Crowdfunding is the name used for when many people get together or are brought together to collectively make money available for projects. Instead of banks, insurance companies or funds, it is private persons, who for example provide financial support to innovative start-up companies, or who participate in large real estate projects. Intermediation is typically performed by specialist crowdfunding services providers, which for example match up the project owner and the potential investors via a platform on the Internet. The news edition of the FMA’s “Let’s talk about money” series for consumers focuses on this issue.
Investors have a wide range of reasons to invest their money in crowdfunding schemes. Some projects advertise certain business objectives – such as particularly ecologically sound manufacturing -, while others promise being part of attrractive residential properties or business premises otherwise off limits for private individuals. In every case, you should be seriously informed about what happens to your money, as well as the risks you enter into. The Austrian Financial Market Authority (FMA) is only competent as the supervisory authority for this aspect.
It is important to know that the FMA does not supervise the parties that receive the money, but only the intermediaries, the crowdfunding services providers, that are active under the EU Crowdfunding Regulation (ECSPR) and the Austrian Securities Supervision Act of 2018 (WAG 2018; Wertpapiergesetz 2018). Providers that collect less than € 2 million do not fall within the FMA’s scope of competence, and instead fall under the regime of the Alternative Financing Act (AltFG; Alternativfinanzierungsgesetz). Municipal and district administration offices are competent for such providers.
Unlike banks, that usually receive collateral for loans, crowdfunding as a rule is not secured by material assets, even if the money flows into a material asset like a real estate property. Protective mechanisms, like deposit guarantee schemes that exist for bank accounts, or other rules in relation to investor compensation, do not apply in this case. In practice, the investment often exists in the form of a qualified subordinated loan with a high rate of interest made to the project, which means that in a crisis situation that it is not required to be repaid. Investors should only contribute money if they understand the project, contract and risks, and if they do not require the money again at short notice.
Useful tips about how consumers can protect themselves
The current edition of “Let’s talk about money” entitled “Who looks out for the crowd?” explains how crowdfunding works, and provides tips about investing money prudently.
It is available for download from the FMA website at: https://redenwiruebergeld.fma.gv.at/wer-schaut-auf-die-crowd/.
Further information can be found on the FMA website at https://www.fma.gv.at/en/financial-service-providers/crowdfunding-service-providers/european-crowdfunding-service-providers-under-the-ecspr/.
Journalists may address further enquiries to:
Boris Gröndahl (FMA Media Spokesperson)
Telephone: +43 (1) 249 59-6010
Mobile: +43 676 8824 9995
E-Mail: [email protected]