Australasian crowd-funding outfit, Equitise, has been pinged with a $7,500 fine for repeat reporting failures as the Sydney-based firm scrambles to re-capitalise its operations.
The Financial Markets Authority (FMA) penalised last week after Equitise missed its October deadline for filing annual financial statements for the third year in succession.
According to the regulator, the licensed crowd-funder was also late with other compliance duties including anti money-laundering (AML) reports.
In a statement, Paul Gregory, FMA acting capital markets director, said: “Equitise has repeatedly failed to meet its statutory financial reporting obligations, so we have escalated our response. Financial statements and other regulatory reports are an essential way for the FMA to understand how a firm is performing and meeting the conditions of its licence.
“Failure to file statements and reports can indicate wider issues, as with this case, so we decided a compliance action plan was proportionate to Equitise’s pattern of breaches.”
The Equitise financial statements filed in January show the crowd-funder’s NZ arm – essentially an un-manned outpost of the Australian business – turned a profit of about $161,000 for the 12 months to June 30 last year on revenue of $193,000 or so, repatriating $137,000 back across the Tasman.
But the parent company (including the NZ results) reported a loss of more than A$370,000 after losing almost A$931,000 the previous year over the same period while both the NZ and Australian operations remain in negative net tangible asset (NTA) territory – in breach of their respective crowd-funding licences.
Equitise auditors, RSM Hayes, notes that the firm’s negative NTA in both jurisdictions – along with other concerns – “indicate a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern”.
However, the Equitise accounts report the company was on track to clear its NTA deficit by the issue of new convertible notes (A$71,700 issued post balance date) and transforming some previous convertible notes – valued at about A$640,000 into equity as they mature in May and June this year (or earlier if triggered by “a Qualifying Financing event”).
The Equitise problems come amid a generally flat year for crowd-funding and other peer-to-peer financial services in general, according to recently published FMA data.
During 2021 the five operational crowd-funding firms in NZ attracted just $17.8 million from about 4,400 underlying investors, representing an 8 per cent increase in funds raised but a slight drop in investor numbers.
Similarly, peer-to-peer lending saw a small year-on-year increase of outstanding loans in 2021 to reach over $661 million compared to $624 million 12 months previously.
The dual ASX/NSZ-listed Harmoney holds more than half of the NZ peer-to-peer lending market with almost $360 million of outstanding loans in 2021 (down from almost $390 million the previous year).
While the number of registered peer-to-peer loan investors rose 8 per cent over the annual period to reach almost 37,000, just 13,350 held outstanding loans: 1,040 new investors dabbled in peer-to-peer loans last year compared 1,261 first-timers in 2020.
The FMA recorded eight licensed peer-to-peer lenders operating last year, although only seven held assets.
Peer-to-peer lending and crowd-funding services were late additions to the 2013 Financial Markets Conduct Act with the first business licensed in the sector in 2014.