You can see the rules and regulations in other jurisdictions.
The introduction of the EU Crowdfunding Regulation has replaced the various national regimes governing crowdfunding, with a uniform set of rules. This aim is to simplify the provision and receipt of cross-border crowdfunding services within the European Union. The Regulation will also help encourage investment in business across Europe.1
As per the Crowdfunding Regulation, there are three types of actors involved: project owners who propose projects to be funded; investors who fund the proposed projects (clients); and intermediaries such as crowdfunding service providers that bring investors and project owners together online.2
The Crowdfunding Regulation outlines uniform conditions for crowdfunding services, the organisation and oversight of crowdfunding service providers, and public platforms providing unrestricted access to investors for the placement of transferable securities or admitted instruments for crowdfunding purposes without a firm commitment basis. Regulations focus on transparency and marketing communications regarding such services across the EU. The Crowdfunding Regulation applies to crowdfunding services that consist of the joint provision of reception and transmission of client orders and the placement of transferable securities or admitted instruments for crowdfunding purposes without a firm commitment basis on a public platform that provides unrestricted access to investors.2
Crowdfunding services that are provided to project owners who are consumers, or crowdfunding offers below €5 million, are assumed to be subject to the national existing regime when they are not subject to the Crowdfunding Regulation. The Crowdfunding Regulation (authorization requirement as a crowdfunding service provider) should be assessed on a case-by-case basis, however, in order to determine if a service or entity is covered.1
A company operating a crowdfunding platform must either hold a payment institution licence or a credit institution licence, depending on whether it transfers funds or provides loans.2
According to the DFSA, financial legislation imposes additional requirements on platform providers and project owners in addition to the above-mentioned licence requirements. These may include observing MiFID requirements for investor protection (including suitability tests) and anti-money laundering requirements.3
Equity-based crowdfunding provides investors with an opportunity to obtain ownership of shares or other kinds of interest in a specific project. In order to protect investors, certain criteria may be imposed, such as the creation of a prospectus and investor suitability checks prior to financing. Depending on the activity being undertaken, different types of permissions may be necessary, ranging from a single-purpose initial public offering to collective investment scheme-related transactions. Furthermore, standard AML and know your customer requirements must be met.2
With a special AIFM licence, you can set up a collective investment vehicle that gains capital from multiple investors, intending to put it towards an approved investment strategy. The investments are made in line with the outlined policy and to benefit the parties involved. Additionally, this licence allows for ancillary services including advice on investments, orders relating to related financial instruments as well as crowdfunding platforms or opportunities.2
In relation to a crowdfunding platform, a licensed investment company is responsible for safekeeping assets, receiving, transmitting, and executing orders relating to financial instruments issued by selected project owners, and providing investment advice to investors. The platforms that hold investment company licenses can also obtain a license to operate a MTF and participate in investments with their own funds.2
A crowdfunding platform provider may have to comply with investor protection rules, such as customer categorization, customer agreements, information obligations, and suitability requirements, depending on the license type.2
In most cases, crowdfunding platforms that are not covered by the Crowdfunding Regulation are covered by the Anti-Money Laundering Act (AML Act). According to the AML Act, companies must prepare a risk assessment and, based on that, establish internal policies and procedures that describe how they will manage and prevent the risk of money laundering and terrorist financing.2
Providing a crowdfunding platform requires compliance with the Consumer Contracts Act. Peer-to-peer lending platforms tend to offer their services online, so they must adhere to distance selling rules. Before entering into a distance selling agreement for a financial service, the provider must provide certain information to the consumer under Section 14 of the Act.2
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