The industry is demanding new regulation. But the law that will tighten the requirements for the players in public financing is still a long way off, the government warns.
Loan intermediaries such as Monio and Fundingpartner – platforms that allow small savers to invest in loans to companies – are currently only regulated by a few sections of the financial legislation and the Marketing Act.
In practice, this means that the requirements placed on these platforms are far fewer and less comprehensive than those placed on, for example, credit companies and banks.
But a new law has been in the works for some time.
Early last year, a proposal from the Securities Act Committee was sent for consultation. Since the consultation deadline in April, it has been pending with Finance Minister Trygve Slagsvold Vedum.
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The reason why it has not come further is that it has not yet been incorporated into the EEA agreement, according to the ministry.
– The Ministry of Finance is now working on the further follow-up of the investigation and consultation input with a view to submitting a legislative proposal to the Storting, writes State Secretary Jakob Bjelland (Sp) in an e-mail to E24.
The ministry has informed E24 that it is not clear when this will happen.
– Makes strict demands
The EU started the study of the need for new legislation for crowdfunding in 2014. In Brussels, the regulation was finally adopted in 2020.
Both before and after this, the Norwegian authorities have held a number of consultation rounds on regulation of the industry.
In a consultation letter in 2018, Finanstilsynet warned of the consequences of not regulating the industry further. On Thursday, Finanstilsynet repeated the warning to E24.
Lawyer Filip Truyen in Wikborg Rein led the study of the new crowdfunding law, a work which was completed in December 2021. He says the bill as it stands will significantly strengthen investors’ rights.
Today, it is only required to register with Finanstilsynet in order to operate loan mediation through crowdfunding. In addition, the Marketing Act regulates that the advertising on the platforms is truthful and not misleading.
With the new law, the companies will have to apply for a licence.
This means that Finanstilsynet can both supervise and refuse companies to establish themselves, according to Truyen.
– The new law will set strict requirements for the kind of information investors will receive about credit ratings and the like, he writes in an e-mail to E24.
– Furthermore, far more comprehensive requirements will follow on how the companies can prevent conflicts of interest and check that the information given by borrowers is correct.
– Will not be able to prevent everything
Today, the companies that offer crowdfunding have organized themselves through the Norwegian Crowdfunding Association.
Leader Linn Hoel Ringvoll writes to E24 that regulation will not solve all the challenges that E24 has discussed in recent weeks.
– No matter what type of regulation you get, a regulation will not be able to prevent loan fraud from occurring, loans being brokered that are defaulted, or that you do not succeed in realizing collateral for the values you had expected when taking out the loan, writes Hoel.
A key change with the bill is that investors will be separated into professional and non-professional investors. The platforms may be required to categorize the investors.
In the proposal, non-professional investors will only be allowed to invest 1,000 euros in each project, while there is no amount limit for the professionals, according to Hoel.
– This will mean that those with the least experience and the most to lose will have to spread their investments, and thus the risk, over many loans, writes Hoel.
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Wants tighter regulation
Three of the largest players in the market say they want tighter regulation of the business.
– We have been calling for a law that regulates us for a long time. This will strengthen the industry and get rid of the unscrupulous actors, says managing director Geir Atle Bore in Fundingpartner.
Kameo wants a new law in place as soon as possible, since Sweden and Denmark got the EU legislation in place last year.
– We therefore hope that the law will come into place soon, as it is disadvantageous for both the platforms, the borrowers and the investors that we lag behind our neighboring countries, writes Kameo CEO Sebastian Martens Harung in an email to E24.
He is supported by Monio CEO Marius Dybdahl.
– Monio is positive about the new bill related to crowdfunding of businesses. The law should be adopted and come into force as soon as possible, Dybdahl writes to E24.
Schibsted owns 10 percent of the shares in Fundingpartner. E24 is a wholly owned subsidiary of the Schibsted group. Certain journalists in E24 own shares in Schibsted through the group’s share savings programme.
