Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)Chapter 10 Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Corporations Amendment (Crowd-sourced Funding) Bill 2016
10.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
10.2 The Bill establishes the regulatory framework to facilitate CSF offers by small unlisted public companies, provides new public companies that are eligible to crowd fund with temporary relief from reporting and corporate governance requirements that would normally apply and creates new exemption powers to provide emerging financial markets with a more tailored regulatory and licencing framework.
Human rights implications
10.3 The Bill engages the right of freedom of expression under Article 19(2) of the International Covenant on Civil and Political Rights (ICCPR).
10.4 New section 738ZG under item 1 in Schedule 1, Part 1 of the Bill restricts the advertisement of CSF offers except in prescribed circumstances.
10.5 The restriction on advertising is part of the investor protection provisions included in the Bill. Restricting the advertisement of CSF offers except as prescribed is intended to ensure that investors make decisions to invest in CSF interests based on full and accurate information.
10.6 To balance the need to protect investors with the need to enable the flow of information, there are a number of exemptions from the advertising restrictions. The first is to allow advertisements relating to CSF offers as long as the advertisement includes a statement that the investor should, in considering whether to invest in the offer, consider the CSF offer document and risk warning.
10.7 The provision provides for advertisements that direct potential investors to the CSF offer document and risk warning on the intermediary's platform to obtain further information about the offer that will enable them to make an informed decision on whether to invest.
10.8 There is also an exemption from the advertising restrictions to permit media businesses reporting on CSF offers in the ordinary course of their business to refer to CSF offers as long as they are not aware that they are breaching the advertising restrictions.
10.9 The CSF regime also provides for a specific communications facility that intermediaries are required to maintain while an offer is open so that investors can obtain information about an offer.
10.10 The advertising restrictions put constraints on the freedom of expression under the ICCPR but do so to protect investors. The provision balances the need to allow full freedom of expression with the need to protect investors participating in CSF offers. The provisions strike an effective balance by enabling the dissemination of information while also ensuring investors are directed to an appropriate source to obtain further information about the offer.
Conclusion
10.11 The Bill is compatible with human rights as it seeks to protect retail clients from advertisements that could induce them to make investment decisions without having all the necessary information.
10.12 To the extent that the Bill restricts the freedom of expression, this is justified because it is a reasonable, necessary and proportionate consequence of protecting investors by ensuring they can access sufficient information about the CSF offer.