COB 11.6 COB 11.6 Property Investment Crowdfunding – extra requirements
This section applies to a
Property Investment Crowdfunding Operator.
The operator must ensure that each property listed for sale on its platform satisfies both of the following conditions:(a) the property consists of an individual apartment, house or building with a single discrete title deed; and(b) the property may be used only for residential purposes.
COB 11.6.2 Guidance
Property Investment Crowdfundingpermits investors to invest in one or more Special Purpose Vehiclesthat each hold a single property. The operator should not facilitate investments in a pool of properties held in a single Special Purpose Vehicle; as such a pooling arrangement is likely to constitute a Collective Investment Fund. GEN Rule 2.2.10E prohibits an operator from operating such a Fund.
(1) The operator must obtain an independent valuation report for each property listed on the platform.
(2) The valuation must be provided by a
Person:(a) who is a professional and reputable valuer;(b) who is not Related to the platform operator or to the seller; and(c) whom the operator reasonably believes will provide an objective valuation.
(3) The report must:(a) be prepared on the basis of an 'open market' valuation;(b) include the valuation and all material details about the basis of the valuation and assumptions used;(c) outline the overall structure of the market including market trends;(d) include a brief description of the property, its location, its existing use, any encumbrances concerning or affecting the property, the capital value and net monthly income expected from the property;(e) confirm the professional status of the valuer and that the valuation report is prepared on a fair and unbiased basis; and(f) be disclosed to investors as soon as it is available.
(4) The valuation must be carried out before a property is listed on the platform and not more than three months before a property is due to be sold.
(5) The operator must disclose the valuation report to investors and potential investors immediately after it becomes available.
Risk acknowledgement form
(1) The operator must ensure that a
Retail Clientprovides a signed risk acknowledgement form for each Investmentthat it makes using the platform.
(2) The risk acknowledgement form under (1) must:(a) set out clearly the risks referred to in COB Rule 11.3.1;(b) require the
Retail Clientto confirm that he understands those risks; and(c) be provided before, or at the same time as, the Retail Clientcommits to making the Investment.
(1) The operator must ensure that investors who have committed to make an
Investmentin a property may withdraw that commitment, without any penalty and without giving a reason, during the cooling-off period.
(2) In (1), “cooling-off period” means the period of at least 48 hours starting at the end of the commitment period.
Special Purpose Vehicle
The operator must ensure that a separate
Special Purpose Vehicleis established to hold title to each property.
Credit cards not to be used
The operator must take reasonable steps to ensure that a
Retail Clientdoes not use a credit card to invest using the platform.
COB 11.6.7 Guidance
An operator may permit an investor to use a debit card to fund an
Investmentprovided it has adequate systems in place to distinguish between a debit and credit card.
The operator must maintain effective systems and controls to ensure that a
Retail Clientdoes not invest more than US$50,000 in total in any calendar year using its service.
Restriction on remuneration sources
(1) The operator must ensure that it, and a person
Relatedto it, does not receive any remuneration, fee, payment or commission for, or in connection with, its service, except from investors or sellers who use the platform.
(2) Without limiting (1), an operator, or a person
Relatedto the operator, must not receive any remuneration, fee, payment or commission from a real estate agent, property manager, valuer, custodian or any other person providing a service related to the property.
Property not to be mortgaged
The operator must ensure that no mortgage, lien or other security is granted over a property that investors invest in using its platform.
COB 11.6.10 Guidance
COB Rule 11.6.10 prevents an operator or a
Special Purpose Vehiclefrom taking a loan secured against the property.