Crowdfunding platform Equitise fined for failure to file accounts on time for third year in a row

Paul Gregory, FMA acting director of capital markets. Photo / Supplied

Crowdfunding platform Equitise has been served an infringement notice and fined $7500 by the financial regulator after it failed to file its financial accounts on time for the third year in a row.

The Australian headquartered company was licensed to operate a crowdfunding platform in New Zealand by the Financial Markets Authority in 2014.

But it has run into ongoing issues with the FMA, whose role includes licensing and regulating crowdfunding platforms.

Equitise is required to file its audited financial statement by October 30 every year but has been late for the last three years. Its latest accounts were filed in January - nearly three months late.

The accounts show the company made a loss of $371,403 in the year to June 30, 2021 and had $325,330 of net liabilities.

It is the second time the company has been issued with an infringement notice by the FMA. But this time the infringement includes a $7500 fee.

The regulator said Equitise had also been late in filing its annual regulatory returns for two consecutive years, annual agreed-upon procedures (AUP) reports for three consecutive years, and its annual AML/CFT [anti-money laundering/countering financing of terrorism] report for two consecutive years.

Paul Gregory, FMA acting director of capital markets, said Equitise had repeatedly failed to meet its statutory financial reporting obligations, so the FMA had escalated its 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 FMA has told Equitise it must also develop a compliance plan which sets out in detail how it will ensure compliance, the applicable timelines and due dates, the person(s) accountable for each step, and how the firm will monitor compliance from now on.

If a satisfactory compliance plan is not provided to the FMA, the regulator may consider using formal regulatory tools, such as a direction order.

The company has 28 days to pay the infringement fee or respond to the notice.

The Herald has contacted Equitise for its response to the infringement notice and fine.

Its financial accounts indicate the company may need to raise capital itself.

The company said management believe its current forecasts support a going concern assumption based on existing cash balances, expected revenue and expenditures, and anticipated equity raising.

"Whilst no equity raising commitments are in place at the time the financial report is complied, the directors are confident in the ability to raise equity based on past experience.

"The directors also anticipate the conversion of existing convertible notes to equity upon their maturity."

Equitise also noted in its financial statements that as it had net liabilities at balance date it was in breach of its crowd-funding license conditions with the FMA and the Australian Securities and Investments Commission.

However the equity raising and conversion of the notes was expected to resolve the NTA [net tangible assets] position once completed.

"The need for Equitise Pty to raise additional equity and increase its revenue and profitability levels, and operate in compliance with its crowdfunding license conditions...constitutes a material uncertainty that may cast significant doubt on the ability of Equitise Pty to continue as a going concern."

Its auditors RSM also noted the company's material uncertainty to continue as a going concern.