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Appendix 3: Required Crowdfunding Company Disclosures

C 7/2020 Effective from 14/11/2020
  1. A crowdfunding company must prominently disclose on its website key information about how its service operates, including:
     
    1. Details of how the CFP functions;
       
    2. Details of how and by whom the crowdfunding company is remunerated for the service it provides, including fees and charges it imposes;
       
    3. Any financial interest of the crowdfunding company or significant shareholders, directors or employees of the crowdfunding company, that may create a conflict of interest;
       
    4. The eligibility criteria for Borrowers that use the CFP;
       
    5. The minimum and maximum amounts of loans that may be sought by a Borrower;
       
    6. What, if any, security is usually sought from Borrowers, when it might be exercised and any limitations on its use;
       
    7. The eligibility criteria for Lenders that use the service;
       
    8. Any limits on the amounts a Lender may lend using the CFP, including limits for individual loans and limits that apply over any twelve (12) month period;
       
    9. When a Lender may withdraw a commitment to provide funding (‘cooling–off period’) and the procedure for exercising such a right;
       
    10. What will happen to funds raised if Loans sought by a Borrower either fail to meet, or exceed, the target level;
       
    11. Steps the crowdfunding company will take if there is a material change in a Borrower’s circumstances and the rights of the Lender and Borrower in that situation;
       
    12. How the crowdfunding company will deal with overdue payments or a default by a Borrower;
       
    13. Which jurisdiction’s laws will govern the loan agreement between the lender and borrower;
       
    14. Arrangements and safeguards for Client Money held or controlled by the crowdfunding company, including details of any legal arrangements that may be used to hold Client Money;
       
    15. Any facility it provides to facilitate the transfer of Loans, the conditions for using the facility and any risks relating to the use of that facility;
       
    16. Measures it has in place to ensure the CFP is not used for money-laundering or other unlawful activities;
       
    17. Measures it has in place for the security of information technology systems and data protection; and
       
    18. Contingency portfolio administration arrangements the crowdfunding company has in place to ensure the orderly administration of Loans if the CFP ceases to carry on business.
        
  2. Additional risks that the crowdfunding company must prominently disclose on its website include:
     
    1. By participating in the CFP, Clients are exposing themselves to material risks pertaining to the business model of the CFP;
       
    2. Listing the specific material risks for Borrowers and for Lenders separately and clearly;
       
    3. Lenders are not placing deposits and are not protected by any insurance or guarantee scheme; and
       
    4. Lenders may face material risks, including the loss of some or all of their money, should the Borrower fail or default on loan repayments
        
  3. A crowdfunding company shall post the disclosures (in this Part) on promotional material whether in electronic medium or otherwise.
     
  4. A crowdfunding company shall also disclose additional information including (but not limited to) the following:
     
    1. Lack of full visibility of use of funds and means to monitor Borrowers closely similar to methods adopted by conventional financing channels such as banking channels;
       
    2. Risk of misleading or insufficient information disclosure by the borrower; and
       
    3. Dispute resolution and redress mechanisms

        

  5. A crowdfunding company must
     

    1. Attach key disclosure clauses in agreement which must be initialled by the borrower;
       
    2. Issue statement of transactions (monthly);
       
    3. Provide 30-day notice of any changes to fees, interests etc.