Only some forms of crowdfunding are currently regulated and thus subject to supervision
Crowdfunding is one way of raising funds from the public for various projects. The funds are normally collected in relatively small amounts, making use of Internet-based service platforms. At present, crowdfunding as such is not regulated in law governing the financial sector, but some of this activity may require authorisation.
Anyone considering participation in a crowdfunding initiative should pay attention to the fact that it may be difficult for an investor to get sufficient and appropriate information in support of decision-making. Risks related to new or unestablished business ventures for which crowdfunding is sought can be significant. For example, in the case of investing in shares, consideration must be given to the rights attached to the shares in the form of voting rights or dividends and to how information on the financial position and operation of the company concerned can be obtained. Given that there may not be well-functioning secondary markets for non-listed shares, valuation and sale of these investments may prove difficult.
The concept of crowdfunding covers a variety of forms of activity that differ in respect of both the objectives of the projects and the compensation received by the providers of finance. Current forms of crowdfunding include
- reward or subscription
- investment (equity or bond-based).
Within the limits of its mandate and tasks, FIN-FSA supervises crowdfunding activity in the financial sector only in so far as the conduct of such activity is subject to existing financial regulation.
FIN-FSA has collected relevant information for both those acting in the sector and the customers, addressing the forms of crowdfunding that are governed by existing financial regulation and falling within the remit of FIN-FSA's current mandate.
The corresponding Finnish-language press/news release was published on 26 June 2014.