What is crowdfunding
Crowdfunding is a type of financial market service covered by the FMC Act. In general terms, a crowdfunding service is where you act as an intermediary between companies issuing shares and investors - by providing the facility (such as a website) where the offer can be made to the public. It is not a crowdfunding service under the Act if your service is only used for charitable or philanthropic fundraising, and donors don't receive shares.
What crowdfunding type is covered
The FMC Act covers equity-based crowdfunding. Equity crowdfunding is where companies raise money from the public by issuing shares. The Act does not cover rewards-based crowdfunding, where companies only offer a reward (for example, tickets, goods, credits on a website) to people who are providing money.
The Act enables companies to raise up to $2 million in any 12 month period, without having to issue an investment statement or prospectus (or a product disclosure statement from 1 December 2014).
Why get a licence
Crowdfunding must be done via a licensed crowdfunding service provider website if you want to take advantage of the lighter disclosure obligations that apply to crowdfunded share offers.
With a licence, you can provide services to companies who want to offer shares without supplying a product disclosure statement (PDS). By using your licensed service these companies can rely on an exemption in the FMC Act that means they don't need a PDS, although they must still meet all their other legal obligations. See clause 6 of Schedule 1 of the FMC Act for more about the exemption.
Your obligations
Licensed crowdfunding service providers have a number of on-going obligations, in addition to the minimum standards and standard conditions set out in their licence. Some of these are:
