 | A few months ago the German government released draft regulations to increase protections for retail investors. The draft received a lot of criticism from the German crowdfunding ecosystem, which deemed it too restrictive, potentially limiting the growth of this new source of finance. Last week, after having collected comments from the public, the German government released a second proposal for the abovementioned law. |
The main changes made to the original draft are the following.
Investors
The new draft does not distinguish between retail investors and professional investors, thus posing the same limits to all. In fact, it sets a cap on the single investment per each offer of €10,000. Additionally investors willing to invest more than €1,000 in an offer have to self-declare that their cash deposits or financial instruments exceed €100,000 or maximum two monthly net incomes. However, there are no clear indications regarding whether the platforms have to verify the information provided by the investors.
A step forward has been made with regards to the so called VIB - i.e. the investment products information leaflet or a simplified version of the investment prospectus -, which, according to the original draft, investors were supposed to sign and send back via mail to the issuer, complicating significantly the investing process. In the new draft, the regulators propose that the signed VIB can be sent also via email, after having being scanned.
Issuers
As specified also in the previous draft, companies cannot raise more than €1 million, which can still be a restrictive limit for the German crowdfunding market which still retains the record of the fastest €1 million raised in the history of crowdfunding. Furthermore companies are forbidden to advertise their offer through social media, which is a renowned key element for crowdfunding campaigns.
Conclusion
Peer-to-peer lending remains out of this proposed regulation, which will be discussed in the following weeks in the German Parliament and will probably enter into force only by mid-2015. Also this time, the reactions from the German crowdfunding ecosystem were not particularly favorable, as many consider that restrictions, like not distinguishing between professional investors and retail investors, may severely hinder the potential of crowdfunding in the country. Therefore it remains still an open question whether these new rules will help the crowdfunding market to grow and establish as a valid and solid alternative source of finance.
References
Aschenbeck-Florange,T. ;Nagel,T. (2014).German Federal Government passes a new draft of the Retail Investors‘ Protection Act. German Crowdfunding Network.
Image credit to: Barbara Muller-Walter http://bit.ly/1uv6e6l
Investors
The new draft does not distinguish between retail investors and professional investors, thus posing the same limits to all. In fact, it sets a cap on the single investment per each offer of €10,000. Additionally investors willing to invest more than €1,000 in an offer have to self-declare that their cash deposits or financial instruments exceed €100,000 or maximum two monthly net incomes. However, there are no clear indications regarding whether the platforms have to verify the information provided by the investors.
A step forward has been made with regards to the so called VIB - i.e. the investment products information leaflet or a simplified version of the investment prospectus -, which, according to the original draft, investors were supposed to sign and send back via mail to the issuer, complicating significantly the investing process. In the new draft, the regulators propose that the signed VIB can be sent also via email, after having being scanned.
Issuers
As specified also in the previous draft, companies cannot raise more than €1 million, which can still be a restrictive limit for the German crowdfunding market which still retains the record of the fastest €1 million raised in the history of crowdfunding. Furthermore companies are forbidden to advertise their offer through social media, which is a renowned key element for crowdfunding campaigns.
Conclusion
Peer-to-peer lending remains out of this proposed regulation, which will be discussed in the following weeks in the German Parliament and will probably enter into force only by mid-2015. Also this time, the reactions from the German crowdfunding ecosystem were not particularly favorable, as many consider that restrictions, like not distinguishing between professional investors and retail investors, may severely hinder the potential of crowdfunding in the country. Therefore it remains still an open question whether these new rules will help the crowdfunding market to grow and establish as a valid and solid alternative source of finance.
References
Aschenbeck-Florange,T. ;Nagel,T. (2014).German Federal Government passes a new draft of the Retail Investors‘ Protection Act. German Crowdfunding Network.
Image credit to: Barbara Muller-Walter http://bit.ly/1uv6e6l
 | About the author - Irene Tordera Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives. During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem. |
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