovative firms has been identified as a barrier to Australian innovation. Research Australia broadly supports the model proposed by the Corporations and Markets Advisory Committee (CAMAC), including the exempt public company structure, and favours limiting CSEF to small businesses and start-ups initially. It supports a per-investment cap but considers $2,500 too low, and opposes a $10,000 annual cap per investor across all platforms as impractical to enforce, proposing instead a $10,000 rolling 12-month limit per account with steps to prevent multiple accounts. Other recommendations include mandatory minimum and optional maximum fundraising targets, investor forums run by intermediaries, a pledge-based cooling-off approach modelled on existing crowdfunding sites, no barriers to a secondary market, and a review of the regime two years after implementation.