CHAPTER IV Investor protection

Article 19 Information to clients
1. All information, including marketing communications as referred to in Article 27, from crowdfunding service providers to clients about themselves, about the costs, financial risks and charges related to crowdfunding services or investments, about the crowdfunding project selection criteria, and about the nature of, and risks associated with, their crowdfunding services shall be fair, clear and not misleading.
2. Crowdfunding service providers shall inform their clients that their crowdfunding services are not covered by the deposit guarantee scheme established in accordance with Directive 2014/49/EU and that transferable securities or admitted instruments for crowdfunding purposes acquired through their crowdfunding platform are not covered by the investor compensation scheme established in accordance with Directive 97/9/EC.
3. Crowdfunding service providers shall inform their clients about the reflection period for non-sophisticated investors referred to in Article 22. Whenever a crowdfunding offer is made, the crowdfunding service provider shall provide that information in a prominent place of the medium, including on every mobile application and webpage where such an offer is made.
4. All information to be provided in accordance with paragraph 1 shall be communicated to clients whenever appropriate, at least prior to entering into a crowdfunding transaction.
5. The information referred to in paragraphs 1, 2 and 6 shall be available to all clients on a clearly identified and easily accessible section of the website of the crowdfunding platform and in a non-discriminatory manner.
6. If crowdfunding service providers apply credit scores to crowdfunding projects or suggest the pricing of crowdfunding offers on their crowdfunding platform, they shall make available a description of the method used to calculate such credit scores or prices. If the calculation is based on accounts that are not audited, that shall be clearly disclosed in the description of the method.
7. EBA shall, in close cooperation with ESMA, develop draft regulatory technical standards to specify:
(a) the elements, including the format, that are to be included in the description of the method referred to in paragraph 6;
(b) the information and factors that crowdfunding service providers are to consider when carrying out a credit risk assessment referred to in points (a) and (b) of Article 4(4) and conducting a valuation of a loan referred to in point (e) of Article 4(4);
(c) the factors that a crowdfunding service provider is to take into account when ensuring that the price of a loan it facilitates is fair and appropriate as referred to in point (d) of Article 4(4);
(d) the minimum contents and governance of the policies and procedures required under this Article and of the risk-management framework referred to in point (f) of Article 4(4).
EBA shall submit those draft regulatory technical standards to the Commission by 10 May 2022.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 20 Default rate disclosure
1. Crowdfunding service providers which provide crowdfunding services consisting of the facilitation of granting of loans shall:
(a) disclose annually the default rates of the crowdfunding projects offered on their crowdfunding platform over at least the preceding 36 months; and
(b) publish an outcome statement within four months of the end of each financial year indicating, as applicable:
(i) the expected and actual default rate of all loans the crowdfunding service provider has facilitated, by risk category and by reference to the risk categories set out in the risk-management framework;
(ii) a summary of the assumptions used in determining expected default rates; and
(iii) where the crowdfunding service provider offered a target rate in relation to individual portfolio management of loans, the actual return achieved.
2. The default rates referred to in paragraph 1 shall be published in a prominent place on the website of the crowdfunding service provider.
3. ESMA shall, in close cooperation with EBA, develop draft regulatory technical standards to specify the methodology for calculating the default rates referred to in paragraph 1 of the projects offered on a crowdfunding platform.
ESMA shall submit those draft regulatory technical standards to the Commission by 10 November 2021.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 21 Entry knowledge test and simulation of the ability to bear loss
1. Crowdfunding service providers shall, before giving prospective non-sophisticated investors full access to invest in crowdfunding projects on their crowdfunding platform, assess whether and which crowdfunding services offered are appropriate for the prospective non-sophisticated investors.
2. For the purposes of the assessment referred to in paragraph 1, crowdfunding service providers shall request information about the prospective non-sophisticated investor’s experience, investment objectives, financial situation and basic understanding of risks involved in investing in general and in investing in the types of investments offered on the crowdfunding platform, including information about:
(a) the prospective non-sophisticated investor’s past investments in transferable securities or past acquisitions of admitted instruments for crowdfunding purposes or loans, including in early or expansion stage businesses;
(b) the prospective non-sophisticated investor’s understanding of the risks involved in granting loans, investing in transferable securities or acquiring admitted instruments for crowdfunding purposes through a crowdfunding platform, and professional experience in relation to crowdfunding investments.
3. Crowdfunding service providers shall for each non-sophisticated investor review the assessment referred to in paragraph 1 every two years after the initial assessment made in accordance with that paragraph.
4. Where prospective non-sophisticated investors do not provide the information required pursuant to paragraph 2, or where crowdfunding service providers consider, on the basis of the information received under that paragraph, that the prospective non-sophisticated investors have insufficient knowledge, skills or experience, crowdfunding service providers shall inform those prospective non-sophisticated investors that the services offered on their crowdfunding platforms may be inappropriate for them and issue them a risk warning. That risk warning shall clearly state the risk of losing the entirety of the money invested. Prospective non-sophisticated investors shall expressly acknowledge that they have received and understood the warning issued by the crowdfunding service provider.
5. For the purposes of the assessment referred to in paragraph 1, crowdfunding service providers shall also require prospective non-sophisticated investors to simulate their ability to bear loss, calculated as 10 % of their net worth, based on the following information:
(a) regular income and total income, and whether the income is earned on a permanent or temporary basis;
(b) assets, including financial investments and any cash deposits, but excluding personal and investment property and pension funds;
(c) financial commitments, including regular, existing or future commitments.
6. Crowdfunding service providers shall, for each non-sophisticated investor, review the simulation referred to in paragraph 5 every year after the initial simulation made in accordance with that paragraph.
Prospective non-sophisticated investors and non-sophisticated investors shall not be prevented from investing in crowdfunding projects. The non-sophisticated investors shall acknowledge that they have received the results of the simulation referred to in paragraph 5.
7. Each time before a prospective non-sophisticated investor or non-sophisticated investor accepts an individual crowdfunding offer thereby investing an amount that exceeds the higher of either EUR 1 000 or 5 % of that investor’s net worth as calculated in accordance with paragraph 5, the crowdfunding service provider shall ensure that such investor:
(a) receives a risk warning;
(b) provides explicit consent to the crowdfunding service provider; and
(c) proves to the crowdfunding service provider that the investor understands the investment and its risks.
For the purposes of point (c) of the first subparagraph of this paragraph, the assessment referred to in paragraph 1 may be used as proof that the prospective non-sophisticated investor or non-sophisticated investor understands the investment and its risks.
8. ESMA shall, in close cooperation with EBA, develop draft regulatory technical standards to specify the arrangements necessary to:
(a) carry out the assessment referred to in paragraph 1;
(b) carry out the simulation referred to in paragraph 5;
(c) provide the information referred to in paragraphs 2 and 4.
When developing those draft regulatory technical standards, ESMA shall take into account the nature, scale and complexity of the crowdfunding services provided by the crowdfunding service provider.
ESMA shall submit those draft regulatory technical standards to the Commission by 10 November 2021.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 22 Pre-contractual reflection period
1. The terms and conditions of the crowdfunding offer shall remain binding on the project owner from the moment when the crowdfunding offer is listed on the crowdfunding platform until the earlier of the following dates:
(a) the expiry date of the crowdfunding offer announced by the crowdfunding service provider at the time of listing the crowdfunding offer on its crowdfunding platform; or
(b) the date when the target funding goal is reached or, in the case of a funding range, when the maximum target funding goal is reached.
2. The crowdfunding service provider shall provide for a pre-contractual reflection period, during which the prospective non-sophisticated investor may, at any time, revoke his or her offer to invest or expression of interest in the crowdfunding offer without giving a reason and without incurring a penalty.
3. The reflection period referred to in paragraph 2 shall start at the moment of the offer to invest or the expression of interest by the prospective non-sophisticated investor, and shall expire after four calendar days.
4. The crowdfunding service provider shall keep a record of the offers to invest and the expressions of interest it receives, and of the point in time when they are received.
5. The modalities to revoke an offer to invest or an expression of interest shall include at least the same modalities by which the prospective non-sophisticated investor is able to make an offer to invest or express an interest in a crowdfunding offer.
6. The crowdfunding service provider shall provide accurate, clear and timely information to the prospective non-sophisticated investor about the reflection period and the modalities to revoke an offer to invest or an expression of interest, including at least the following:
(a) immediately before the prospective non-sophisticated investor can communicate his or her offer to invest or expression of interest, the crowdfunding service provider is to inform the prospective non-sophisticated investor of:
(i) the fact that the offer to invest or the expression of interest is subject to a reflection period;
(ii) the duration of the reflection period;
(iii) the modalities to revoke the offer to invest or the expression of interest;
(b) immediately after receipt of the offer to invest or of the expression of interest, the crowdfunding service provider, through its crowdfunding platform, is to inform the prospective non-sophisticated investor that the reflection period has started.
7. In the case of individual portfolio management of loans, this Article shall apply only to the initial investment mandate given by the non-sophisticated investor and not to the investments in specific loans made under that mandate.

Article 23 Key investment information sheet
1. Crowdfunding service providers shall provide prospective investors with all of the information referred to in this Article.
2. Crowdfunding service providers shall provide prospective investors with a key investment information sheet drawn up by the project owner for each crowdfunding offer. The key investment information sheet shall be drafted in at least one of the official languages of the Member State whose competent authorities granted the authorisation in accordance with Article 12 or in another language accepted by those authorities.
3. Where a crowdfunding service provider promotes a crowdfunding offer through marketing communication in another Member State, the key investment information sheet shall be made available in at least one of the official languages of that Member State or in a language accepted by the competent authorities of that Member State.
4. Crowdfunding service providers shall not be prevented from arranging for a translation of the key investment information sheet into any language or languages other than those referred to in paragraph 2 or 3. Those translations shall accurately reflect the content of the original key investment information sheet.
5. The competent authorities shall inform ESMA about the language or languages that they accept for the purposes of this Regulation as referred to in paragraphs 2 and 3. ESMA shall make that information available on its website.
6. The key investment information sheet referred to in paragraph 2 shall contain all of the following information:
(a) the information set out in Annex I;
(b) the following disclaimer, appearing directly underneath the title of the key investment information sheet:

‘This crowdfunding offer has been neither verified nor approved by competent authorities or the European Securities and Markets Authority (ESMA).
The appropriateness of your experience and knowledge have not necessarily been assessed before you were granted access to this investment. By making this investment, you assume full risk of taking this investment, including the risk of partial or entire loss of the money invested.’;

(c) the following risk warning:

‘Investment in this crowdfunding project entails risks, including the risk of partial or entire loss of the money invested. Your investment is not covered by the deposit guarantee schemes established in accordance with Directive 2014/49/EU of the European Parliament and of the Council. Nor is your investment covered by the investor compensation schemes established in accordance with Directive 97/9/EC of the European Parliament and of the Council.
Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149).
Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes (OJ L 84, 26.3.1997, p. 22).’.
You may not receive any return on your investment.
This is not a savings product and we advise you not to invest more than 10 % of your net worth in crowdfunding projects.
You may not be able to sell the investment instruments when you wish. If you are able to sell them, you may nonetheless incur losses.’.

7. The key investment information sheet shall be fair, clear and not misleading and shall not contain any footnotes, other than those with references, including quotations where appropriate, to the applicable law. It shall be presented on a stand-alone, durable medium that is clearly distinguishable from marketing communications and consist of a maximum of six sides of A4-sized paper format if printed. In the case of admitted instruments for crowdfunding purposes, where the information required under Part F of Annex I exceeds one side of A4-sized paper format if printed, the remainder shall be produced in an annex attached to the key investment information sheet.
8. The crowdfunding service provider shall request the project owner to notify it of any change of information in order to keep the key investment information sheet updated at all times and for the duration of the crowdfunding offer. The crowdfunding service provider shall immediately inform investors who have made an offer to invest or expressed an interest in the crowdfunding offer about any material change to the information in the key investment information sheet that was notified to it.
9. Member States shall ensure the responsibility of at least the project owner or its administrative, management or supervisory bodies for the information given in a key investment information sheet. Those responsible for the key investment information sheet shall be clearly identified in the key investment information sheet by, in the case of natural persons, their names and functions or, in the case of legal persons, their names and registered offices, as well as declarations by them that, to the best of their knowledge, the information contained in the key investment information sheet is in accordance with the facts and that the key investment information sheet makes no omission likely to affect its import.
10. Member States shall ensure that their laws, regulations and administrative provisions on civil liability apply to natural and legal persons responsible for the information given in a key investment information sheet, including any translation thereof, in at least the following situations:
(a) the information is misleading or inaccurate; or
(b) the key investment information sheet omits key information needed to aid investors when considering whether to finance the crowdfunding project.
11. Crowdfunding service providers shall have in place and apply adequate procedures to verify the completeness, correctness and clarity of the information contained in the key investment information sheet.
12. When a crowdfunding service provider identifies an omission, mistake or inaccuracy in the key investment information sheet that could have a material impact on the expected return of the investment, that crowdfunding service provider shall signal such an omission, mistake or inaccuracy promptly to the project owner, who shall promptly complete or correct that information.
Where such completion or correction is not made promptly, the crowdfunding service provider shall suspend the crowdfunding offer until the key investment information sheet has been completed or corrected, but for a period of no longer than 30 calendar days.
The crowdfunding service provider shall immediately inform investors who have made an offer to invest or expressed an interest in the crowdfunding offer about such identified irregularities, the steps taken and further to be taken by the crowdfunding service provider and the option to revoke their offer to invest or their expression of interest in the crowdfunding offer.
If, after 30 calendar days, the key investment information sheet has not been completed or corrected to rectify all identified irregularities, the crowdfunding offer shall be cancelled.
13. A prospective investor may request a crowdfunding service provider to arrange for a translation of the key investment information sheet into a language of the investor’s choice. The translation shall faithfully and accurately reflect the content of the original key investment information sheet.
Where the crowdfunding service provider does not provide the requested translation of the key investment information sheet, the crowdfunding service provider shall clearly advise the prospective investor to refrain from making the investment.
14. Competent authorities of the Member State where the authorisation was granted to the crowdfunding service provider may require an ex ante notification of a key investment information sheet at least seven working days before making it available to prospective investors. Key investment information sheets shall not be subject to ex ante approval by the competent authorities.
15. Where prospective investors are provided with a key investment information sheet drawn up in accordance with this Article, the crowdfunding service providers and the project owners shall be considered to have satisfied the obligation to draw up a key information document in accordance with Regulation (EU) No 1286/2014 of the European Parliament and of the Council.
Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352, 9.12.2014, p. 1).
The first subparagraph shall apply mutatis mutandis to natural or legal persons advising on, or marketing, a crowdfunding offer.
16. ESMA shall develop draft regulatory technical standards to specify the following:
(a) the requirements for and content of the model for presenting the information referred to in paragraph 6 and Annex I;
(b) the types of main risks that are associated with the crowdfunding offer and therefore must be disclosed in accordance with Part C of Annex I;
(c) the use of certain financial ratios to enhance the clarity of key financial information, including for presenting the information referred to in point (e) of Part A of Annex I;
(d) the commissions and fees and transaction costs covered by point (a) of Part H of Annex I, including a detailed breakdown of direct and indirect costs to be borne by the investor.
When developing those draft regulatory technical standards, ESMA shall take into account the nature, scale and complexity of the crowdfunding services provided by the crowdfunding service provider.
ESMA shall submit those draft regulatory technical standards to the Commission by 10 May 2022.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 24 Key investment information sheet at platform level
1. By way of derogation from the first sentence of Article 23(2) and from point (a) of Article 23(6), crowdfunding service providers providing individual portfolio management of loans shall draw up in accordance with this Article, and make available to prospective investors, a key investment information sheet at platform level containing all of the following information:
(a) the information provided in Parts H and I of Annex I;
(b) information about the natural or legal persons responsible for the information given in the key investment information sheet; in the case of natural persons, including members of the crowdfunding service provider’s administrative, management or supervisory bodies, the name and function of the natural person; in the case of legal persons, the name and the registered office;
(c) the following responsibility statement:

‘The crowdfunding service provider declares that, to the best of its knowledge, no information has been omitted or is materially misleading or inaccurate. The crowdfunding service provider is responsible for the preparation of this key investment information sheet.’.

2. The crowdfunding service provider shall keep the key investment information sheet at platform level updated at all times and for the duration of the crowdfunding offer. The crowdfunding service provider shall immediately inform the investors who have made an offer to invest or expressed an interest in the crowdfunding offer about any material change to the information in the key investment information sheet.
3. The key investment information sheet at platform level shall be fair, clear and not misleading and shall not contain any footnotes, other than those with references, including quotations where appropriate, to the applicable law. It shall be presented on a stand-alone, durable medium that is clearly distinguishable from marketing communications and consist of a maximum of six sides of A4-sized paper format if printed.
4. Member States shall ensure the responsibility of at least the crowdfunding service provider for the information given in a key investment information sheet at platform level. Those responsible for the key investment information sheet shall be clearly identified in the key investment information sheet at platform level by, in the case of natural persons, their names and functions or, in the case of legal persons, their names and registered offices, as well as declarations by them that, to the best of their knowledge, the information contained in the key investment information sheet is in accordance with the facts and that the key investment information sheet makes no omission likely to affect its import.
5. Member States shall ensure that their laws, regulations and administrative provisions on civil liability apply to natural and legal persons responsible for the information given in a key investment information sheet at platform level, including any translation thereof, in at least the following situations:
(a) the information is misleading or inaccurate; or
(b) the key investment information sheet at platform level omits key information needed to aid investors when considering whether to invest through individual portfolio management of loans.
6. Crowdfunding service providers shall have in place and apply adequate procedures to verify the completeness, correctness and clarity of the information contained in the key investment information sheet at platform level.
7. When a crowdfunding service provider identifies an omission, mistake or inaccuracy in the key investment information sheet at platform level that could have a material impact on the expected return of the individual portfolio management of loans, that crowdfunding service provider shall itself rectify the omission, mistake or inaccuracy in the key investment information sheet.
8. Where prospective investors are provided with a key investment information sheet at platform level drawn up in accordance with this Article, the crowdfunding service providers shall be considered to have satisfied the obligation to draw up a key information document in accordance with Regulation (EU) No 1286/2014.
The first subparagraph shall apply mutatis mutandis to natural and legal persons advising on, or marketing, a crowdfunding offer.

Article 25 Bulletin board
1. Crowdfunding service providers may operate a bulletin board on which they allow their clients to advertise interest in buying and selling loans, transferable securities or admitted instruments for crowdfunding purposes that were originally offered on their crowdfunding platforms.
2. The bulletin board referred to in paragraph 1 shall not be used to bring together buying and selling interests by means of the crowdfunding service provider’s protocols or internal operating procedures in a way that results in a contract. The bulletin board shall therefore not consist of an internal matching system that executes client orders on a multilateral basis.
3. Crowdfunding service providers that allow the advertisement of interest referred to in paragraph 1 of this Article shall comply with the following requirements:
(a) they are to inform their clients about the nature of the bulletin board in accordance with paragraphs 1 and 2;
(b) they are to require their clients advertising a sale of a loan, security or instrument referred to in paragraph 1 to make available the key investment information sheet;
(c) they are to provide clients intending to buy loans advertised on the bulletin board with information on the performance of loans facilitated by the crowdfunding service provider;
(d) they are to ensure that their clients advertising an interest to purchase a loan, security or instrument referred to in paragraph 1 of this Article and qualifying as non-sophisticated investors receive the information referred to in Article 19(2) and the risk warning referred to in Article 21(4).
4. Crowdfunding service providers that allow the advertisement of interest referred to in paragraph 1 of this Article and that provide asset safekeeping services in accordance with Article 10(1) shall require their investors advertising such interest to notify them of any changes in ownership for the purposes of conducting ownership verification and record-keeping.
5. Crowdfunding service providers that suggest a reference price for the buying and selling referred to in paragraph 1 of this Article shall inform their clients that the suggested reference price is non-binding and substantiate the suggested reference price, and shall disclose key elements of the methodology in line with Article 19(6).

Article 26 Access to records
Crowdfunding service providers shall:
(a) keep all records related to their services and transactions on a durable medium for a period of at least five years;
(b) ensure that their clients have immediate access to records of the services provided to them at all times;
(c) maintain for a period of at least five years all agreements between the crowdfunding service providers and their clients.