Lender selection and suitability

1. A crowdfunding company must take reasonable care in on-boarding Lenders, assessing the suitability of the Lender and ensuring the Lender has a clear understanding of the risks they are undertaking. This process shall be documented and relevant employees shall have appropriate training.
    
2. In addition to other checks (e.g. for money laundering), a crowdfunding company shall verify and document the identity of a Lender and confirm their address. Such measures include (but are not limited to) the following:
    
   1. Call the client on their home or business contact numbers;
       
   2. Contact an employer to confirm employment, after gaining the client’s consent;
       
   3. Review bank statements for details of salary and other income; or
       
   4. Requesting documents confirming their identity
       
3. A crowdfunding company shall obtain sufficient information from Lenders about their financial circumstances and objectives through self-declared assessment questionnaire forms, or by any other equivalent means.
    
4. Based on the information provided and independently reviewed by the crowdfunding company, the CFP shall classify all Lenders as a Retail or Market Counterparty. The classification shall be shared with the Lender.
    

Lending structure

5. A crowdfunding company shall structure its activities in a clear, transparent format using plain language that shall be stipulated within an enforceable (lending) contract, taking into account Appendix 2 of this Regulation.
    
6. A crowdfunding company must ensure that, when a loan is made using its platform, there is a written loan agreement in place between the Borrower and Lender that is legally enforceable and sets out sufficient details of the loan, the terms of repayment and the rights and obligations of the Borrower and Lender.
    

Borrower Risk Scoring, Loan Pricing and Due Diligence

7. A crowdfunding company shall be responsible to:
    
   1. Ensure there is a sufficient and transparent risk scoring and loan pricing system in place. The basis and methodology of risk scoring, loan pricing and due diligence shall be made publically available.
       
   2. Obtain self-declared risk assessment questionnaire forms from their Borrowers.
       
   3. Take reasonable steps to confirm the information provided in the risk assessment questionnaire.
       
   4. Take adequate measures to prevent Borrowers from seeking loans for personal use.
       
   5. Requiring a range of information, including Al-Etihad Credit Bureau reports, to enable the risk scoring and loan pricing, including cash flow forecasts.
       
   6. Carry out a risk assessment on prospective Borrowers based on the information required.
       
   7. Taking reasonable care to undertake thorough anti-money laundering (AML) checks and establishing the ultimate beneficial owner of the Borrower.
       
   8. Ensure what is treated as a default is in accordance with the Central Bank definition and methodology. Default rates on projects/borrowers listed on the platform must be made publically available.
       
   9. Implement policies to manage disputes / conflicts of interest.
   
    
8. A crowdfunding company shall conduct reasonable due diligence and risk assessment on a Borrower and communicate the result of the due diligence to the Lenders within the risk scoring process.
    
9. A crowdfunding company shall review the financial situation of Borrowers at least annually and in the event of any material change, communicate its assessment to clients.
    
10. In the event that a crowdfunding company identifies any issues with the Borrower that increase the risk score of that Borrower, the crowdfunding company shall communicate its findings with the relevant Lenders and develop an action plan for how outstanding balances on any loans related to that borrower will be managed.
     
11. A crowdfunding company shall require Borrowers to declare its current and intended borrowing from other CFPs and other sources in a calendar year. A crowdfunding company should take reasonable steps to monitor whether Borrowers are accessing loans through any other sources, including regularly checking with Al Etihad Credit Bureau.
     

Ceilings on lending

12. A crowdfunding company shall impose a limit on lending per person per project (per calendar year) to:
     
    1. Retail Client: AED 20,000; and
    2. Market counterparty: AED 50,000
13. A crowdfunding company shall impose a limit on total lending per person (per calendar year) to:
     
    1. Retail Client: AED 200,000; and
    2. Market counterparty: AED 500,000

Ceilings on borrowing

14. The borrowing limit for Borrowers in any calendar year is AED 10,000,000.
     
15. Borrowers may only list themselves on one CFP per project. The crowdfunding company and its management shall be responsible for ensuring, as part of the due diligence of Borrowers, that the borrower is not listed on any other CFP for the same project.
     

Loan release

16. Crowdfunding companies shall prevent borrowers from gaining access to:
     
    1. Any amounts raised unless the borrowers raised 100% of its funding goal.
    2. Any amount exceeding the funding goal.

Client information confidentiality

17. A crowdfunding company shall maintain the strictest standards of client information confidentiality including implementing the necessary systems and controls to ensure such standards are met.
     

Client money

18. A crowdfunding company shall not accept, take, or receive the transfer of full ownership of money from clients.
     
19. A crowdfunding company shall ensure adequate protection of Client Money.
     
20. Where a crowdfunding company makes arrangements on behalf of a client to receive and disburse funds, such monies shall be maintained in segregated/ escrow accounts in the name of the client as per the agreed arrangements.
     
21. The segregated/escrow accounts holding clients’ money must be externally audited:
     
    1. on a monthly basis for Category 1 CFPs; and
    2. on a quarterly basis for Category 2 CFPs
        
22. Client funds shall only be held with local retail banks who are licensed and regulated by the Central Bank.
     

Information disclosures

23. All crowdfunding companies shall disclose the terms and conditions of their business to their Clients and any subsequent updates to these terms and conditions.
     
24. All crowdfunding companies shall provide necessary (written) warnings of material risks to Clients.
     
25. A crowdfunding company shall collaborate and coordinate with Al Etihad Credit Bureau and share information concerning both its Lender(s) and Borrower(s).
     
26. Further to the above, all crowdfunding companies shall also make Clients aware of the relevant information as set out in Appendix 3.
     

Disclosures to Lender

27. For the purposes of the above, a crowdfunding company shall disclose comprehensive information about the Borrowers linked to a specific project directly to Lenders. The information expected shall include (at a minimum) the following:
     
    1. Information on the business model or operation of the Borrower, both historical and projected.
        
    2. Critical success factors and important dependencies.
        
    3. Information on the financial condition of the Borrower.
        
    4. Risks relevant to the Borrower based on due diligence undertaken by the CFP including expected default rates.
        
    5. Other borrowing and repayment terms.
        
    6. CFP’s fees and charges on the specific project.
        
    7. Terms of repayment and controls and precautionary measures taken, and
        
    8. Right of cancellation of contracts and lawful jurisdiction applicable for any disputes.

Conflicts of interest

28. A crowdfunding company and the key personnel shall take steps to identify/disclose and prevent or manage conflicts of interest. Examples of conflicts of interest include (but not limited to) the following:
     
    1. A crowdfunding company lists a Borrower who is a related party to a CFP (or its significant shareholders / directors / employees);
        
    2. A crowdfunding company has an interest in the outcome of a service provided to the Client, which is distinct from the Client's interest in that outcome;
        
    3. A crowdfunding company has a financial or other incentive to favour the interest of another Client or group of Clients over the interests of the Client;
        
    4. A crowdfunding company receives or will receive from a person other than the Client an inducement in relation to a service provided to the Client, in the form of money, goods or services, or
        
    5. A crowdfunding company (or its significant shareholders / directors / employees) has financial interest in a Borrower.
        
29. A crowdfunding company shall not allow any of its shareholders, directors or employees to borrow on the platform.
     
30. A crowdfunding company shall not provide advice to Clients relating to any crowdfunding available through its CFP.
     
31. A crowdfunding company may not directly market any offer, Borrower or project available on the CFP to any current or prospective Client.
     

Dispute management

32. A crowdfunding company shall:
     
    1. Establish dispute handling and grievance redress mechanisms to deal with complaints from clients or other parties and include in client agreements the details of these mechanisms.
        
    2. Develop an adequate collections policy and procedures, setting out actions to be taken against borrowers who fail to make timely payments.
        
    3. Maintain records demonstrating to the Central Bank that it has control mechanisms in place to address complaints and grievances.

Contingency Portfolio Administration Arrangements

33. In the event that a crowdfunding company fails or is wound up (either voluntarily or involuntarily), the crowdfunding company must have in place documented arrangements to ensure that the loan portfolio continues to be administered.
     
34. The board of the crowdfunding company bears ultimate responsibility for ensuring that contingency portfolio administration arrangements are in place.
     
35. The Central Bank will periodically review the contingency portfolio administration arrangements and may take supervisory or enforcement actions if such plans are found to be inadequate.