A Melbourne climate-tech founder is halfway through a $2.4 million pre-Series A. She has closed the lead and about half the balance from warm intros. To fill the round she pulls a list of 180 “Australian angel investors” from a scraper, drops a personalised opener into a LinkedIn Sales Navigator sequence, and by Thursday afternoon has forty-two replies, nine calls booked and two verbal commitments. The founder’s lawyer sees the sequence in a data-room review the following week and asks a question the founder has not thought about since the round was scoped: which of these 180 people are wholesale clients, and how did the founder know that before she pressed send? None of them. She didn’t. Two of the nine call-bookings are unlicensed advisers who forward the deck to a WhatsApp group of 300 retail investors overnight. The founder wakes up on Friday to a ticker in a Discord channel, a $30,000 cheque request from a stranger, and — one week later — an ASIC letter under s 912A/s 992A referencing the sequence text.
That is the underrated compliance layer sitting on top of every Australian seed and Series A round. Section 708 decides whether the offer needs a disclosure document. Section 992A decides whether the manner of the offer was lawful in the first place — and unlike s 708, it applies before you even know whether the person on the other end of the cold DM qualifies for any exemption at all.
What the Anti-Hawking Prohibition Actually Says
Section 992A of the Corporations Act 2001 (Cth) — rewritten by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 and in force since 5 October 2021 — prohibits a person from offering a financial product for issue or sale to a retail client in the course of, or because of, unsolicited contact. Shares, options, convertible notes, SAFEs and MIS units are all financial products. Every startup capital raise is therefore inside the perimeter unless a carve-out lifts it out.
The prohibition is criminal (up to five years imprisonment for individuals, corporate fines calculated by reference to s 1311 and the greater-of formula in s 1311B) and civil (the greater of 5,000 penalty units, three times the benefit obtained or 10% of turnover capped at 2.5 million penalty units under s 1317G). ASIC also has a stop-order and infringement-notice pathway. The offence is not one founders can quietly disclose their way out of after the fact.
The Retail-Client Filter — Where Most Startups Sit
Section 992A applies only to offers made to a retail client. Under s 761G and s 761GA, a person is a retail client unless one of the wholesale gateways applies — the $500,000 product-value threshold, the $2.5 million net-assets or $250,000 income accountant-certificate test, the s 761GA experienced-investor pathway through an AFSL, or the s 9 professional-investor list.
The important sequencing point is that the classification is tested at the time the offer is made, not when the cheque lands. A founder DM-ing an angel out of the blue does not, at the moment of sending, have a valid accountant certificate for that angel on file. The recipient may or may not qualify — but the offer is being made to a person whose retail/wholesale status is unknown to the offeror. ASIC’s position in RG 38.98 and the associated April 2022 update is that the offeror must have reasonable grounds to believe the recipient is a wholesale client at the time of the offer; a post-hoc certificate does not retrospectively cure the initial contact.
For a well-run round, the practical filter is a two-stage funnel: introduce, verify wholesale status, then offer. Cold-messaging with the offer in the first message inverts the funnel and moves the risk squarely onto the founder.
What “Unsolicited Contact” Means
Under s 992A(4), contact is unsolicited if the consumer did not consent to it, and consent must be positive, voluntary and clear. Silence is not consent. Pre-ticked checkboxes are not consent. A “we may send you deal flow from time to time” clause buried in a newsletter opt-in is not consent to a specific offer. And consent given for one purpose does not extend to a broader one — an angel who consented to receive market updates has not consented to receive a subscription agreement.
Two additional statutory features tighten this further:
- Temporal decay. Consent lapses after a “reasonable period.” RG 38 gives six weeks as ASIC’s working benchmark for retail contexts; anything older than that is treated as stale.
- Scope decay. Even fresh consent covers only offers that are “reasonably within scope” of what the consumer agreed to. An investor who opted into a fintech newsletter has not consented to a hardware-startup pre-seed.
What “Real-Time Contact” Means
Section 992A(5) captures contact that is in the nature of a discussion or conversation — phone calls, face-to-face meetings, video calls, chatbots, and (per RG 38.51) instant messages including LinkedIn direct messages, Twitter/X DMs, WhatsApp, Slack and Discord. The technology-neutral drafting is deliberate. ASIC’s April 2022 update specifically flags SMS and direct-messaging sequences on professional networks as inside the perimeter.
Non-real-time contact — a mass email, a public blog post, a broadcast newsletter — is not “real-time” for s 992A purposes, but it may still fall foul of the s 734 advertising restriction inside the s 708 personal-offer analysis (see our post on s 708 pathways). The two regimes overlap without being identical, and founders often get exposure on the second while trying to avoid the first.
Where the Exemptions Bite for Startups
The prohibition contains a small number of carve-outs and one very large one:
- Existing client relationship. Contact made in the ordinary course of an existing customer or member relationship — for example, a startup approaching its own existing shareholders about a follow-on round — is treated as solicited if the existing relationship is genuine.
- Consent given inside six weeks. An investor who signed up to a founder’s “future rounds” list six weeks ago, from a clear opt-in describing the kinds of offers to expect, has consented.
- Wholesale offers. Offers made only to wholesale clients are outside s 992A entirely — this is the exemption that makes any seed round workable, but only where wholesale status is verified before the offer.
- AFSL-intermediated offers. A licensed intermediary running the placement on the founder’s behalf can carry the anti-hawking analysis inside its own licence conditions, subject to its own conduct obligations under s 912A.
Notably absent from the list: “warm intro from a mutual friend.” A warm intro helps establish that the offeree is likely to be a wholesale client and reduces the s 708 personal-offer risk, but it does not by itself convert an unsolicited-real-time contact into a solicited one for s 992A purposes. The recipient’s own consent is what does the work.
The Practical Playbook for a 2026 Round
Founders who close clean rounds run the anti-hawking analysis as an operational discipline, not a legal-review question. The pattern that survives an ASIC review:
- Segment the pipeline before the first message goes out. Every prospect is tagged: existing shareholder, prior-round participant, opted-in newsletter subscriber (with date), AFSL-intermediated introduction, warm intro with a stated wholesale qualifier, or cold. Cold prospects receive content, not offers — a first-touch message that shares a market thesis or a landing-page link is not an offer of a financial product.
- Verify wholesale status before any offer document flows. A qualified-accountant certificate under reg 6D.2.03 (dated within six months for s 708(8) purposes) or a documented s 761GA statement precedes the term sheet, not the other way around.
- Log consent with dates and scope. A CSV of opt-in timestamps and the specific opt-in wording is the artefact that answers a s 992A inquiry. Founders who cannot produce it are treated as having had no consent.
- Keep a “no-offer” firewall on public and semi-public channels. LinkedIn posts, Twitter threads and podcast appearances describing the round in operational terms — market, traction, team — sit safely on the awareness side of the line. The moment a channel carries a subscription price, minimum cheque or term-sheet-level detail, s 992A (and s 734, and s 708(2)’s personal-offer character) all trip together.
- Use an AFSL intermediary for anything outside the warm network. For seed-plus rounds that need to draw on a broader pool, running the placement through a licensed intermediary shifts the anti-hawking compliance to a person whose business is designed to carry it.
The Bottom Line
Anti-hawking is not a rule about cold email being illegal in Australia. It is a rule about the content of unsolicited real-time contact — and the content restriction it imposes on a startup capital raise is total. A founder can DM a stranger to ask for a coffee. A founder cannot DM a stranger to offer them shares in the company unless that stranger has already, positively, voluntarily and clearly consented, or is verifiably a wholesale client, or the offer is being carried through an AFSL. The Melbourne founder in the opening scenario had a defensible s 708 posture on the round and lost it in the manner of the outreach, not in the offer itself. The founders who avoid that outcome build their pipeline around consent and wholesale verification first, and their fundraising message second — because in the sequence s 992A polices, message-first is the mistake the statute is designed to catch.
Viridian Lawyers advises Australian founders, angel syndicates, AFSL-holding intermediaries and family offices on capital-raising conduct — including s 992A anti-hawking analysis, s 761G/761GA wholesale-client verification, RG 38 consent architecture and AFSL-intermediated placement structures. If you are scoping outreach for a seed or Series A round, refreshing an investor pipeline, or reviewing an existing sequence for anti-hawking exposure, get in touch.
