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Monday, 20 March 2017
Page: 1319


Senator XENOPHON (South Australia) (11:05): I rise to make a brief contribution to this debate and to outline my position and that of my colleagues on the amendments proposed by the opposition to this bill, the Corporations Amendment (Crowd-sourced Funding) Bill 2016. I think the Economics Legislation Committee report gives a fairly neat summary of what crowdsourced funding is:

Crowd-sourced funding … also known as equity crowdfunding or investment-based crowdfunding, is an evolving concept in corporate capital-raising. Broadly, the term describes a company seeking funds—particularly start-up or early-stage capital—online from 'the crowd'. In exchange for cash, the company offers its equity. Equity offers are published through an online portal, also known as a funding portal; that is, a website.

That is a fairly neat summary in the economics committee's report on this bill.

I would like to start off by acknowledging the efforts of the member for Chifley, Ed Husic, who has devoted a lot of time and energy to this legislation. I also note and recognise the work of the government in responding to some of the concerns raised about the first version of the bill. This bill was previously debated in the 44th Parliament but lapsed on 9 May 2016. The main differences between the two versions of the bill are an increase in the assets and turnover thresholds of eligible companies from $5 million to $25 million and a reduction in the cooling-off period for retail investors from five business days to 48 hours. I welcome the increase in the turnover threshold but have some concerns about the reduction in the cooling-off period.

I note that the Senate Economics Legislation Committee in the majority report recommended that the cooling-off period remain at 48 hours. There were a range of views put forward by stakeholders. Equitise regarded them as 'one of the greatest potential threats to the fair and orderly operation of the market', while Chartered Accountants Australia and New Zealand recommended the five-day cooling-off period due to the fact that 'crowdsourced funding is a new form of investment'. The opposition's dissenting report expressed concerns at the higher risk that crowdsourced equity funding represents to mum-and-dad investors.

On balance, I think it is appropriate for the cooling-off period to remain at five days as originally proposed. The committee recommended that the government monitor carefully the implementation of the legislation and undertake a review of the legislation two years after its enactment. I would need to hear very firm undertakings from the government in relation to this review. The monitoring and review process as recommended by the committee is an appropriate and essential way to monitor the effectiveness of the cooling-off period, but I believe that cooling-off period ought to be five days, not two—not 48 hours. As crowdsourced funding becomes more established, the cooling-off period can be reviewed and, if appropriate, revised, but caution, a prudential approach, is to say that it ought to be five days for the sake of consumers for this new form of investment. So we will be supporting the opposition's proposed amendment to extend the cooling-off period to five days.

In relation to the issue of limiting access to crowdsourced funding to public companies, I note the concerns raised by the opposition and the Australian Greens. Excluding proprietary companies from the regime in the bill is concerning, but I note that the government has indicated its intention to develop and introduce a framework allowing proprietary companies to access crowdsourced funding 'as a priority' and introduce a bill in the 'near future'. I know that Senator Gallagher has been quite critical of that, and I can understand why she has. I am interested in hearing from the minister as to the time frame the government has in mind for introducing this framework, to fulfil the undertakings it has given, and when parliament can expect to see a bill reflecting this. I think the 'near future' is not specific enough. I think former Prime Minister Rudd used to say 'in due season', so at least it has not said that, but 'near future' does not seem to be specific enough. That is something that the government needs to address, I believe, in the committee stage.

Amending the Corporations Act to give effect to this policy objective is not a simple task, and it needs to be approached with caution and care. It should have been done by the government so that a complete crowdsourced-funding framework could be passed by the parliament. My concern with the amendment proposed by the opposition, as sympathetic as I am to it, is that it may have a whole range of unintended consequences in the sense that the legislative framework is not there to include proprietary companies and that the other consequential amendments that would need to apply in terms of probity and other prudential requirements for proprietary companies are not there for this. They are not there in this amendment. Even though I think that it is clear that this is the path that we need to go down sooner rather than later, we must have the right legislative framework.

However, the bill before the chamber should pass. I do have concerns, as I said, that the opposition's proposed amendment to allow for a wider range of start-ups to access the crowdsourced-funding regime may have unintended consequences at best or, at worst, jeopardise the passage of this legislation. So we are not inclined to support the opposition's proposed amendment (1) on sheet 8047 as circulated. While it would have made more sense to present a bill that does not exclude proprietary companies, this bill should pass, as it is an important step to open up early-stage capital markets, which will ultimately help businesses to grow and therefore create new employment opportunities.

In closing: we live in a fast-moving world. Through advancements in technology, the rapid exchange of ideas has opened up business opportunities that generations before us would never have believed possible. These are business opportunities that, if implemented properly, can support families and communities through the creation of jobs, but we must have an appropriate consumer protection framework. The importance of fostering potential small businesses must not be underestimated.

Going forward, crowdsourced equity funding will play an increasingly important role in small businesses realising their ideas and ambitions. It is encouraging to see that the government is taking action to help grow small businesses and start-ups in Australia. Crowdsourced equity funding is one part of this equation. I believe this bill ought to go further, but it needs to be done in a carefully considered and appropriate framework. It will be interesting to see the extent to which these provisions are taken up by companies and investors alike. However, we must remain vigilant and responsive to the needs of small businesses. After all, they are an integral part of our economy and society. If this bill achieves what it is meant to, that is unambiguously a good thing.