- The Finnish crowdfunding act comes into force today, makes it easier to do equity crowdfunding in Finland
- The extensively prepared act builds on existing local crowdfunding legislations in the EU and cherry picks the best parts
- The Finnish crowdfunding act can provide a benchmark for future EU crowdfunding regulations
The Finnish crowdfunding act coming into force today lightens the legislation applied to investment crowdfunding in Finland. Its purpose is to solidify the position of equity crowdfunding as part of the capital markets.
The act is likely to result in increased growth in the Finnish crowdfunding market. "On a European level, crowdfunding volume is expected to double this year. We believe that with the new legislation Finland will be able to reach similar numbers," says Invesdor CEO Lasse Mäkelä.
Here are the five main points of the Finnish crowdfunding act:
1. Registration procedure makes it easier to enter the industry
Until now, doing equity crowdfunding in Finland has required an investment firm licence from the Finnish Financial Supervisory Authority (FIN-FSA). The licence was a tall order for smaller aspiring crowdfunding platforms and it has slowed the market entry of new players.
In the framework set by the new act, crowdfunding can be organised by applying for registration at the FIN-FSA provided that the service provider meets a set of criteria. Registration is a considerably more affordable alternative to the investment firm licence, therefore the new procedure will pave the way for new entrants into the market.
2. Good balance between investor protection and growth
Although the registration procedure is a lighter form of regulation than a licence, investor protection is still at a good level under the new act. Both registered crowdfunding service providers and fundraising companies are subject to certain disclosure obligations whose purpose is to provide investors sufficient information about the investment opportunity and the risks involved with it.
3. Registered operations are limited
Crowdfunding platforms using the registration procedure are subject to certain limitations in the services that they can offer. For instance, a registered service provider cannot organise funding for companies listed on stock exchanges. Furthermore, registered platforms can only handle customer funds in limited instances, and all money flows related to, for example, equities and bonds must be organised in co-operation with a licensed bank or investment firm.
4. Two frameworks: national and international
The crowdfunding act is national legislation, therefore it applies only to crowdfunding services provided within Finland. Service providers using the registration procedure can thus only organise financing for Finnish businesses and actively market investment targets to Finnish investors.
A licence in accordance with the EU's Markets in Financial Instruments Directive (MiFID) is still needed for international crowdfunding. Invesdor was the first European equity crowdfunding service provider to get such a licence.
5. The act only covers investment crowdfunding
The new crowdfunding act does not cover rewards or donations based crowdfunding models. For example the rewards based model popularised by Kickstarter falls under consumer protection acts, whereas donations based crowdfunding is legal in Finland only with a special fundraising permit from the police.
For contact information and past press releases, see Invesdor for media.