On September 1, 2016 the government of Finland has updated its regulation concerning investment crowdfunding with its new Crowdfunding Act (734/2016). The Ministry of Finance has declared that the new Act will ease the regulation of investment-based crowdfunding, clarifying the ground rules for loan-based crowdfunding at the same time. Moreover, the Act will help to clarify the responsibilities of various authorities appointed of supervising the crowdfunding market, and to improve investor protection.
The size of the Finnish investment-based crowdfunding market in 2015 was EUR 15.5 million, while the loan-based crowdfunding market was approximately EUR 68.9 million. Through the Crowdfunding Act, the Finnish government intends to help the growth of this sector.
The new Act facilitates the access to the sector for aspiring crowdfunding platforms, by requiring a registration in the register of crowdfunding intermediaries maintained by the Finnish Financial Supervisory Authority (FSA). The minimum capital requirement for crowdfunding intermediaries has been reduced from EUR 125.000 to EUR 50.000, taking into consideration the current small size of the market. The previous procedure required an investment firm license from the FSA, blocking the market entry of small players. In any case, the registration has also the scope of creating a sufficient threshold for entry into the market, by imposing clear requirements for registration, aimed at demonstrating the reliability of the notice providers.
Among the innovations introduced by the Act, it is useful to highlight an increased attention towards customer care: crowdfunding intermediaries now have to handle customer funds in limited instances. Furthermore, the Act establishes a duty of disclosure towards the customer, in order to avoid cases of false or misleading information. In fact, as of the 15th of December 2016, fundraising companies are required to disclose information towards investors following a format as indicated by the Ministry of Finance in this document. It is compulsory for any company raising more than € 2,000 and it should contain various information, including:
- basic information, e.g. name of crowdfunding recipient, purpose of the fund-raise
- Risks, e.g. risk of loss and lack of market liquidity for the investment
- Information on the crowdfunding recipient, e.g. legal form, largest shareholder, board of directors
- Information on the investment instrument and the offering, e.g. amount sought, subscription price and conditions
- Information on guarantor and collateral.
The Crowdfunding Act can be considered a significant improvement in the Finnish regulation of this sector, gathering the best of the existing legislation and making it more effective. It could represent a standard for future EU crowdfunding regulations.
Read more in this document.