07/07/2017 - 13:53

Asic clamps down on sophisticated investor loophole

07/07/2017 - 13:53

Bookmark

Save articles for future reference.

The corporate watchdog has made an example out of Kwickie Investments – which is run by the founder of failed music streaming service Guvera – over the misuse of the ‘sophisticated investor’ status.

The corporate watchdog has made an example out of Kwickie Investments – which is run by the founder of failed music streaming service Guvera – over the misuse of the ‘sophisticated investor’ status.

The Australian Securities and Investments Commission today declared that Kwickie shares were not to be offered to retail investors through a trust structure.

The watchdog said this method had been used by some accountants to disguise investors as 'sophisticated investors' and allow them to buy shares without a prospectus.

An investor receives its ‘sophisticated’ certificate from an accountant when he or she holds gross income of at least $250,000, or has assets of at least $2.5 million.

“Under the Corporations Act accountants are entrusted with an important role: by providing a certificate attesting to the assets or income of a person, the accountant can attest that a person is a sophisticated investor and therefore does not need the protections that apply to a ‘retail investor’,” Asic said.

“Asic is aware that, in certain recent fundraisings, some accountants have used trust or company structures that purport to allow investors who are not sophisticated investors to receive offers to purchase shares without a prospectus or other disclosure document.

“This has recently occurred in relation to offers of shares by Kwickie International.”

Kwickie, a Gold Coast-based messaging service chaired by Guvera founder Darren Herft, uses stars such as sports athletes and fitness models to engage in recorded conversations with users and generate advertising revenue.

Music streaming service Guvera collapsed after the ASX refused to approve the listing of its shares, after it had sought to undertake a $50 million IPO in mid 2016.

“Asic has made a declaration, to put the issue beyond doubt, that Kwickie International shares may not be offered to retail investors through a trust structure,” Asic said.

“Asic is continuing its investigation into the use of these structures. Asic is also in discussions with the appropriate accounting professional bodies about this issue.”

The watchdog said it was important that the sophisticated investor test was applied by accountants in a way that was consistent with the reason that the provisions were law.

“Otherwise retail investors will not be afforded the safeguards in making appropriate investment decisions that the law explicitly providers for,” Asic said.

“Asic also notes that accountants need to be careful not to recommend or otherwise provide financial advice unless licensed.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options