AFM publishes license checklist for crowd-funding

Tuesday 7 May 2013

On May 1, 2013 the Netherlands Authority for the Financial Markets (“AFM”) published a checklist, developed together with the Dutch Central Bank (“DNB”), for determining whether or not a license is required with respect to crowd-funding activities. 

Crowd-funding is an initiative to attract funds through an (online) platform and to lend those funds to consumers and businesses. This alternative form of funding may have added value in the range of financing options available to consumers and businesses. 
Depending on the exact form of the platform and the activities, crowd-funding initiatives could be subject to existing regulations that protect the interests of customers and therefore may require a permit or exemption from DNB and/or the AFM. The regulators have created a checklist which allows the promoters of these platforms to verify whether they require a permit or an exemption.

In general, the activities of different crowd-funding platforms are not substantially different from one another. They focus on bringing together borrowers and investors for the funding of a project through an (online) platform. The projects are wide-ranging and often small in nature with a non-commercial or commercial purpose.
In these cases, according to the AFM, there is often mediation involved for which the Act on Financial Supervision is applicable.

Investors can easily determine whether a crowd-funding platform has a permit or an exemption, using the registers of the AFM and DNB. At present, there are two platforms with a license from the AFM. If indeed a license is required, then also the provisions relating to the expertise and reliability of management and directors, operational requirement and professional liability insurance may apply. Furthermore, the law imposes transparency of information and a duty of care. 

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