German Crowdfunding Association Issues Self-Regulatory Transparency Quality Label

At the InnoFinance Summit 2019 on March 26, 2019, the German Crowdfunding Association  (Bundesverband Crowdfunding) introduced its new “Transparency Seal”. The Transparency Seal is a self-regulatory label awarded by the association to member platforms which respect a set of quality and customer protection standards.

With this move, the association advances on its path towards establishing itself an industry self-regulation body.

The label will be awarded exclusively to the association’s member platforms. It is the first of its kind in the European market for alternative financing.

“This is a significant step towards even better protection for retail investors in Germany,” explained Dirk Littig, Member of the Executive Board of the association and CEO of crowdinvesting platform Conda.”

By design, crowdinvesting is more transparent than conventional forms of investment. “

We, therefore, take it to heart to guide crowdinvesting platforms towards achieving exemplary transparency standards in performing their activity,” he added. Dirk Littig was responsible for developing and driving the Transparency Seal project in the association.

At launch, the new transparency seal was able to reach about three-quarters of the member platforms. Other platforms are in the starting blocks and are applying for the label as well.

“Our transparency seal proves once again that the association is a trailblazer in the German sector,” said Jamal El Mallouki, Chairman of the board of the association and founder and CEO of Crowddesk. “We started by issuing a Code of Conduct, then we made reporting standards mandatory for member platforms. Now, we are offering a third consumer protection tool. These three measures demonstrate how we go above and beyond legal requirements in terms of retail investors’ protection.”

The Transparency Seal can only be granted to member platforms. The set of requirements that must be met to obtain the label is comprehensive. It includes criteria of data protection, run-off management in case of insolvency, regulatory information, certificates and test reports, implementation of the reporting standards, quality control, complaint management, as well as the criteria for project selection and how these are presented to retail investors. See details below.

The Transparency Seal is awarded for one calendar year. Platforms must reapply each year.

“This ensures that the quality criteria are always up to date. It provides additional consumer protection,” concluded Dirk Littig.

The following crowdfunding platforms have already received the Transparency Seal 2019:

Aescuvest, Bettervest, Companisto, Exporo, Geldwerk1, Greenvesting, Solutions, kapilendo, Crowddesk, LeihDeinerUmweltGeld, Wiwin, ReaBiz, Ecoligo Invest, Moneywell, Civum.

Detailed criteria for awarding the Transparency Seal:

  • The transparency seal is awarded exclusively to members of the Crowdfunding association.
  • By joining the association, members commit to implementing the code of conduct for crowdfunding platforms.
  • By joining the association, members commit to integrating the association’s reporting guidelines in the contracts between project owners and investors. They must explain to the association in which documents the reporting standards have been included and how compliance with reporting standards is verified.
  • Once a year, the platforms provide the association with the following basic information: operator contact details, regulatory status, intermediary registration number, supervisor, arbitration board, liability umbrella (if applicable).
  • Once a year, the platforms communicate the following information to the association: name of the auditor, date and period of the last audit.
  • The platforms undertake to make the Investment Information Sheets (VIB) and/or the Securities Information Sheets (WIB) accessible on the site in a barrier-free manner.
  • The platforms disclose to the association their process of handling investor complaints.
  • The platforms disclose to the association how projects are selected and what information about the projects is presented on the platform. They also disclose to the association what documents the project owners need to provide to appear on the platform.
  •  The platforms disclose to the association what action will be taken in the event of the insolvency of the platform operator.
  • The platforms must name a privacy protection officer. If due to the size of the company, no data protection officer has been appointed, the platforms must explain how data protection is implemented in the company.

The details of the platforms are not published for reasons of competition but are known to the association’s management.

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.

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