In a move designed to firmly establish the credibility of the investment crowdfunding sector in Germany, the German Crowdfunding Association (Bundesverband Crowdfunding) announced that its 21 member platforms have adopted common, and quite stringent standards for reporting to investors. These definitely raise the bar for crowdfunding standards internationally.
Based in Berlin, the German Crowdfunding Association was founded in November 2015. It gathers 21 crowdfunding platforms, mostly crowdinvesting platforms (see list below), of which the most internationally well-known probably is Companisto. The current announcement of the adoption of investor reporting standards comes on the back of the adoption by the association of a complete Code of Conduct in October 2016. Both the overall Code of Conduct and the present addition of investor reporting standards go above and beyond the legal requirements set by the German financial regulator BaFin.
With these stringent standards, the association intends to shed light on its industry, to demonstrate its commitment to investor protection and to build trust. Indeed, the perception of the sector by the German public and by German politicians it often unclear. I can attest that crowdfunding is sometimes met there with more than healthy skepticism.
As it stands now, however, the binding standards of the German crowdinvesting sector not only go beyond legal requirements, they also surpass the international standards of crowdfunding associations in terms of clarity and commitment. Undoubtedly these efforts will soon pay off and give a strong boost to the German crowdinvesting sector, which is currently underdeveloped in relation to Germany’s GDP.
“As a young and dynamic Fintech sector, we go far beyond legal requirements. The platforms organized within the association are united in supporting this effort. Our common concern is to further optimize the protection of small investors in crowdfunding,” said Jamal El Mallouki, Managing Director, CrowdDesk, and Chairman of the Board of the Crowdfunding Association.
Investor Reporting Requirements
The current addition to the Code of Conduct is designed to significantly improve the reporting of information from companies and project owners to their crowd investors in order to maximize consumer protection.
The required timing standards are:
- Reporting to investors every six months
- No later than 60 calendar days after the end of the first half of the year
- Nor later than 90 calendar days after the end of the year
The recommended timing standards are:
- Reporting quarterly
- No later than 30 days after the reporting period
The standards also define a template for reporting content. They set different binding requirements and recommendations according to the type of investment instruments traded (the law prescribes shareholder loans for equity crowdfunding); the nature of the business (startups, other development stages); and the industry it operates in (real estate, clean energy, media…). These templates are also integrated on the platforms to allow investors to track their investments. The information provided must be transparent, balanced and conclusive. It should include all the significant achievements, challenges and extraordinary events that happened during the reporting period.
The member platforms have already implemented these standards in their crowdfunding agreements. These standards are binding for all investments offered from January 1, 2017 on.
“I do not know any other sector in the capital market, which has succeeded in developing common standards within just a few weeks despite the different business models,” said Uli Fricke, Managing Director, FunderNation and Member of the Board of the Crowdfunding Association.
The association intends to continue working in this direction:
“The common standards for investor reporting are the starting point for us to standardize other aspects of the crowdfunding process, such as the design of the asset information sheet,” Tamo Zwinge, Managing Director, Companisto, Member of the Board of the Crowdfunding Association.
“The response to the association’s Code of Conduct has been overwhelmingly positive. We were particularly pleased to hear that the project owners welcomed and embraced the strict guidelines, too,” said Karsten Wenzlaff, CEO, Ikosom andGeneral Secretary of the Crowdfunding Association.
List of the members of the German Crowdfunding Association
- Conda Deutschland
Therese Torris, PhD, is a Senior Contributing Editor to Crowdfund Insider. She is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.