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Information for investors

by EUROCROWD on 06.03.2024

If you are a crowdfunding platform, an entrepreneur, or an investor, then you should look this series of articles on the European Crowdfunding Regulation (ECSPR).
The ECSPR is a game-changer. It harmonizes rules across the EU, creating a level playing field for crowdfunding services. In these notes, we break down the jargon, demystify legal intricacies, and provide practical insights.
In this reading, we will briefly summarize the authorizations contained in the ECSPR. This is not a legal guide to obtaining them, but an introduction to what kind of authorizations are included in the regulation. In other words, the perfect 3-minute reading to familiarize yourself with ECSPR authorisations.
Compliance isn't optional; it's crucial. Be empowered with knowledge with EUROCROWD.

Information for investors

Imagine that you are a person who has received a good income, and you want to invest this money in something with a great profit.
You have heard about crowdfunding and the idea appeals to you. However, you don't feel safe to invest your money in any platform because the information provided is not enough from your point of view.
So, the question is: how much money is not invested in crowdfunding just because potential investors don't feel safe according to the information provided by the platforms?
Thanks to ECSPR this situation will change.

Information fair, clear and not misleading
The ECSPR states that all information, including marketing communications from crowdfunding service providers to customers, about themselves, about the costs, financial risks and charges associated with crowdfunding services or investments, about the selection criteria for crowdfunding projects, and about the nature and risks of their crowdfunding services must be fair, clear and not misleading.
In addition, this information shall be provided to customers whenever appropriate, at least prior to entering into a crowdfunding transaction, and shall be available to all customers on a non-discriminatory basis in a clearly identified and easily accessible section of the crowdfunding platform's website.
Brief conclusion: Crowdfunding platforms must clearly present info on costs, risks, and project selection to investors, both in marketing and platform materials, to ensure informed decisions. This information should be readily available and non-discriminatory.

Neither deposit-guarantee nor investor compensation scheme
On the same page, crowdfunding service providers shall inform their clients that their crowdfunding services are not covered by the deposit-guarantee scheme established under Directive 2014/49/EU and that transferable securities or instruments admitted for crowdfunding purposes acquired through their crowdfunding platform are not covered by the investor compensation scheme established under Directive 97/9/EC.
This information shall also be made available to all clients on a non-discriminatory basis in a clearly identified and easily accessible section of the crowdfunding platform's website.
Brief conclusion: Crowdfunding investments lack safety nets like deposit-guarantee or investor compensation schemes. Platforms must clearly display this info on a dedicated website section for all clients.

Reflection period for non-sophisticated investors
Crowdfunding service providers shall inform their clients about the reflection period for non-sophisticated investors. Whenever a crowdfunding offer is made, the crowdfunding service provider shall provide this information in a prominent place in the medium, including on each mobile application and website where such an offer is made.
Brief conclusion: Non-sophisticated investors get 4 calendar days to reconsider crowdfunding investments. Platforms must clearly display this reflection period on all offer pages across their websites and apps.

Credit scores or suggested prices
Where crowdfunding service providers apply credit scores to crowdfunding projects or suggest prices for crowdfunding offers on their crowdfunding platform, they shall make available a description of the method used to calculate such credit scores or prices.
If the calculation is based on unaudited financial statements, the description of the method shall clearly disclose that fact.
This information shall be available to all customers in a clearly identified and easily accessible section of the crowdfunding platform's website and in a non-discriminatory manner.
Brief conclusion: Crowdfunding platforms using credit scores or suggesting prices must clearly explain how they're calculated and disclose if unaudited financials are used. This info must be readily available on their website for all customers.

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