ASIC blocks crowd-sourced funding offer from reaching investors

The Australian Securities and Investments Commission (ASIC) has hit Hirehood Pty Ltd with its first stop order related to crowd-sourced funding (CSF), after it published an offer to invest in securities on the VentureCrowd platform.

The interim order seeks to prevent retail investors from taking part in Hirehood’s non-compliant offer under the CSF regime, which requires only fully paid ordinary shares to be offered. Hirehood used a nominee arrangement, which means investors did not directly acquire shares in Hirehood but they were instead “intended to be held by a related party of the intermediary”, VentureCrowd.

ASIC said this arrangement meant investors held only an equitable interest in the shares, rather than the complete legal and equitable ownership rights normally expected with the acquisition of ordinary shares.

“While ASIC acknowledges that the CSF regime is designed to facilitate flexible and low-cost access to capital, ASIC reminds issuers and intermediaries that we will act where CSF offers are not made lawfully,” the corporate regulator’s statement said.

“ASIC conducts targeted surveillances to ensure issuers and intermediaries are adhering to the legislative requirements of the CSF regime. ASIC will actively enforce compliance with the CSF framework and will exercise its stop order powers or take enforcement action if necessary to address any breaches.”

The stop order was also issued after ASIC found the offer document published on VentureCrowd did not follow the requirements set out in the Corporations Act 2001 and Corporations Regulations 2001, including providing “sufficient detail about the issuer’s business model”.

The interim stop order will remain in place for 21 days, unless cancelled earlier. Hirehood will also have the opportunity to make any submissions before any final stop order may be issued.

A VentureCrowd spokesman told Financial Newswire that the CSF campaign was “promptly closed” after notification of ASIC’s stop order.