The Central Bank has tightened up the regulatory regime for Crowdfunding Service Providers under EU Regulation.
The Central Bank said that while crowdfunding brings new funding possibilities for businesses and new opportunities for investors, it is important that investors are appropriately protected and well informed as to its potential risks.
Crowdfunding is the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, usually via the internet.
The Central Bank said today a number of provisions of the Consumer Protection Code 2012 will now apply to advertising by crowdfunding service providers in Ireland.
Advertising for crowdfunding must be fair and clear and must not mislead or seek to influence consumers unduly in their investment decisions, the Central Bank said.
Crowdfunding service providers must display a prominent warning message on all advertisements that investment in crowdfunding projects entails risks, including the risk of partial or entire loss of the money invested, it added.
The ads must also state that any investment is not covered by a deposit guarantee scheme or by an investor compensation scheme.
The Central Bank also said that crowdfunding service providers must be authorised and subject to operational requirements and investor protection measures.
Gerry Cross, Director of Financial Regulation - Policy and Risk at the Central Bank - said that crowdfunding provides a form of alternative finance for start-ups and SMEs, typically relying on small investments.
"Trust, confidence, and fair dealing are essential for any financial market or product. It is therefore vital that investors are made aware of the risks of any such investment," Mr Cross said.
"The Central Bank is now applying its advertising rules to crowdfunding service providers. This will ensure that Irish consumers receive the same protections in relation to advertising by crowdfunding service providers that we require of other financial service providers," he added
Peer-to-peer lending platform Linked Finance welcomed the Central Bank's announcement on crowdfunding regulations, which it said marks official recognition of the important role peer-to-peer lending has to play as a source of funding to help growth the SME sector in Ireland.
"For several years we have been seeking an Irish regulatory framework and this announcement is a useful move in that direction," it said in a statement.
