The Malta Financial Services Authority (MFSA) said on Thursday it considers introducing a cap on the maximum amount of financing obtained via a single round of equity-based crowdfunding, as well as the maximum amount an individual is allowed to invest via this type of financing.
The regulator also intends to require equity crowdfunding platforms to exercise minimum due diligence tests on project/project owners, as well as to provide disclosure reports on offers even in cases when they are exempt to the general prospectus requirement.
The regulator did not disclose any specific figures.
The measures, which are part of a regulatory change proposal from the European Securities and Markets Authority (ESMA), aim to reduce the risk of fraud associated with crowdfunding and protect investors and their money.
The Maltese regulator has published the proposed measures for public discussion until 31 January 2017.
Earlier this week, France announced it has adopted regulatory amendments concerning crowdfunding. It raised the cap on P2P lending and equity crowdfunding and introduced a new type of business lending, called ‘minibonsl’. The changes were in line with an EU directive on the matter.
Crowdfunding is a type of financing where funds are provided by a large number of investors, i.e. crowd in crowdfunding. Individuals and enterprises use this type of financing for personal projects, to achieve corporate growth and expansion, as well as for funding social activities. There are four types of crowdfunding – donation-based, reward-based, equity-based, and loan-based.
The MFSA is the single regulator for financial services in Malta.