Best practices for regulating investment- and lending-based crowdfunding

EBRD and Clifford Chance have produced a report on best practices for regulating investment- and lending-based crowdfunding platforms which seeks to offer best practice recommendations for the regulation of both equity- and lending-based crowdfunding platforms. Our recommendations are based on the analysis of the regulations of six jurisdictions: Austria, Dubai (DIFC), France, Germany, the UK and the US, which were selected to provide a cross-section of geographies, approaches and degrees of market maturity.

Drawing upon commonalities and best practices identified from across these jurisdictions, the report makes recommendations on the following key issues: (i) type of authorisation(s) required for the operation of platforms; (ii) capital and liquidity requirements; (iii) know-your-customer rules and anti-money laundering checks required; (iv) maximum size of offer/loan; (v) maximum investable amount; (vi) consumer protection measures, including type of investor disclosures; (vii) risk warnings; (viii) due diligence/pre-funding checks; (ix) conflicts of interest inherent in the crowdfunding platforms’ role; and (x) platforms’ governance requirements.

These recommendations should help lawmakers in the EBRD region to get more comfortable with the formulation of the crowdfunding legislation, which in turn should give legitimacy to crowdfunding platforms, while ensuring adequate protection of investors