December, 2015. Paper abstract bibtex
Crowdfunding occurs when capital and loans are mediated via a technological platform that links together capital seekers and investors. This form of financing is an alternative to more traditional funding that occurs via credit institutions and markets. By efficiently linking many small investors to projects that need capital, crowdfunding could potentially make it cheaper and easier for smaller companies in particular to raise capital. Alternative sources of financing can have a positive influence on competition and efficiency on the financial market by increasing the number of projects that receive financing, even if, for example, banks were unable to provide a loan. However, crowdfunding also introduces some risks for consumers. Individuals that invest on a crowdfunding platform are in many cases exposed to a higher risk than what they would be exposed to via traditional forms of investment, such as securities or funds. Despite this relatively high risk, in many respects there is no consumer protection comparable to the protection that is in place for regulated forms of investment. Crowdfunding constitutes only a very small part of the financial market and is currently only partly regulated. Given that it is a form of investment that increasingly targets consumers, Finansinspektionen believes there is a need to assess whether or not supplementary regulation is required for the platforms offering equity-based and lendingbased investments. Other central topics that should be further investigated are how the dissemination ban should be interpreted with regard to crowdfunding, whether crowdfunding should require any form of authorisation and whether the platforms’ conduct should be regulated, for example by holding the platforms responsible for the information they provide to both investors and capital seekers. Another important aspect of crowdfunding is that consumers are currently very weakly protected in some of the different contractual situations that could arise. For example, in terms of lending-based crowdfunding, it is often unclear from a legal perspective who should be considered “the lender”. More investigation is needed into how regulation in this area could be formulated.