​​Crowdfunding: inform the investors of specific risks​

Updated: October 2019

PROPOSED SOLUTIONS AND ACTIONS 

ESBG believes that crowdfunding platforms’ disclosure requirements, registration requirements, risk management and consumer/investor protection rules should be harmonised. We are concerned that local platforms operating below ‘best practice’ standards could have a negative effect on the trust in platforms across the EU. 

Existing regulations of credit institutions, credit intermediators and investment firms should be considered to reflect different services and nature of platforms. Therefore, to enhance consumer protection, crowdfunding platforms should be obliged to inform investors of specific risks associated with the investments being made. 

BACKGROUND: WHAT THE EU HAS DONE SO FAR 

Crowdfunding is an emerging alternative form of financing that connects those who can give, lend or invest money directly with those who need financing for a specific project. It usually refers to public online calls to contribute finance to specific projects. 

According to the European Commission, the EU market for crowdfunding is underdeveloped as compared to other economies. In October 2017 the European Commission published an inception impact assessment on a legislative proposal for an EU framework on crowd and peer to peer finance. ESBG responded via the Commission’s ‘Have Your Say’ tool on this impact assessment in January 2018. In March 2018, as part of its Fintech Action Plan, the European Commission presented a proposal for a regulation on crowdfunding service providers. Once adopted at EU level, the new regulation will aim to allow platforms to apply for an EU passport based on a single set of rules. This should enable them to offer their services across the EU. Before the break for the EU elections, the crowdfunding position had been fixed by the European Parliament and the Council also agreed on its position. In the next parliamentary term, trialogue negotiations are due to take place to finalise this file. 

IDENTIFIED CONCERNS 

It is important to safeguard similar rules and regulations for all market participants (banks and others) to ensure a consistent level playing field for EU and non-EU players, as well as avoiding, for example, fraudulent schemes. These points need to be borne in mind by the EU decision-makers when they finalise this file.

WHY POLICYMAKERS SHOULD ACT

To ensure a level playing field, both among EU Member States and between financial institutions and new market players, it is important that additional EU legislation is taken into account. As crowdfunding grows in popularity and more opportunities arise for both investors and project leaders, the European institutions need to harmonise requirements and ensure consumer protection.​