Section 1.3 Crowdinvestors: a new regime for African individual investors

In a traditional POS, investors have recourse to the services of licenced financial advisors who perform an assessment of their risk profile and suitable level of portfolio exposure to public equities. Private placements may be limited to individual investors who satisfy a given definition of “accredited” or “qualified” investor, i.e. individuals with significant personal wealth or relevant professional qualifications and experience.

The ACfA Label Framework must provide for similar controls to be implemented by crowdfunding intermediaries themselves or by third party service providers. Instead of excluding individual investors, crowdfunding intermediaries must be able to categorise investors according to their level of investable income, level of financial education, expectations on returns and the overall suitability of the securities offering to their portfolio.

The ACfA Label Framework creates the possibility for individual unqualified investors to participate in crowdfunding operations that are conducted by registered Crowdfunding Intermediaries in compliance with the ACfA Label Framework. The categorisation of investors, suitability tests, risk warning and KYC requirements are provided in DOC 2-2019: ACfA Label Categories.