Estateguru was recently granted a licence, by the Estonian Financial Supervision and Resolution Authority (Finantsinspektsioon), to operate as an EU crowdfunding service provider. Here’s everything you need to know about what that means for the platform, and what it means for you.
The new licence allows us to operate in all EU member states in accordance with the framework laid out in the recently introduced European Crowdfunding Service Providers for business Regulation (ECSPR). Having always been in favour of unified regulations that provide greater protection and enhanced transparency for investors, we are happy to be one of the first platforms to receive a crowdfunding licence for our main markets.
Below we’ll go through the various changes that will be implemented on the platform, and what estateguru has done to prepare for this transition.
Which changes apply to investors on the crowdfunding platform?
One of the main aims of the Crowdfunding Regulation is to enhance levels of protection and transparency for investors. To ensure our full compliance with the regulation, we have made several changes to the platform, which include providing additional information on the way in which we operate, and also on the projects themselves. Below we will outline the main changes and how they will affect our users.
- We have improved our customer onboarding process, which now includes a questionnaire for our users. The purpose of the questionnaire is: (i) firstly, to assess whether a user who registers as an investor is a sophisticated investor or a non-sophisticated investor, (ii) secondly, to assess the knowledge about loan-based crowdfunding services. We may have to limit your access to our services if you have not completed the questionnaire in due time.
- We have added a loss bearing calculator to the onboarding process, which will allow investors to calculate their loss bearing ability. The loss bearing ability is calculated as 10% of your net worth. We do not store any data you enter into the calculator other than the result which you submit to us. We will not restrict your access to our services based on the result, but we may need to warn you if your investment exceeds your loss bearing ability.
- We have improved the due diligence process for project owners (potential borrowers) and introduced project specific key investment information sheets which give an overview of not only the project and lending terms but also the background, activities and financial status of the borrower, to the extent possible. Changes to the key investment information sheet during the syndication period may trigger a requirement whereby investors would be allowed to withdraw their investments into the project for which the key investment information sheet is amended. We will give more specific information if any such circumstances occur.
- We have added a reflection period for investors who make investments. This means that investors have the right to withdraw their investments within 4 days of making it. For investors using Auto Invest, the reflection period applies within 4 days of activating Auto Invest (but not for any subsequent investment made after that 4 day period). For investors making manual investments, the reflection period applies for 4 days as of the moment the investor manually approved the investment.
- We have improved the information disclosures and process descriptions under Legal documents on the platform.
- We have made changes to the General Loan Terms and User Terms for the documents to comply with the investor protection requirements applicable to us. We aim to further review and simplify the General Loan Terms by the end of the year.
What we’ve done and still need to do implement to our crowdfunding platform
Estateguru has been making preparations for the authorization to operate as a crowdfunding service provider ever since the regulation was formally adopted. During that time, we have planned and worked on changes to the platform, processes, organisational structure, policy framework and many other aspects of our services and operations. It’s still necessary to launch certain functions, update certain documents and information to align with information disclosure requirements for crowdfunding service providers. This will include updating the User Terms and Loan terms.
The process has been difficult due to the fact that the regulatory technical standards were delayed and were only adopted in their final wording in November 2022 which created delays. Certain platform developments, internal processes and policies depend on the content of the regulatory technical standards, which are still not all in place at the time of writing this. This means that there may be slight changes to how we operate depending on the details of these technical standards.
We received authorisation from the Finantsinspektsioon in May. In order to fully comply with all requirements of the Finantsinspektsioon, there are several changes that must still be made. We aim to have all required functions, information disclosures and processes in place before the end of July, in order to ensure that we can test everything before launching the changes. If possible, we will finalise the process quicker in which case we will inform all users beforehand.