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Monday, 20 March 2017
Page: 1327

Senator CORMANN (Western AustraliaMinister for Finance and Deputy Leader of the Government in the Senate) (11:39): The government will not be supporting these amendments today, although, in relation to the first issue that Senator Gallagher has raised, the government is entirely sympathetic to her position and what I believe Senator Whish-Wilson as well has been putting on the table. The issue is that extending crowdfunding to proprietary companies is not simple and would require significant changes to the law. It would represent a fundamental change to the traditional concept of a proprietary company. The opposition's amendment would be inconsistent with the current law, which prohibits a proprietary company from engaging in any public fundraising that would require disclosure to investors. Extending the crowdsourced funding regime to proprietary companies is a priority for the government. The government expects to consult on draft legislation in coming months. Consultation will be essential to ensure an appropriate balance between investor protection and opening up crowdfunding for innovative early stage companies. The overwhelming majority of stakeholders support proceeding with this current legislation to allow public companies to begin crowdfunding as soon as possible. As one submission to the Senate inquiry noted:

Australia will lose fast growth enterprises to jurisdictions with CSF if we delay much longer.

In relation to the second issue, the cooling off period, the government has reduced the cooling off period available for retail investors from five days to 48 hours in response to stakeholder concerns that a longer cooling off period would incentivise rivals to disrupt the crowdfunding offer by subscribing to the offer with the intention of withdrawing within the cooling off period. The 48-hour withdrawal period provided for in this bill presents a balanced approach. It reduces the risk of gaming by rivals and ensures investors have sufficient time to reconsider their investment decision. There is no international consensus on the need for a legislated cooling off period or on the optimal length of a cooling off period. For example, there are no legislated cooling off rights under the New Zealand crowdfunding model. In the government's judgement, the proposed cooling off period of 48 hours provides greater protection than that available for investors in public equity offers such as IPOs, who generally do not have access to cooling off periods at all. For these reasons we will not be supporting the amendments.

In response to some of the questions that were raised, implementing this framework will involve a range of areas across ASIC, including staff from the Corporations and the Investment Managers and Superannuation areas, the Registry and financial markets. ASIC will have a range of enforcement options available to address misconduct in the crowdfunding market. Specifically, crowdfunding intermediaries will be required to have an Australian financial services licence. Where there is misconduct, ASIC can impose conditions on a licence, suspend or cancel a licence or ban individuals from the industry. Where specific obligations of intermediaries or companies are breached, ASIC can issue an infringement notice or take a person to court to seek to impose a penalty.