Regulator to oversee supervisions of providers
The Central Bank of Ireland is seeking industry views about how tightly it should police marketing by crowdfunding companies such as Linked Finance and FundIt.
Crowdfunding often sees individuals and small firms raise equity or loans via online platforms. Backers usually each stump up relatively small amounts as part of an overall fundraising.
The activity is currently unregulated here.
Last year, the EU agreed a new regulatory regime for crowdfunding service providers and those rules will be applied from November this year. The Central Bank of Ireland will oversee the supervision of crowdfunding providers.
It will be responsible for ensuring compliance by crowdfunding service providers (CSPs) of national rules applicable to marketing communications.
The new EU rules establish a number of marketing requirements applicable to crowdfunders, including requirements to ensure that marketing communication must be fair, clear, and not misleading, and consistent with the information contained in the Key Investment Information Sheet.
“All marketing communications about their services must be clearly identifiable as marketing communications,” noted the Central Bank.
“In addition, CSPs must ensure that marketing communications do not disproportionately encourage investment in any one crowdfunding project,” it added.
The Central Bank is planning to apply certain advertising requirements already contained in its 2012 consumer protection code to crowdfunding.
It said this would ensure that Irish consumers receive the same protection as regards crowdfunding advertising communications that they already do for other financial services.
It has proposed examples of wording that might be contained in advertising by crowdfunding service providers.
One such example reads: "Investment in crowdfunding projects entails risks, including the risk of partial or entire loss of the money invested. Your investment is not covered by a deposit guarantee scheme or by an investor compensation scheme.”
There are a number of other crowdfunding service providers operating in Ireland, such as Spark Crowdfunding and GoFundMe.
While they support business and entrepreneurs raising money, they also allow people to fundraise for a wide range of other purposes.