Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Hansard source

I am really pleased to speak on this bill, the Corporations Amendment (Crowd-sourced Funding) Bill 2015. I know that the alternative finance sector, the many organisations that are finding new ways to work and the start-up community have been waiting sometime for this, so I am very pleased to be able to talk about it in the parliament today. There is of course much criticism of this bill, too. I am going to touch on some of that, but my colleagues have covered much of the sector criticism that we have seen in the submissions to the Senate Economics Legislation Committee inquiry and in the media, so I am not going to go into much detail on that. I want to talk more generally about the alternative finance sector and its needs, and why I believe the government really needs to rethink some of the elements of this bill.

We all know that something needs to be done. Even in the submissions that were highly critical of this bill, the need to do something fast was clear. We need to catch up with what is already happening among our competitors and we need to find ways to support the extraordinary creativity that we find within our business community to enable them to pursue some of the wonderful solutions that they have found—particularly start-ups but also small businesses. We need it not just for individual companies to flourish but because the economic system in Australia needs more capital: if there is no funding here, then our best minds and our best businesses will quickly go elsewhere. Entrepreneurs are welcome all over the world, and there are several countries now that are well and truly ahead of us in the area of access to funding through equity crowdfunding.

Nearly all of the submissions to the Senate committee inquiry were highly critical of what they see as overregulation, complexity, high costs and, sometimes, barriers that prevent certain types of businesses or organisations from accessing the scheme. Many believe that the bill itself risks the very growth in the sector that the bill is supposed to stimulate. So there is very real criticism but very real need.

The alternative finance industry, of which equity crowdfunding is a part, is still in its infancy. There is a lot of talk about it. We hear of peer to peer and of fintech, but it is very much in its infancy. The best report I have found recently is one from Nesta in the UK, from the University of Cambridge. They put out a substantial report in 2014 that looked at the UK alternative finance industry, which mirrors but is slightly ahead of ours. Even in 2014, they identified nine different elements of alternative finance: peer-to-peer business lending, invoice trading, community shares, reward based crowdfunding, debt based securities, pension led funding, peer-to-peer consumer lending, donation based crowdfunding and equity based crowdfunding. In 2014, there were nine, so there are probably 11 now, and I suspect that in the years to come we will see many, many more ways of disrupting what has been quite a conventional finance sector, through new products and systems.

As I said, the alternative finance industry is in its infancy, and, at a time when it is in its infancy, perhaps tying it down in such a prescriptive way limits its possibilities. The Prime Minister talks of agility; he says we must be 'agile'. I hope he is not talking just about the government, because the role of government at a time like this, a time of rapid change, is to allow flexibility into the economy to allow businesses and entrepreneurs to be agile, and you do not do that by overregulating or narrowing the definitions of the things they are doing at such an early stage. Being agile does not mean imposing a set of restrictive rules on a growing area. In fact, regulating a growing area is incredibly difficult. There are few times, probably no time, when it has been more difficult to do that than it is now because the speed of change means that our regulation needs to be very light to allow for things to change, almost on a weekly basis.

I think the problem that the government has here is that it has tried to regulate an answer to crowdfunding as we know it in quite a narrow sense. It has tried to solve the problem of crowdfunding. I believe that is the wrong way to go.

I find regulating for answers to be quite a common thing. It seems quite obvious. I come from a sector of the arts industry, which was never industrialised. We have never been in that world where you build large, monolithic structures and you have to stay within them. We dealt with a constantly changing environment all the time. Many times in my frustration I sit down and consider what we do, even in government. Quite often we have ministers for answers. We have a minister for superannuation. That is a very good answer, but we do not have a minister who considers how we build financial security through life in retirement. We do not have someone who considers how we create a sustainable way of life or how we ensure the health and wellbeing of our population or how we build the capacity of our people. It is a way of looking at government that looks at the major questions that we all ask ourselves—How do we improve the quality of life? How do we rebuild community cohesion and capacity? How do we strengthen community and decision making? How do we build resilience?—all those questions which we all ask ourselves, which in government we quite often break down into answers we already know, and then concentrate on.

I think that is, again, a method of looking at the world which is increasingly less relevant, and it is exactly what we have the government doing now. We have a bill that deals with something the government thinks it understands—that is, equity crowdfunding. It legislates rules to make the government feel comfortable about something that is already there. It is very much catch-up legislation. The problem here, though, is that crowdfunding as we know it now is nowhere near finished. It is still a possibility. It is still nascent and it is still very much questioned.

There are two ways of looking at crowdfunding even as we know it. On the one hand there is the government approach, and it is quite clear in the explanatory memorandum what that approach is. The first couple of sentences say:

Crowd-sourced funding (CSF) is an emerging form of funding that allows entrepreneurs to raise funds from a large number of investors. It has the potential to provide finance for innovative business ideas and additional investment opportunities for retail investors, while ensuring investors continue to have sufficient information to make informed investment decisions …

For the government, crowdsourced funding is a way for entrepreneurs to raise funds from a large number of people—a crowd in this case.

There is another view of crowdfunding which turns it around the other way. It is that crowdfunding is actually about the crowd. I will talk about that for a small amount of time, because I was involved in crowdfunding back in the eighties. It was not equity crowdfunding, because it was not legal then as it is not now, but crowdfunding generally. I first participated in a crowdfunding project—I think the choir was called Cafe at the Gate of Salvation. They sent out a letter to a range of people, because the internet did not exist then, asking us to buy a CD that they would press some time in the next year, and when it was finally pressed I would get one. I was not a particularly great fan—it is actually a great choir, by the way.

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