Crowd funding is a type of financial market service covered by the Financial Markets Conduct Act 2013 (FMC Act). An equity-based crowd funding service licence holder acts as an intermediary between companies issuing shares and investors purchasing shares. The licence holder provides a facility where offers of shares can be made to the investing public.
What type of crowd funding is covered by a licence?
The FMC Act covers equity-based crowd funding. Equity crowd funding is where companies raise money from the public by issuing shares. The FMC Act does not cover rewards-based crowd funding, where companies only offer a reward (for example, tickets, goods, credits on a website) to people who are providing money. It is not a crowd funding service under the FMC Act if the service is only used for charitable or philanthropic fundraising where donors don't receive shares.
The FMC Act enables companies to raise up to $2 million in any rolling 12 month period, without having to issue a product disclosure statement.
Licensing and registration
Why get a licence
Equity crowd funding must be done through a licensed crowd funding service provider if the issuer of shares wants to take advantage of the lighter disclosure obligations that apply to crowd funded share offers.
With a licence, a service provider can help companies who want to offer shares without having to prepare and supply a product disclosure statement. By using the licensed service, these companies can rely on an exemption in the FMC Act that exempts them from providing product disclosure statements, although they must still meet all their other legal obligations.
Applying for a licence
To ensure the licence application runs as efficiently as possible, please follow the steps outlined below:
Review the licensing guides below as they contain all the information that is needed to complete and submit your application.
Licensing Guide Part A contains information about the licensing process and includes many answers to FAQs and explains how to use the online application form.
Licensing Guide Part B contains all the specific questions that will be asked and the minimum standards that need to be met in order to obtain a crowd funding licence. It also provides details of the information and supporting documents that will need to be provided when submitting the licence application.
The fee payable to the FMA when applying for a new FMC Act licence for crowd funding services is $6,238.75 (excl. GST). The fee includes 40 assessment hours.
We may charge an additional fee at the FMA staff hourly rate where the assessment of an application exceeds 40 assessment hours. If it appears that an additional fee may be charged for your application, the FMA will inform the applicant in advance and provide them with a reason for this. We may also invoice for any costs of external advice or assistance.
All licensed trustees have a number of obligations, in addition to the minimum standards and standard conditions set out in their licence. These obligations include meeting the relevant professional standard of care; monitoring your compliance; identifying material changes of circumstances; meeting reporting obligations and notifying the FMA of certain events and providing us with information. A list of your obligations can be viewed below.
The fair dealing provisions of the FMC Act prohibit misleading or deceptive conduct, false, misleading or unsubstantiated representations, and offers of financial products in the course of an unsolicited meeting.
The FMA has issued a guide to fair dealing in advertising and communications specific to crowd funding and peer-to-peer lending service licence. The purpose of this guidance document is to ensure licensed crowd funding and peer-to-peer lending service providers understand their obligations when advertising or communicating with customers.
Anti-money laundering and countering financing of terrorism
You must provide a written risk assessment of the money laundering and financing of terrorism activity you could expect in the course of running your business.
You are required to implement an anti-money laundering and countering financing of terrorism programme that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism.
You are required to appoint a compliance officer to administer and maintain your programme.
You are required to perform due diligence processes on your customers. This includes customer identification and verification of identity.
You are required to report suspicious transactions.
Every licensed crowd funding provider is required to complete and submit an annual regulatory return which is a series of questions about your business and how your licensed service is used. The information you provide us through the annual return helps us to:
better understand your business and the services you offer;
ensure the information we have on your business is current; and
focus our monitoring activities more effectively.
All licensees will need to submit their return to us by 31 August for the 12 months to 30 June.
Licensee obligations include notifying the FMA of certain events and providing us with information. All notifications should be emailed to firstname.lastname@example.org, noting the relevant obligation in the subject line of your email.
Forms to be completed if there are changes to directors or senior managers
It is a standard condition of licensing for independent trustees (corporates) to notify the FMA of changes to directors or senior managers of a licensee and/or key personnel of an authorised body. To notify us of a change to your key people and managers as required by the licensing standard conditions, please send an email to email@example.com outlining what the changes are and the qualifications and experience of the new or replacing personnel, e.g. attach their c.v.
The FMA has wide powers to exempt persons or transactions from some financial markets law requirements. These powers enable us to remove rigidities in the law and ensure requirements for businesses are reasonable and cost-effective.