There are a few topics that must be considered within CSEF and this Submission context.
1. What relaxation of the Sophisticated Investor status will mean
2. What relaxation for startups on the rule of general solicitation will mean
3. The Insurance Policy if CSEF is wrong
1. When we allow retail investors to commit funds to projects with a real risk that they may not see a return on these funds you have to create an ombudsman, similar to the TIO. Perhaps funded by the Licensed Intermediaries or government regulator or both through a levy on funds raised.
This ombudsman will make changes to the processes Intermediaries enforce on Issuers and Investors based on what does and doesn’t work at reducing risk and improving performance of CSEF-derived entities.
Simple things like ensuring that Investors and Issuers abide by caps on investment and raising respectively make sense. As does plain language product labeling and the industry should be forced to call a spade a spade. Complexity hides stuff. CSEF should be simple, cheap and effective because of the combination of processes and the “crowd”.
Generally speaking the amounts invested will be small and all investors should be given buyer beware information about CSEF Offers and Specific Information on each Issue to make sure they can make informed decisions.
However, the more complex the regulation makes it the further from the goal we take CSEF and therefore the less efficient it will be at creating economic stimulus through the creation of new enterprises.
2. These new businesses (SPV’s) are seedling ideas and if they are to be funded they need to be advertised within the platforms at a minimum. However, the desirable outcome is that any SPV can advertise on any medium to anyone within the time frame of their Issue as long as they clearly state they are an SPV.
Allowing CSEF-born start-ups to generally solicit only during their period of issue means you won’t annoy existing businesses that may otherwise want the right to generally solicit. Once the Issue is full or the timeline expires the SPV will no longer have the right to on-goingly generally solicit.
If a business wished to on-goingly generally solicit then they should be a public company with associated IPO and product disclosure.
SPV advertising in this space will get more creative – for better or for worse – and that will allow those that do it well to draw more attention and probably funds than someone that does it badly.
Moreover, it becomes a statement for the company soliciting funds about who and how they advertise. Their investor advertising and communication, which under CSEF conditions is much expanded, becomes the “brand” for that business/entity.
If we had “free for all” solicitation in Australia for all companies (if say you relaxed the provision within the current regime) it would probably add more junk mail to already full inboxes.
3 This submission is promoting fresh legislation, for fresh companies, with fresh entity types and fresh Intermediaries. This has an inbuilt “insurance” mechanism if the resulting behaviour is unacceptable. It can be easily un-done.
If however, the government does CSEF in increments and within the current regime, if winding back of legislation were required it would be much harder and much more expensive to un-do.
There are a few topics that must be considered within CSEF and this Submission context.
1. What relaxation of the Sophisticated Investor status will mean
2. What relaxation for startups on the rule of general solicitation will mean
3. The Insurance Policy if CSEF is wrong
1. When we allow retail investors to commit funds to projects with a real risk that they may not see a return on these funds you have to create an ombudsman, similar to the TIO. Perhaps funded by the Licensed Intermediaries or government regulator or both through a levy on funds raised.
This ombudsman will make changes to the processes Intermediaries enforce on Issuers and Investors based on what does and doesn’t work at reducing risk and improving performance of CSEF-derived entities.
Simple things like ensuring that Investors and Issuers abide by caps on investment and raising respectively make sense. As does plain language product labeling and the industry should be forced to call a spade a spade. Complexity hides stuff. CSEF should be simple, cheap and effective because of the combination of processes and the “crowd”.
Generally speaking the amounts invested will be small and all investors should be given buyer beware information about CSEF Offers and Specific Information on each Issue to make sure they can make informed decisions.
However, the more complex the regulation makes it the further from the goal we take CSEF and therefore the less efficient it will be at creating economic stimulus through the creation of new enterprises.
2. These new businesses (SPV’s) are seedling ideas and if they are to be funded they need to be advertised within the platforms at a minimum. However, the desirable outcome is that any SPV can advertise on any medium to anyone within the time frame of their Issue as long as they clearly state they are an SPV.
Allowing CSEF-born start-ups to generally solicit only during their period of issue means you won’t annoy existing businesses that may otherwise want the right to generally solicit. Once the Issue is full or the timeline expires the SPV will no longer have the right to on-goingly generally solicit.
If a business wished to on-goingly generally solicit then they should be a public company with associated IPO and product disclosure.
SPV advertising in this space will get more creative – for better or for worse – and that will allow those that do it well to draw more attention and probably funds than someone that does it badly.
Moreover, it becomes a statement for the company soliciting funds about who and how they advertise. Their investor advertising and communication, which under CSEF conditions is much expanded, becomes the “brand” for that business/entity.
If we had “free for all” solicitation in Australia for all companies (if say you relaxed the provision within the current regime) it would probably add more junk mail to already full inboxes.
3 This submission is promoting fresh legislation, for fresh companies, with fresh entity types and fresh Intermediaries. This has an inbuilt “insurance” mechanism if the resulting behaviour is unacceptable. It can be easily un-done.
If however, the government does CSEF in increments and within the current regime, if winding back of legislation were required it would be much harder and much more expensive to un-do.