Does an ICO automatically trigger Chapter 6D disclosure obligations?

No, not automatically. The treatment depends on the rights and features of the token. ASIC INFO 225 explains that tokens representing equity, debt, or interests in a managed investment scheme are likely to be financial products. If the token is a 'security' under section 761A of the Corporations Act 2001, Chapter 6D fundraising disclosure applies. If it is a financial product but not a security, Chapter 7 disclosure (PDS) obligations apply instead.

What disclosure obligations apply to crowd-funded offers under the CSF regime?

Under Part 6D.3A of the Corporations Act 2001, eligible companies can rely on an alternative disclosure regime — a CSF offer document rather than a full prospectus. The CSF intermediary (which must hold an AFSL with CSF authorisation) is the gatekeeper: it must conduct identity, criminal history and bankruptcy checks on the issuer (section 738U), and refuse to publish offers it believes to be misleading (sections 738Y-738Z).

ASIC RG 240: Crowdfunding Promoter Disclosure Obligations

ASIC Regulatory Guide 240 on promoter and intermediary disclosure obligations for fundraising, including crypto and token offers, under Chapter 6D of the Corporations Act 2001.

RG 240 scope and context

RG 240 deals with disclosure obligations for offers of securities through crowd-funded debenture offers. It operates within the framework of Chapter 6D of the Corporations Act 2001 (Cth), which governs fundraising and Prospectus disclosure exemptions Corporations Act.

Generally, an offer of securities to retail investors in Australia requires a prospectus complying with section 710 of the Corporations Act, unless an exemption applies under section 708. These exemptions can include small-scale, sophisticated investor, and senior manager offers.

The crowd-sourced funding regime in Part 6D.3A of the Corporations Act provides an alternative disclosure regime for eligible CSF offers, facilitated through a licensed intermediary. ASIC has also issued INFO 225 'Initial coin offerings and crypto-assets' to clarify disclosure obligations related to ICOs and crypto-asset offers.

When ICOs and token offers trigger Chapter 6D

Initial coin offerings (ICOs) and token offers may trigger Chapter 6D disclosure obligations. Whether a crypto-asset is a financial product depends on its rights and features, not its label, as explained in ASIC INFO 225. Tokens that represent equity, debt, or interests in a managed investment scheme are likely to be financial products under section 763A.

If a token offer constitutes an offer of a ‘security’ or an interest in a managed investment scheme, Chapter 6D (or Chapter 7) disclosure obligations apply. Offers of financial products that are not ‘securities’ but remain financial products will instead trigger Product Disclosure Statement obligations under Part 7.9.

Promoters and issuers must be aware of their obligations. They can be liable under sections 728 and 1041H for misleading or deceptive statements made in connection with any token offer.

Promoter and intermediary obligations

Promoters of Crowd-sourced funding Australia CSF offers have disclosure obligations and may be liable for defective disclosure under section 729. These promoters are those who control or substantially influence the offer.

Intermediaries, including platforms hosting offers, have obligations to consider whether their activities constitute operating an unregistered managed investment scheme or providing a financial service without an Australian Financial Services Licence (AFSL). Crowd-sourced funding intermediaries must hold an AFSL with the specific authorisation under section 911A and fulfil CSF gatekeeper obligations under section 738Q.

Section 738U requires intermediaries to conduct prescribed checks on the issuer, including identity, criminal history, and bankruptcy checks. Further, sections 738Y and 738Z impose obligations on intermediaries to refuse to publish an offer if they have reason to believe it is misleading or deceptive.

ASIC enforcement and penalty exposure

ASIC has demonstrated a willingness to enforce compliance with fundraising regulations, taking action through measures such as stop orders and Federal Court injunctions, particularly in relation to initial coin offerings and unauthorised fundraising. These enforcement actions highlight the seriousness with which ASIC views non-compliance.

Promoters should be aware of the potential for both civil and criminal liability. Section 728 creates liability for misleading or deceptive statements in fundraising documents, carrying a maximum criminal penalty of five years imprisonment. Section 1041H prohibits misleading or deceptive conduct related to financial products and services.

Failure to comply with these obligations can result in significant civil penalties. Under section 1317G, civil penalty proceedings may result in pecuniary penalties of up to the greater of $782,500, three times the benefit obtained, or 10% of annual turnover for body corporates. Issuers must also lodge offer documents with ASIC under section 718 and may be subject to ASIC stop orders under section 739.