With the introduction of this legislation into Australia, retail investors now have the opportunity to invest in an array of companies. A lot of investors and platforms focus on early-stage companies, looking for the next unicorn ($1 billion market value) and that’s a really important part of the market that needs support in Australia.
But at FUNDSITION, we focus on a completely different type of asset class, that is, SMEs with a track record and need capital for growth and expansion.
The opportunity for investors, is accessing an asset class that’s often mis-priced, misunderstood and generally lower-risk due to the fact they are established companies, which benefits investors.
Many of the rules are designed to protect potential investors, particularly those who are “retail clients” under Australian law. In broad terms, “retail clients” are potential investors who are not categorised as sophisticated, professional or institutional investors.
THE PROTECTION FOR RETAIL INVESTORS INCLUDE:
RETAIL CLIENT INVESTMENT CAP
- Retail clients will be limited to investing $10,000 per fundraiser via a particular platform within a 12-month period ($10k per company per year, but an unlimited number of companies is allowed)
RETAIL CLIENT COOLING-OFF PERIODS
- Retail clients will have a 5 business day cooling off period to withdraw their acceptances under CSF offers
Let’s have a look at how it works for an investor, the diagram provides an overview of the process: