Crowdfunding Act would establish clear ground rules
The Ministry of Finance is requesting statements on its draft of a Crowdfunding Act. The purpose of such a law would be to establish clear ground rules enabling companies to make better use of new types of financing channels such as crowdfunding. At the same time, small investors would be presented with more investment alternatives.
Crowdfunding is a method of obtaining financing for company activities and projects launched by individuals and organisations. Crowdfunding typically involves the collection of relatively small sums, via the Internet, from a large number of people. Crowdfunding can be practised in many different formats. The draft law focuses on loan and investment-based crowdfunding.
The size of Finland’s crowdfunding market in 2013 was around MEUR 18 and the market is growing by approximately 20–50 per cent a year.
It is thought that such a funding format would have major potential both as an investment target and as a channel for corporate financing. However, there is no legal definition of crowdfunding and the activity is fairly diverse and variable. Various types of crowdfunding are currently regulated in a number of ways in the national legislation.
Enhancing diversity of the markets
The Ministry of Finance has formulated a draft to serve as the basis for an Act on Crowdfunding, dealing with loan and investment-based activity within the sector. The objective of this Act would be to:
- diversify the financial markets
- establish operational and growth prerequisites for supplementary and, in part, alternative finance channels, while ensuring sufficient investor protection
- increase investment alternatives, particular for small investors
- establish clear legal ground rules for the sector
- clarify the liabilities of the various public authorities with respect to supervising different crowdfunding formats.
The draft law is partially based on report which the Ministry of Finance published together with the Ministry of Employment and the Economy on 13 March. The proposal also includes amendments to some existing Acts.
The objective – a parliamentary bill in the autumn
The Ministry of Finance delivered the draft law for consultation on 15 May. Statements are being widely requested from the authorities, stakeholders and market actors. The consultation period will end on 12 June.
A summary of the resulting feedback will be published during the autumn. Statements given as feedback and new government policies will have an impact on the eventual bill. To begin with, it is intended that the new government will submit its proposal to Parliament during the autumn.
Aki Kallio, Ministerial Adviser (LL.M.), tel. +358 2955 30477, [email protected]