ASIC issues first stop order for crowd funding

The Australian Securities and Investments Commission (ASIC) has issued an interim stop order preventing Hirehood from offering securities under its crowd-sourced funding (CSF) offer document.

The CSF was published on the VentureCrowd intermediary platform. ASIC said it made the interim order in the public interest to protect retail investors looking to invest in the offer.

This is ASIC's first use of its stop order powers in relation to a CSF offer under the Corporations Act 2001 (Corporations Act).

ASIC acted in relation to Hirehood's use of a nominee arrangement, the regulator said.

"This arrangement did not permit investors to directly acquire ordinary shares in Hirehood. Instead, shares issued by Hirehood were intended to be held by a related party of the intermediary, as nominee on bare trust for the shareholders," ASIC said.

"For an offer to be valid under the current CSF regime, only fully paid ordinary shares can be offered. Hirehood's nominee arrangement resulted in investors holding only an equitable interest in the fully paid ordinary shares, rather than full legal and equitable ownership rights normally associated with the ownership of ordinary shares."

ASIC added that it also acted as the offer document did not comply with the minimum content requirements prescribed in the Corporations Act and Corporations Regulations "2001, which includes providing sufficient detail about the issuer's business model.

ASIC acknowledged that the CSF regime was designed to facilitate flexible and low-cost access to capital, but reminded issuers and intermediaries that it would act where CSF offers were not made lawfully.

ASIC said it was conducting targeted surveillances to ensure issuers and intermediaries were 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," it said.

The interim order is valid for 21 days unless revoked earlier and Hirehood will have an opportunity to make submissions before any final stop order is made by ASIC.

VentureCrowd acknowledged the stop order and confirmed the campaign was promptly closed upon notification.

"We respect ASIC's regulatory role and are committed to addressing their concerns. Our CSF campaigns are meticulously planned to ensure compliance, and we believe the nominee structure we use is in the best interest of our investors, providing robust protection and representation, as well as enabling a cleaner cap table that is simpler for founders to manage," a VentureCrowd spokesperson said.

"We consider that our actions are permitted under law and will be responding to ASIC on that basis. We will work transparently with ASIC to resolve this matter and ensure the best outcomes for our investors and stakeholders."