George Lucas uses force to Raiz Bitcoin for investors...
We apologise for the clickbait.
In a recent email sent to investors, George Lucas, CEO and Managing Director of micro-investing app Raiz (sadly not the Star Wars Lucas), confirmed that Raiz plans to deliver a portfolio including an asset allocation including Bitcoin launching in June 2020. This email follows a story in the Australian Financial Review which suggested that ASIC had issued Raiz "relief to operate a Bitcoin retail fund".
Lucas's email to investors doesn't clarify what regulatory approvals or relief have actually been obtained, and the AFR does not go into detail on this point. It may be that no legal relief is required to operate the fund proposed by Raiz, but it never hurts to have early engagement with regulators. Raiz has some time before issuing public documentation for this offer which will set out any specific relief obtained.
All operators of retail managed investment schemes are required to lodge their Product Disclosure Statement (PDS) and Compliance Plan with ASIC for approval. The PDS currently available on Raiz's website is dated 16 December 2019, and is likely to have been amended to update the PDS's disclosure of risks to include risks specific to investing in and holding Bitcoin. Similarly, to ensure it can comply with section 601HA of the Corporations Act, Raiz will have, or will need to amend its Compliance Plan to incorporate how it manages the specific risks around Bitcoin. Before publishing an amended PDS, and implementing an amended Compliance Plan, Raiz is required to lodge the amended documents with ASIC for approval.
Further, as an authorised representative of an Australian Financial Service Licence (AFSL) holder (Instreet Investment Limited- AFSL 434776), as a condition of its corporate authorised representative agreement with the AFSL holder, Raiz will need to comply with the conditions attached to that AFSL.
One aspect of the Compliance Plan which is likely to have been updated are the provisions detailing how Raiz ensures that all scheme property is clearly identified as scheme property and held separately from Raiz's other property, or the property of any other scheme as required by section 601HA(1)(a) of the Corporations Act.
Responsible entities of registered managed investment schemes (like Raiz), are required to meet minimum custody standards set out in the Corporations Act and ASIC Regulatory Guide 133, which has historically been challenging for the custody of cryptoassets. Raiz is reported to be using the US-based Gemini as its custody solution.
Raiz is an ASX-listed company (ASX: RZI), and since the announcement has seen a jump in its share price from $0.82/share to $0.91/share at the time of writing. However, no further details about the proposal have been disclosed on the ASX, and the ASX does not appear to have any issues with the proposal as of yet.
However, after issuing a new compliance update regarding cryptocurrency-related activity on 1 August 2019, the ASX has made it clear that it views any interaction with cryptocurrency by a listed entity with a generous amount of skepticism. In particular, the ASX has provided that for listed entities considering a cryptocurrency activity, the ASX's primary areas of concern are compliance with:
Listing Rule 3.1 (Continuous disclosure - general rule);
Listing Rule 11.1 (Significant transactions - change to activities); and
Listing Rule 12.5 (Ongoing requirements - appropriate structure and operations).
It doesn't seem likely that Raiz's announcement should cause issues around the Listing Rules, but it remains to be seen whether the ASX begins to more closely monitor Raiz in future in response.