Most Estonian crowdfunding service providers will from this month have to apply for authorization from the Financial Supervision Authority (FSA), in line with European Union regulations.
Kilvar Kessler, FSA board chair, says his organization has been working on this basis already, while the EU crowdfunding regulation is to enter into force on November 10, with a year’s period of grace to obtain the license for existing crowdfunding platforms.
Kessler said: “Opening of the market means uniform conditions for crowdfunding companies to operate in the European market. In particular, a common set of investor protection requirements will be established in crowdfunding through the obligation to disclose information to investors, prevention and mitigation of conflicts of interest for crowdfunding companies, and the management of technological risks.”
Kessler added that the role of the FSA would be to monitor compliance with the regulation’s requirements after authorization was received for that crowdfunding body also.
Kessler noted that the new regime did not eliminate the risk for investors that a crowdfunding project would fail, however, nor that an investor could lose all or part of an investment.
During the authorization procedure, the FSA will verify, among other things, that the undertaking has sufficient funds of its own, as well as adequate internal control systems.
Existing crowdfunding service providers will be entitled to continue to provide crowdfunding services until November 10, 2022 or until the receipt of authorization, whichever arrives first, and the FSA recommends that applications be submitted early.
Authorized parties will be able to also provide services across borders in other EU member states, provided they have provided the FSA with the information set out in the regulation.
The FSA had already proposed regulating the sector in 2016, in the interests of protecting investors and standardizing requirements in line with those of the EU.
The FSA has also set up a supervisory policy, including guidelines for service providers.
All crowdfunding providers that offer individuals and businesses the opportunity to provide loans or invest in crowdfunding projects owned by a business must apply for a crowdfunding authorization. (ERR/Business World Magazine)