HISTORY of the Australian Unlisted Capital Market

SME Over-the-Counter (OTC) deregulated trading market brief.

"The pathway to poverty is broad, however the road to wealth is disciplined, many will come and few will be chosen, the OTC market opens its door to all" -Burrows

1990s :- Early in the 1990s a Forum was set up for the study of economic growth prospects for Small Medium Enterprises (SMEs) who are the corporate consumers in industry. The result was the Report of Round Table of Bankers and SME (2000 final report of 3) sponsored by the 10 largest global banks (G10) in Basle, Switzerland.

The Reports recommendation was for Banks, Governments and Corporations to promote better integration of services, legislation and attitudes towards SMEs to stimulate SME activity, inclusive of stimulating emerging SMEs with new technologies, products and methodologies. Since that time progressive reports were issued that gave rise to changes in many countries legislation, capital markets and banking policy, EEC, Australasia and America being supporters.

In 1996 the Australian Reserve Bank issued permissions under banking supervision protocols for Australian Banks to develop structures that would ultimately see them allocate up to 5 percent of capital reserves for SME investments. Most banks have since created a maze of investment divisions, institutions, funds and private capital structure.

During 1997 Australian Securities & Investment Commission (ASIC) forged new securities laws that would see the development of the unlisted (deregulated) capital markets which where shadowing the Securities Exchange Commission (SEC) regulations for restricted securities sales. Many countries attempted to establish secondary Stock Markets with limited success, however Australia is deemed to be the only country that provided a legislative platform for full deregulation of SME capital markets and became a reality.

The Australian Unlisted Capital Market eventually became that reality.

The OECD in 1998 laid down basic principles for development and conduct of Business, Corporate and Economic governance in the western world, Australia being a signatory.

In 1998 the Australian Stock Exchange (ASX) in corroboration with Australian Securities and Investment Commission (ASIC) spear headed the opening up of the Unlisted Capital Markets in Australia.

Early March 1998 General Credits, Inc. (Reg No. T-1541) though its Australian division of Corporate Investor Relation Pty Ltd (ACN 078 250 969) (CIR) officially signed up with the Australian Stock Exchange Enterprise Market as a Founding Member with a menu of highly innovative services and new financial products for SMEs. CIR reportedly held approximately 25-30% of active deals on the Enterprise Market with national Seminars and Investor Showcases. It is a leader in the emerging SME industry.

General Credits comes under scrutiny of ASIC and international agencies as to compliance.

Since 1998, CIR has maintained and operated its own Unlisted Capital Market simultaneously alongside the ASX. The CIR success initiated the expanded continuation of an SME Bulletin Board when the markets effectively became privatised in 2001

Upon the expiry of the ASX Enterprise Market in April 2001, General Credits through CIR again expanded the Unlisted Capital Market onto a permanent platform and in its current format as the Australian Unlisted Capital Market (ACN 096 398 364) trading as Australian OTC Bulletin Board which is now the longest running continuous unlisted capital market in the Australasia and Pacific region with full integrated Securities Registry, Settlement & Clearance of trades, tracking and proofing of company shares, Custodian services and allied broker or dealer support. 

It is an company reporting electronic market located at www.OTCBB.com.au with paper document back office services for registry and settlement services.

During the period from 1998 to 2001, General Credits established specialist services for complete deregulated market system for SME companies which include divisions of 

• Secur-O-Clear for Clearance & Settlement system for securities, 
• General Credits Custodians Pty Ltd for securities custodial services, 
• General Credits Australia Limited for syndication underwriting services, 

In 2001 the Australian Unlisted Capital Market filed its revised Market Business Rules (V-4.5) with the ASIC as a recognised unquoted market.

Continuing success ensued and by 2002 the Australian Unlisted Capital Market attracts participants from around the globe with 10 Markets and over 30 Boards for SME Offerings and formally becomes an international and national market whereby approximately over a billion shares had been handled by the Australian Unlisted capital Market, General Credits and  CIR jointly.

During mid 2003 the market relocated into whole ground floor of No 12 Market Street, Melbourne which is a prestige quiet cul-de-sac street off the busy Collins St in the heart of Melbourne's uptown Financial precinct which is less than a block from the Australian Stock Exchange and financial hub. The new location offers customers and investors a inhouse Theatrette, catering, communications, off street ground floor entry, multi story car parking and top restaurants and a future Public Gallery, education centre with book shop.

In 2004, General Credits celebrated its 10th anniversary since establishment and CIR celebrated 6 years solely specialising in the deregulated capital market industry.

The net results of the last 10 years have created a fertile environment for fiscal products within the deregulated Capital Markets for both small and medium corporations.

The Australian Unlisted Capital Market has became recognised by other global Stock Exchanges as the cutting edge market platform for SME securities offerings and becomes a model for other countries to adopt where SMEs can sell, swap and trade shares negotiable securities on a delayed published results with less fear of legislation breaches.

Australian corporate finance history has been re-written and now includes the Australian OTC Bulletin Board as the undisputed pioneer and most successful non Stock Exchange market for Start Up and Emerging companied under $50 million.

In 2005, the Australian Unlisted Capital Market was scrutinized by the Australian Securities & Investment Commission (ASIC) as to compliance with the Australian Financial Securities Legislation (AFSL) and the relevant exemptions to which the market operates.

During the period of 2006 saw increased growth and stability from SME in Europe and Asia Pacific region supporting their entry onto a capital market. The AOTCBB is accepted internationally as an alternative system to an Stock Exchange for small to medium cap companies.

April 2007, saw the Australian Unlisted Capital Market fully establish its European OTC Bulletin Boards Representative Office at the Vienna Stock Exchange Building. This was seen as the culmination of 3 years work to establish the market as a true global OTC market for SMEs with Representatives in Europe, Pacif and Americas.

Written by Stephen C. Burrows. JP, AIBF (fellow).

 

About the Author: 
Stephen Burrows is a Justice of the Peace, Fellow in the Institute of Banking and Finance and arguably one of Australia's foremost experts in SME securities/capital structuring, capital programs  and deregulated capital markets operations. 

Stephen was also a founding participant on the Australian Stock Exchange enterprise market.

He is a well known entity in a number of  institutional circles in Australia and overseas with impeccable record with his regulatory peers. He has been in Melbourne's CBD (primarily Collins St) since the mid 1980s and previously held senior position at board level of a foreign bank, finance company and practiced as an insolvency specialist. He also sits on a number of  Public company boards and supports Community services as a Justice of the Peace. Unlike many high flyers, he leads a simple unassuming lifestyle.

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