We use cookies to improve your experience and our services, by analysing how people use our website. By continuing to use the website, we understand that you accept their use.



Losing money in crowds

August 23, 2016
Rupert Smoker, CEO Evolution Trustees

Last week’s Australian Securities and Investments Commission annual forum showed united enthusiasm for technologically driven improvements in financial services. A key government proposal is to introduce draft laws to permit crowd-sourced equity funding. In other words, laws that will relax investor protection laws for small start-up companies seeking to raise no more than $5 million from mums and dads.

Crowd-sourced equity could provide significant capital to great entrepreneurs. This will drive economic growth and be good for Australia. The new laws have merit. However, only 10 per cent of start-ups succeed. Another statistic is that only 50 per cent of Australians know what 50 per cent is. With the fourth-largest superannuation pool in the world, the gap between where financial literacy within our population is, and where it ought to be, is large. The fact is, many mums and dads will lose money in these investments due to normal market forces. Many investors will not understand why they lost their money, and some will want someone to pay them back.

In letting mums and dads access high risk start-ups without normal investor protections, it must follow that the government accepts its role as the underwriter of responsibility for the laws it enacts.

Published in The Australian Financial Review, 29 March 2016.

Connect with us

Contact Us