What is crowdfunding?
Crowdfunding is the practice of raising funds from the general public through the internet in order to finance a business or project. The basic principle behind crowdfunding is to collect small quantities of money from a large quantity of people.
How does it work?
There are various types of crowdfunding. With the first type of crowdfunding, people make a donation without getting anything in return. With the second type of crowdfunding, people receive payment in kind in exchange for their contribution, for example a CD in exchange for financial support to a musician. With the third type of crowdfunding, people invest in a company or lend money to a company. In exchange for this investment, the investors get a share of this company’s potential profit.
Moreover, a distinction is made between crowdfunding via a crowdfunding service provider and offers of investment instruments to the public without the involvement of a crowdfunding service provider.
What rules apply to crowdfunding?
Service providers wishing to offer crowdfunding services are subject to certain rules. In order to be able to do so, they must obtain an authorization, meet certain conditions and comply with conduct of business rules. In principle, a key investment information sheet is to be given to the investors.
For offers of investment instruments to the public without the involvement of a crowdfunding service provider, other rules apply. If the investment exceeds certain thresholds, a prospectus must be issued that mentions all the necessary information and risks. Under those thresholds, an information note is required, and, in the case of a public offer of certain complex investment products, a key information document must be given to the investors.
What does the FSMA do?
The FSMA is responsible for authorizing crowdfunding service providers and for supervising their operations. More information about the possibility of filing a complaint against a crowdfunding service provider can be found here.
Crowdfunding service providers authorized by the supervisory authority of another EU Member State fall under the supervision of that supervisory authority.
In the case of an offer to the public without the involvement of a crowdfunding service provider, the FSMA supervises the information provided to the investors as well as the related advertisements.
Where can you get more information?