Estonia, Financial Services, Funds, Law and Regulations

"Rapidly developing crowdfunding offers new alternative possibilities aside from the regulated banking, fund and investment services markets. In the domain of financial services opportunities and risks go hand in hand. We believe that more precise addressing of requirements and risks by means of law will help the financial services market become more transparent, stable and also effective," Andre Nomm, board member of the Financial Supervision Authority, said.

"Since crowdfunding has not been harmonized on the level of the European Union thus far, several countries have begun to regulate this field on their own because of the rapid development of crowdfunding. We believe that our draft legislation will help provide a framework to further discussion on regulating crowdfunding and a balanced solution can be found in an open and inclusive debate," Nomm said.

"We believe that the crowdfunding market in the European Union has to be opened, since we see it as a good opportunity to open up the potential of the common market to our entrepreneurs," he added.

At present crowdfunding businesses are not subject to financial supervision and the proposal of the Financial Supervision Authority is that they should not be subjected to financial supervision for now. Nor would an authorization from the Financial Supervision Authority be necessary to run a crowdfunding platform.

The legislative initiative is aimed first and foremost at protecting the customer of a crowdfunding business, the Financial Supervision Authority said. The proposals listed have to do primarily with the presentation of data and its transparency, protection of personal data, managing of conflict of interest and ensuring the separation of assets. In addition crowdfunding businesses should take measures to control the risks that the financial sector is faced with, such as prevent money laundering.