Required Standards of Conduct for Harmonised PFPs

Harmonised crowdfunding platforms must comply with the following rules of conduct:

Rules of Conduct

• Act in a professional and diligent manner, in accordance with the principles of transparency, neutrality and impartiality.
• Ensuring the safety of investors’ funds.
• Protect investors’ interests, especially in terms of information and disclosure.
• Avoid conflicts of interest.
• Cooperate with the competent authorities.

Specific mandate for the servicing of individualised loan portfolios

In order to offer the service of individualised loan portfolio management, crowdfunding platforms must obtain an individual mandate from investors. This mandate must specify the following issues:

• The type of projects in which the investor wishes to invest.
• The amount of money the investor wishes to invest.
• The investment criteria that the platform should use to select projects.

Classification of experienced and inexperienced investors

Investors in crowdfunding platforms fall into two categories:

• Experienced investors: Investors who have experience in investing in financial instruments, and who have obtained adequate training in equity finance.
• Inexperienced investors: Investors who have no experience in investing in financial instruments, or who have not obtained adequate training in equity finance.

Investment limits per project for retail investors

Retail investors, which are those who do not exceed EUR 250,000 in financial assets, may not invest more than 10% of their net worth in a single equity finance project. There is a limit of €1,000 for retail investors in debt crowdfunding. This limit is set out in Regulation (EU) 2020/1503 on European providers of equity finance services for companies. The limit applies to loans granted to businesses, with the exception of loans granted to microenterprises.

Degree of information required in favour of customers

Equity crowdfunding platforms must provide investors with the following information:

• Information about the platform: Information about the platform’s structure, activity and policies.
• Project information: Information on the project promoter, the project itself and the risks associated with the investment.
• Investor information: Information on investors’ rights and obligations.

Scope of the key investment information sheet

The key investment information sheet is a document that must be provided to investors before they make an investment. The factsheet must contain the following information:

• Information on the project promoter: name, address, tax identification number, main activity, experience, etc.
• Information on the project: project description, objectives, necessary funding, risk, etc.
• Information about the platform: Name, address, tax identification number, etc.

Scope of the platform key investment information sheet for platforms to provide the individualised portfolio management service for loans

The key investment information sheet of platforms providing the individualised loan portfolio management service should contain the following additional information:

• Information on the individual mandate: description of the mandate, investment criteria used by the platform, etc.
• Information on the loan portfolio: Information on the projects included in the portfolio, portfolio risk, etc.

Suitability test for inexperienced investors

Equity crowdfunding platforms must conduct a suitability test for inexperienced investors before they make an investment. The test should assess whether the investor has the necessary knowledge and experience to understand the risks of the investment.

Cooling-off period for non-expert investors

Inexperienced investors have a 48-hour cooling-off period before they can make an investment. During this period, investors can cancel the investment without penalty.

Scope and requirements of the loan default rate advertising scheme

Equity crowdfunding platforms must publish the default rate of loans granted in the last 12 months. The rate should be published on the platform’s website and any other information channel used by the platform to communicate with investors.

The default rate should be calculated as the number of defaulted loans divided by the total number of loans granted. The rate should be expressed as a percentage.

Platforms must update the default rate every quarter.

If you enjoyed this article, you may also find it interesting to read the following one:

The imminent entry into force of the Digital Services Act (2024) and what it involves