investor advertising

Hi Everyone,

I am looking at placing an advertisement in the newspaper to source some private funds from investors for the purpose of property investment. My understanding is that as long as you offer a fixed interest rate you are not required to lodge anything with asic ? I would be very interested to hear from anyone who has used this method of securing funds.

Best regards,

Charlie

Charlie

My understanding is that as long as you offer a fixed interest rate you are not required to lodge anything with asic ?

This is certainly not the case. I would check out the requirements under the Managed Investments Act before you place any ad.

Cheers

Yours in Finance
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
www.tayloredfinancialsolutions.com.au
richard@tayloredfinancialsolutions.com.au.
Lodoc loans from 7.83%

Hi Richard,

I've had a chance to view the act and it mentions that it is only a managed fund if greater than 20 people belong to it?
In your opinion, how can one legally seek funds from private individuals without having to go through all the  the red tape  with asic.
Your comments would be appreciated.

Regards,

Charlie

Yes 20 is the majic number under the MIA but i think you will also find that ASIC require reduced documentation whenever you are placing an ad for investment funds.

If you now the investor then possibly you could get away with it however any ad will require full disclosure.

Cheers

Yours in Finance
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
www.tayloredfinancialsolutions.com.au
richard@tayloredfinancialsolutions.com.au.
Lodoc loans from 7.83%

Hi Charlie,

If you have a look in the back of the Sydney Morning Herald every saturday under the 'Money wanted' section there is a whole list of people who place small ads advertising for investors similarly to what you described above.

Are you personally trying to raise funds under your own name or for a company that you control? If your fund raising under a company structure head to S708 (small scale offerings of securities) of the Corporations Act which states that there is a 20 investor ceiling as well as a $2 million cap. The section goes onto to include a list of exemptions for disclosure including sophisticated investors, offer through financial advisors,  professional investors.. If you comply with these requirments you don't need to lodge any disclosure with ASIC. Thats not to say your investors won't want a PDS for their own information anyway. 

Securities under the Act is taken to include shares in the company and debentures issued by the company. From your description above it sounds as if you would be issuing a debenture type security.

I knew company law would come into handy one day ha-ha.

Best of luck,

David

Hi David,

Thank you very much for your reply!! Would it be possible  to set up a number of unit trusts  for different projects  with each containing  20  investors and still be able  to apply  the S708 section of the corporations act?

Best regards,

Charlie

There was a good article in Australian Property Magazine on this topic in August 2005.  Might be a good place to start.

Hey Charlie,

If you nominate a company (or more likely a series of different companies) to be the trustee of the unit trusts, my logic says that the company is still the entity raising the funds and the Corporations Act 2001 still holds.
 
At $600+ for each company and $250 for the trusts you should factor in the potential administrative/compliance nightmare. I'd check with your legal team before you register anything.

Regards,

David