Crowd funding Web sites may offer one of the coolest means to earn some big bucks but Australia's corporate watchdog issued an advisory on Tuesday outlining the risks and responsibilities that come with getting involved on such projects.

The basic function of crowd funding sites is to attract prospective investors who might be willing to pitch in some cash that would be used for specific projects, which according to the Australian Securities and Investment Commission (ASIC) was not exactly illegal.

"Crowd funding, as a discrete activity, is not prohibited in Australia, nor is it generally regulated by ASIC," ZDNet Australia reported ASIC Commissioner Greg Tanzer as saying in a statement.

But as more and more people were being lured by the online financial activity, Mr Tanzer disclosed that his agency has commenced close monitoring for such programs, especially in specific cases that may require scrutiny from ASIC.

"ASIC's view is that some types of crowd funding could involve offering or advertising a financial product, providing a financial service or fundraising through securities requiring a complying disclosure document," Mr Tanzer said.

In short, if activities would generally involve substantial exchanges of funds, Business Day noted that "the fundraising effort might qualify as a managed investment scheme - a type of investment scheme that is heavily regulated by ASIC."

"These activities are regulated by ASIC under the Corporations Act and ASIC Act, and may impose legal obligations on operators of crowd-funding sites and on people using those sites to raise funds," Mr Tanzer added.

Along this line, the corporate regulator has sent formal notices to crowd funding sites operating from and within Australia, reminding them that projects that entail sizeable returns to contributors, either in financial or property forms, must be officially registered.

An oversight on the matter or failure to obtain a license for operation will constitute legal fines of up to $22,000 or jail term of no more than two years, ASIC cautioned.

Likewise, patrons of crowd funding operators must also be wary of fraud or likely loss of their 'investments', Mr Tanzer said.

Such incidents could occur if unscrupulous project operators, especially the unregistered sites, suddenly disappeared with the investors' money or a legitimate website encountered project failures and subsequent bankruptcy, ASIC said.

They only underscored the financial disasters that the average contributors face in the absence of protection being extended by government regulators, Mr Tanzer said.

ASIC has launched the initiatives following what Business Day has reported as request coming from a group which called on federal authorities to relax its existing regulations that bar or cap crowd funding sites' ability to offer attractive financial packages to would-be financiers of projects.

A letter recently sent by crowd funding player Pozible to the Small Business Ministry has argued for revision of Australia's rule on the matter, which the group said can look on cases in the United States and the United Kingdom as likely regulatory models.

"We firmly believe crowd funding has enormous potential as a way to provide seed funding for start-ups and small business in a diverse range of industries, including in particular technology start-ups and environmental start-ups," Pozible co-founder Rick Chen was reported by Business Day as saying in the briefing.

The government, Mr Chen said, would provide for more growth space to the nascent industry and to the general economy as well "by allowing start-ups to offer shares, profits or debt."